CASE BRIEF: THE RAJAH OF BOBBILI v. AKELLA SURYANARAYANA RAO GARU AND ORS.

CASE NAME	The Rajah Of Bobbili V. Akella Suryanarayana Rao Garu And Ors., AIR 1920 MADRAS 911
CITATION	[1970] 1 WLR 241; (1970) 21 P & CR 38; (1970) 114 SJ 70; [1970] CLY 2893
COURT	Madras High Court
BENCH	Hon’ble Justice Oldfield
PETITIONER	The Rajah Of Bobbili
RESPONDENT	Akella Suryanarayana Rao Garu And Others
DECIDED ON	Decided on 6th March, 1919

INTRODUCTION

A concise statement of the definition procedure would be as follows: A promise is an approved proposal, an agreement is a contract, and a contract is an agreement. Therefore, every agreement results from a proposal made by one party and accepted by the other. Revocation is the termination of a contract by its parties or the annulment or cancellation of a declaration, document, or offer that has not yet been accepted. One can, for instance, cancel a will or an agreement to sign a contract. According to contract law, a binding agreement is formed after an individual’s offer is accepted. A contract is formed between two or more parties when one party extends an offer to another to get the other party’s consent.

The situation in the case of Rajah of Bobbili vs. Akella Suryanarayana Rao Garu and Ors. (1919) concerns an auction in which the top bidder, Rajah of Bobbili, withdrew his bid, having secured the winning position but prior to fulfilling the required procedures. Whether the bidder had the right to revoke his offer before making the necessary payment was the legal question that the court had to decide. This case examines contract law fundamentals, focusing on the Indian Contract Act’s offer and acceptance procedures and the moment an offer becomes irreversible.

FACTS OF THE CASE

This appeal and petition concern the conditions under which the Temporary Subordinate Judge of Vizagapatam conducted a court auction. Eight villages in a zamindari belonging to the judgment debtors—hereafter referred to as the respondents—were auctioned as a single lot on 27-9-1918, with the decree under execution valued at about Rs. 250,000. From that day onwards, the sale was held until 22 October 1918, at which point the Rajah of Bibbili, who is the petitioner and appellant in this case, and a woman named Perla Ramamurthi Chetty were the last remaining bidders. That day, the former bid for Rs. 325,000 through his Muktyar or agent. However, the Cheety bid Rs. 326,000 on October 28, 1918. Unit 5-11-1918 was then put up for sale, but no more bids were received, presumably by the requests of the Chetty and the Rajah as stated in two of the telegrams designated as Ex. III.

As news of Chetty’s passing spread, an adjournment was granted for the following day so that his widow could place a bid. This continued until November 18, 1918, when the Subordinate Judge correctly declared that Chetty’s bid had been nullified by his death. However, he proceeded with the transaction based on the Rajah’s highest bid, which was made before him. Unit 5-11-1918 was then put up for sale, but no more bids were received, presumably in accordance with the requests of the Chetty and the Rajah as stated in two of the telegrams designated as Ex. III. As news of Chetty’s passing spread, an adjournment was granted for the following day so that his widow could place a bid. This continued until November 18, 1918, when the Subordinate Judge correctly declared that Chetty’s bid had been nullified by his death. However, he proceeded with the transaction based on the Rajah’s highest bid, which was made before him.

ISSUES RAISED

Whether there was acceptance of bidding or it was only an offer?
Whether the contract is valid and Rajah is liable to fulfill the contract?
Whether the withdrawal from the bid considered as revocation of acceptance?

ARGUMENTS FROM BOTH SIDES

Arguments on behalf of the petitioner

This was an unusual practice because either his own bid had been withdrawn on 5-11-18, or it had been discharged by either (1) the auction being suspended during its adjournment at the end of the day or (2) Chetty’s greater bid.
The Rajah contended that his bid was only an offer, subject to withdrawal prior to the auctioneer’s official acceptance. He withdrew his bid before payment was made; therefore, there was no formal agreement. He insisted that the contract would not be binding unless he paid the deposit, which was required to complete the sale.
The appellant further argued that since the acceptance of the bid was conditioned on the payment of the deposit, the auctioneer had not properly accepted it. There could be no legally binding contract without this.

Arguments on behalf of the respondent

The Raja’s bid was discharged by adjourning the sale at the end of the day on which it was made.
The respondents said Rajah’s proposal was an irrevocable offer once made and declared the highest. They contended that the Rajah had broken his contract by not paying the deposit since, at an auction, the highest bid is deemed accepted as long as no other bids are placed. The deposit was considered a necessary formality to close the deal, and withdrawals made without paying the amount due were void.
The appellant had broken the end of the bargain when his offer was deemed the highest and neglected to deposit the needed sum. The respondents contended that his withdrawal was void since the Rajah had committed to the deal.
The Subordinate Judge’s order was interlocutory in nature, meaning that it could not be changed until after a resale and a declaration of the deficiency recoverable from the appellant.

JUDGMENT

Without a doubt, the Subordinate Judge’s process contained every significant irregularity and serious criminality. As far as the appellant was concerned, the auction ended when a better offer was received, and his offer was not accepted promptly. Giving him the status of a buyer in these situations is the same as giving any random guy on the street the status of an auction buyer, even though he didn’t bid during the auction. The appellant has been deemed the purchaser by the subordinate judge, who has also directed the sale of the property, holding him accountable for any potential deficiencies in the resale.

The subordinate judge’s error sprang from a fundamental misunderstanding of the nature of the transaction he was involved in and his authority rather than from an occurrence or an incorrect application of or deduction from legal principles. Additionally, the respondents request that the Raja waits for the outcome of the resale, to which he objects before suing once the full scope of his grievance has been determined. It goes without saying that this court does not typically employ its revisional powers when a better option is available. However, the guideline is not infallible, and in this instance, since the remedy’s effectiveness is questionable and a resale would only exacerbate the tensions between the parties involved, there is ample justification for prompt intervention with the irregular course taken by the proceedings.

CONCLUSION

The reasonableness of a given question is contingent upon the commercial practices of specific societies. However, even in this nation, where contracts are purportedly concluded more slowly than in England if the Lower Court judge postponed the sale to obtain a higher price for the land, he most definitely cannot be considered to have intended to accept the earlier offer.

The case presents important issues regarding the formation of contracts in auction settings. An offer may be withdrawn prior to acceptance by the Indian Contract Act. Because the auctioneer’s acceptance was conditioned on the deposit being paid, the appellant argued that his bid represented an offer that had not yet been accepted. This is consistent with the well-established rule that a bid becomes an offer, and an auctioneer’s request for bids is an invitation to treat. The essence of acceptance in the context of auctions is the key question. The responders contended that once the proposal was acknowledged as the highest, it was accepted, and a legally enforceable agreement was made. This interpretation implies that even if a deposit is required by procedure, acceptance can be implied in the auctioneer’s declaration.

Another important factor is that auction transactions are customary. Courts frequently consider customary practices within particular contexts, which can have an impact on how contractual commitments are interpreted. This scenario highlights the significance of comprehending the practical workings of auction dynamics.

The decision rendered by the Supreme Court, in this instance, highlights the subtleties of contract law, especially as it relates to auctions. It draws attention to the delicate balance that exists between the auctioneer’s authority to enforce bids and the bidder’s right to withdraw prior to final acceptance. The ruling upholds the idea that, although bids may be interpreted as offers, acceptance may also occur due to auction procedure customs. This case emphasizes the necessity of precise auction terms and conditions in order to avoid disputes and adds to the growing body of legal precedent regarding contractual responsibilities in auctions.