Mualtl v. DENTU BHASKARA RAO

The disqualifi:ation which rcsulta from the section b conditioned by three circumstance.. First, there must be a subsisting contract betwocn the appropriate Government and the candidate. Then the contract must be in the course of the trade or busineso of the candidate and, finally it n•ust be int<r alia for the supply of goods to such Government. Held in the case th8.t as the mining lease was subsisting. the contract if any, was also subsisting. Further that the mining lease, if it wa.s a contract, wu in the course of the business of the respondent It was not necessary that a course of business based upon other transactiom must have lint existed hr.fore .the offending contract could be sa:d to be in the course of fhe contract itself could be the start of the business. Held business. therefore that the mining leas<i WM not a contract to supply &oods to the Government. There was only a right in the Government to pre.empt the minerals and iessee could not begin delivery to the Government until Governm~nt served a notice on him stating the quantity pre-empted and the time within which the supply should be made.

This was only a reservation of a right of pre-emption which did not amount to a con tract for the supply of goods which could be said to subsist between tho partieo. CIVIL APPELLATE JURISDICTION: Civil Appeal No. 1072 of 1963. Appeal from the judgment and order dated April l 0. 1963 of the Andhra Pradesh High Court in Special Appeal No. 52 of 1962. K. R. Chaudhuri, for the appellant. A. V. Viswanatha Sastri and T. V. R. Tatachari, the respondent. May 4, 1964. The Judgment of the Court was delivered by HIDAYATULLAH, J.-The respondent Dentu Bhaskara HidaJat11l1"" I returned to the Andhra Pradesh Legislative Rao was Assembly from Kakinada constituency at the last general election. The appellant C. V. K. Rao was his closest competitor. There were two other candidates but obtained very few votes and they have not shown any further interest. The appellant filed an election petition to question the election of the respondent on many grounds: one ·such ground was that the respondent was disqualified 1964 -.:. V. K. Rao v.

O>entu Bhaskara Rao Sfidayatullah J. 154 SUPREME COURT REPORTS [1g64l under s. 7 ( d) of the Representation of the People Act, 1951 (43 of 1951). The respondent had obtained a mining lease from the State of Andhra Pradesh on Apri, 13, 1960, though on the date he filed his nomination paper he had not begun operations under that lease. The appellant took objection to the nomination of the respondent on the ground that he held a contract from the Andhra Pradesh Government within the prohibition of s. 7 ( d) of the Act, but the Returning Officer over-ruled his objection. The Election Tribunal later _held that he was disqualifkd J,mder s. 7 ( d) of Act 43 of 1951 and declared the election void. On appeal, the High Court of Andhra Pradesh reversed the decision and the present appeal has been filed on a certi licate granted by the High Court. Section 7(d) reads as fol!ows:-- "7. A person shall be disqualified for being chosen as, and for being, a member of either House of Parliament or the Legislative Assembly or Legislative Council of a State-- (a) (b) (c) • • • • • • • • • (d) if there subsists a contract entere<l into the course of his tradi: or business by him the appropriate Government for the supply of goods to, or for the executi(ln of any works undertaken by, that Government; " The mining lease was in the standard form and after secting out the consideration for the lease, it described in Pai ts I tc III, the area of the lease, the description of lile area, liberties, powers and privileges to be exercised and enjoyed by the lessee and the restrictions and conditions as to their exercise.

In Part IV it described the liberties, powers and privileges reserved to the. State Government and in Parts V and VI the rents and royalties reserved by the lease and certain other provisions relating tg them. Part VII then dealt with the covenants of the lessee in respect of payment 8 S.C.R. SUPREME COURT REPORTS 155 of rents, royalties, taxes etc. One such covenant was clause 21 and was headed "Right of Pre-emption" and it conferred on the State Government a right of pre-emption of the minerals lying in or upon the land dei; nised or else lessee. ThJlt clause was where under the control of the interpreted by the Tribunal as a contract entered course ot' trade or business by the respondent with the State Government for the supply of goods to that Government. The High Court held that there was no such contract. 1964 C. V. K. Rao v. Dtntu Bhaskaro· Rizo Hidayatullah 1. to say The disqualification which results from s.

7 ( d) is condi tioned by a number of circumstances. First, there must be a subsisting contract (this is in actual existence) between the appropriate Government and the candidate. Then the contract must \>e in the course of the trade or business of the candidate and, finally, it must be inter alia for the supply of goods to such Government The appro priate Government according expression is t~e Government of Andhra Pradesh. The High Court in reaching its conclusion interpreted cl. 21 of Part VII of the lease and held that the mining lease was not a contract, that clause 21 did not amount to a contract and that cl. 21 even if a contract was not a contract for the supply of goods to the Government. This conclusion is assailed by the appellant. clause at this stage: It is convenient to quote the definition of "21. (a) The State Government shall from time to time and at all times du~ing the said term have the right (to be exercised by notice in writing to the lessee) of pre-emption of the minerals (and all products thereof) lying or upon the said lands he!eby demised or else lessee and where under the control of the the lessee shall with all possible expedition deliver all minerals or products or minerals purchased by the State Government under power conferred by this provision in the quan tities, at the times in the manner and at place specified in the notice exercisin11 the said right. ' 1964 oC. V. K. Rao v. ofJ•ntu Blaaskaro Rao ·Hidayatullah I. 156 SUPREME COURT REPORTS (1g64] (b) Should tile Jight to pre-emption conferred by this present provision be exercised and a vessel chartered to carry the minerals or products thereof procured on behalf of the State Gov· ernment or the Central Government be detain ed on demurrage at the port oCloading lessee shall pay the amount due for demurrage according to the terms of the charter party of such vessel unless the State Government shall the delay is due to causes be satisfied that beyond the control of the lessee. ' ( c) The price to be paid for all minerals or pro ducts of minerals taken in pre-emption by the State Government in exerci~e of the right here by conferred shall be the fair market price prevailing at the time of pre-emption provided that in order to assist in arriving at the said fair market price the lessee shall, if so requir ed, furnish to the State Government confidential information of the Government particulars of quantities, desqiptions and prices of carriage oI the same and shall produce to such officer or officers as may be directed by the State Government original or authenticated copies of contracts and charter parties entered into for the sale of freightage of such minerals or products. • the said minerals or producu .,, (d) • • Mr.

K.' R. Chaudhury contended that under this clause there was a standing contract for the supply of goods and all that Government had to do was to send !1 notice to the respondent and he was compelled to supply the goods Government. He pointed out that from the time the lease was granted Government was asking commence operations to raise the minerals but the pondent avoided working the mine probably to save himself from the disqualification. According to Mr. Chaudhury, it mattered not whether the mine was worked or not, but respondent 1964 C. V. K. Rao Y. Dentu Bhiukara Rao Hidayatullah J. 8 S.C.R. SUPREME COURT REPORTS 157 what mattered was that there was a subsisting contract for to the appropriate Government. the supply of minerals that the Mr. A. Vishwanatha Sastri, in reply, contended mining lease could not be regarded as a contract and further that it was not 'in the course of' the trade or business of the respondent, and finally that, in any event, it was not a contract for the supply of goods.

That it was in the course of business of the respo.ndent almost goes without saying. It is not necessary, as Mr. Sastri suggested, that a course of business ba, ed upon other transactions must first exist before the offending contract can be said to be in the course of business. That contract may itself be the start of business and the words 'in the course of the business' would still be apt. As the mining lease ;as subsisting, the con tract, if any there be, was also subsisting and there is no doubt on that aspect of the matter. The question is whether the provisions of cl. 21 bring about a contrJct the. supply of goods. This question can be broken into two which are: (a) whether cl. 21 can be regarded as a contract and (b) whether it can be regarded as a coatract for supply of goods. Clause 21 is invariably inserte.d in every mining to the to the Government lease. minerals which vest in Government bu( which are allowed to be raised by the lessee holding the lease.

The lease is, in one sense, a contract be!v:ccn the Government and the Jessee because there is consideration on both sides and offer and acceptance. There are obligations created by it. some of which are contractual even though some may be regarded as arising from the conditions of the grant. The mining lease without cl. 21 cannot possibly be described as a contract for the supply of goods. Without that clause there would neither be a mention of goods nor of their If the lease is to be read as satisfying the disquali supply. fication ins. 7(d), cl. 21 alone can satisfy it. Clause 21 speaks of a right of the Government minerals and all products thereof lying land demised or elsewhere under the control of the lessee. There is, however, no concluded contract in respect of any goods because it hardly needs to be said that relying upon this clause the lessee cannot begin delivery of the ore to the Gove~nt.

He can do so only if the Government to pre-empt in or around It reserves 1964 C. V. K. Rao v. Dtntu Bhaskara Rao Bidayatullah J. 158 SUPREME COURT REPORTS serves a notice on him stating the quantity pre-empted and the time within which the supply is to be made. The clause, however, does not make it obligatory on Government prC-empt any quantity of mineral or at all. There is no obligation to buy nor is there any compulsion ·on the pan In these circumstances, ot the lessee to sell unless asked. the clause does no -more than to keep intact a right of the Government to obtain the minerals or their products as and when Government requires to others. Till Government makes up its mind and serves a notice there is no obligation to make any deliveries and even though the word 'subsists' is a word of wide import, it cannot be said that a contract for the sale of goods subsists because a contract requires an offer and its acceptance and is not a mere reservation of a right. in preference Taking the most liberal view of the matter it is clear that cl.

21 did not bring into being a contract for the supply of goods. All that it did was to reserve to the Government the right to prior purchase of rese11;ation of such rights docs not respondent. The amount to a contract for the supply of goods which can be said to subsist between the parties. The High Court was, therefore, right in reversing the decision of the Election Tribunal. The appeal fails and is dismissed with costs. the minerals raised by Appeal dismissed. 1964 May 5 UNION OF INDIA v. ABDUL JALIL AND ORS. (M. HIDAYATULLAH AND N. RAJAGOPALA AYYANGAR, JJ.) Forest Act-"Reserved forest"-Tripura Act replaced by Indian Forest Act-No preliminaries prescribed under Tripura Act-Notification under it whether can he deemed to be under Indian Forest Art Tripura Act and Indian Forest Act, object and purpose-Corres (Act 16 of 19271, ponding provisions-Indian Forest Act, 1927