P L D 1973 Lahore 345 (PLP)

SARDAR MUHAMMAD IQBAL, J.‑

This is a Letters Patent Appeal against the order dated the 7th of March 1967 of our learned brother Muhammad Gul, J. whereby he dismissed the writ petition of the appellants which he had filed to challenge the orders of the Settlement Authorities confirming the auction in favour of Major Qaisar Ali Khan respondent No. 4.

2. The facts of the case have been stated in detail by the learned Single Judge. We may however, refer to some of the salient facts which are relevant for the disposal of this appeal. The property in dispute measuring 8 kanals 10 marlas and 17 sq. feet was auctioned on the 15th of January 1962 and the highest bid was of the appellants who offered Rs. 52,000.00. The property was again auctioned on the 3rd of February 1962 and respondent No. 4 gave the highest bid of Rs. 3,320,00.00. The Chief Settlement Commissioner, by his order dated the 6th of April 1962, directed that the auction of the plot in favour of respondent No. 4 be approved. A formal approval was accorded by Mr. Saeeduz Zaman, Additional Settlement Commissioner on the 7th of April 1962. Subsequent to this on the 27th of May 1962 Mr. Amir Muhammad Bhatti, another Additional Settlement Commissioner, approved the auction held on the 15th of January 1962 in favour of the appellants.

3. There is no element of mala fides on the part of the authorities or either of the parties in holding the second auction or the approval given by Mr. Bhatti. We may in this behalf refer to the observations of the learned Single Judge which have not been assailed before us. It is observed in para. 9 of the Judgment: "One thing, however, that stands out clearly and is not even controverted by the petitioners is that respondent No. 4 was not aware of the auction‑sale in favour of the petitioners, when the auction in his favour was held on the 3rd February 1962 or even, when he later moved the Chief Settlement Commissioner on the 20th February 1962 to stay the re‑auction of the plot as earlier directed by him on the application of Mrs. Durrani. Nor even the Auction Committee who supervised the second auction of the plot was aware of the first auction in favour of the petitioners which was still pending approval of the appropriate authority". The learned Judge further observed in paragraph 10: "Likewise the Chief Settlement Commissioner's order, dated the 6th April 1962, directing the approval of the auction in favour of respondent. No. 4 was made in ignorance of the first auction in favour of the petitioners".

4. The only question which arises for determination is, whether the first auction held in favour of the appellants on the 15th of January 1962 and approved on tae 27th of May 1962 or the second auction held in favour of respondent No. 4 on the 3rd of February 1962 and formally approved by Mr. Saeedua Zaman, Additional Settlement Commissioner on the 7th of April. 1962 constitutes a valid transfer. If the auction held on the 15th of January 1962 created a valid title in favour of the appellants, then obviously the second auction held in favour of respondent No. 4 on the 3rd of February 1962 would be of no validity. Likewise, if the auction held on 3rd of February 1962 in favour of respondent No. 4 is a valid transfer in his favour and a right or title in that was acquired by him, the auction held in favour of the appellants would not be valid and they would not acquire any right or title in the property.

5. Learned counsel for the appellants contended that the auction in favour of respondent No. 4 was void ab initio inasmuch as after having exhausted the amount from his compensation, book he ceased to be a claimant and under Para. 7(b) of the terms and conditions of auction, he as an Intending bidder had to deposit with a Auction Committee Rs. 1,000.00 as earnest money in cash. The learned Single Judge did not accept this contention and held :‑ It is true, that respondent No. 4 had exhausted his compensation book. But from the Settlement File produced by Major Ishaque Muhammad Khan, it appears that respondent No.4 instead of depositing Rs. 1,000.00 in cash as earnest money, deposited Compensation Book No. 834‑165‑KYC‑A‑21 XVII of his younger brother Basit Ali Khan and Compensation Book No. 144070‑KCY/A/139 XVIII of one Muhammad Yasin. son of Muhammad Siddique, each of whom executed a power of attorney in favour of respondent No. 4 authorizing him to utilize his compensation for the relevant purpose. These compensation books were accepted by the Settlement Authorities. It can scarcely be controvered that the whole object underlying the deposit of compensation book by a claimant or cash deposit by others was to exclude spurious or speculative bidders and to confine auction to bona fide bidders. This condition was not intended to confer any legal title or status on the potential bidders. This requirement, in my opinion, was amply satisfied by respondent, when he procured the compensation books of his brother and Muhammad Yasin and deposited the same with the Auction Committee and which the Committee chose to accept. We are in agreement with this view of the learned Judge and would further like to add that the language of the said condition makes us think that it was meant to be a directory one, because there is no further condition or provision that an omission to comply with it would render the auction a nullity. It is now well established that in order a particular provision may be mandatory it must clearly provide the legal consequences of its non. compliance. Condition No. 7(b) of the conditions of the auction as were laid down by the Chief Settlement Commissioner under paragraph 9 of the Settlement Scheme No. VI reads as :‑ "Every intending bidder, if he is a non‑claimant displaced person, local or a claimant without a Compensation Book, he shall deposit with the Auction Committee Rs. 1,000.00 as earnest money in cash. Cheques will not be accepted." It does not provide that if the condition was not satisfied it will entail a consequence of rendering the bid in favour of the highest bidder void. The respondent had offered the highest bid of Rs. 3,32,000 and it was six time the highest bid of Rs. 52,000.00 offered by the appellants in the earlier auction held about three weeks before and to render the bid void on the ground that he had not deposited Rs. 1,000.00 in cash before participating in the bid under condition No. 7(b) would frustrate the object of para. 9 of the Scheme itself providing for the disposal of all vacant sites "in an unrestricted public auction", the intention being that such properties should fetch the maximum price for the compensation pool. In Maxwell on Interpretation of Statutes (11th Edition) it is observed at page 364: "It may, perhaps, be found generally correct to say that nullification is the natural and usual conse quence of disobedience, but the question is in the main governed by consideration of convenience and justice, and, when that result would involve general inconvenience or injustice to innocent persons, or advantage to those guilty of the neglect, without promoting the real aim and object of the enactment, such an intention is not to be attributed to the Legislature". It is again provided at page 369 : "On the other hand, where the prescrip tions of a statute relate to the performance of a public duty and where the invalidation of acts done in neglect of them would work serious general inconvenience or injustice to persons who have no control over those entrusted with the duty without promoting the essential aims of the Legislature, such prescriptions seem to be generally understood as mere instructions four the guidance of those on whom the duty is imposed, or, in other words, as directly only". Respondent No. 4 did not deposit Rs. 1,000.00 and instead offered the compensation books which it is stated before us, were of much higher value. If the Auction Committee had refused to accept, there would have been no problem for respondent No. 4 to have deposited Rs. 1,000.0 in cash. The respondent cannot be made to suffer for the failure of the Auction Committee to insist on the strict observance o Condition No. 7.

6. It was next contended that the bid of the appellants had never been rejected by any competent authority and so long as the proceedings of a validly held auction did not conclude as provided in Scheme No. VI the auction property continued to be committed to the auction and no second auction of the same property could be held and that in the circumstances the second auction was void ab initio. The auction was held under the Displaced Persons (Compensation and Rehabilitation) Act (Act XXVIII of 1958) and we may refer to the relevant provision of law applicable to such sales to determine this question. It is provided in paragraph 14 of the Schedule to the Act : "All vacant evacuee building sites not falling under paragraph 3 shall be sold to the highest bidder in an unrestricted public auction". Under section 16 of the Act the Central Government may require the Chie Settlement Commissioner to prepare a Scheme for the transfer of immovable property on evaluation basis or otherwise claimants, non‑claimants or locals in accordance with the provisions of the Schedule. Settlement Scheme No, VI cam into force on 13th of November 1959 and paragraph 9 of Chapter III deals with the auction of vacant building sites and it provides: "All vacant building sites shall be disposed' of in unrestricted public auction in accordance with the terms and conditions to be laid down by the Chief Settlement Commissioner". The terms and conditions of the auction so laid down (printed at page 152 of the Manual of the Settlement, Second Edition) o inter alts provide : "Any person whether a claimant, non claimant displaced person or a local will be allowed to participate in the suction", and that the auction will be conducted under the supervision and control of an Auction Committee. It is provided in condition No. 9: "The highest bid offered to the Auction Committee shall be subject to the approval of the Additional Settlement Commissioner concerned, who may oil may not accept it without assigning any reason and may order a fresh auction". Condition No. 10 reads as: "After an offer is accepted by the Additional Settlement Commissioner the Deputy Settlement Commissioner concerned will issue to intimation of acceptance which will be delivered to the successful bidder by hand or by registered post". The rest of the provisions deal only with the mode of payment or the possession of the property, its permanent transfer or re‑auction on default of payment. It is nowhere provided that there is to be any specific order to be passed for the rejection of an offer. Condition 9 and 10 are couched in unmistakable terns that the bid offered is subject to the approval of the Additional Settlement Commissioner and it is only on its acceptance that intimation is to be given to the successful bidder.

7. It was next contended that the appellants by giving the highest bid in the first auction have acquired though not a right in the property but a right to get the property in pursuance of that. The contention is untenable. The appellants when they gave the highest bid on the 15th of January 1962 did not acquire any right or interest in the property. The highest bid given by them was in the form of an offer which could mature into a contract only on its acceptance under condition No.

9. An absolute acceptance is where the sale officer, or the auctioneer, as the ease may be, is given full authority to accept a bid uncondi tionally. The Auction Committee had only a right to receive the bids and pass them onto the Addl. Settlement Commissioner who was the final authority to confirm and conclude the contract. The Committee acted merely as a sort of conduit pipe to convey the highest bid to the competent authority. Till such time as an approval had been given in such a case, the highest bid was only an offer and created no right. In Harris v. Nickerson (1873 L R 8 Q B 286), ft was held: "An advertisement of a sale by auction is not itself offer, but only a declaration of intention to hold the sale and allow the public generally to make offers". In Watson v. Davies (1931 Ch. 455), it was held: "In a case where the agent for one party to a negotiation informs the other party that he cannot enter into a contract binding his principal except subject to his approval, there is in truth no contract or contractual relation until the approval has been obtained". It was further held: "An acceptance by an agent subject in express terms to ratification by his principal is legally a nullity until ratification, and is no more binding on the other party than an unaccepted offer which can, of course, be withdrawn before acceptance". In Khedar‑un- Nissa Begun v. Muhammad Mustafa Ali (A I R 1916 Mad. 75). it was held "Where an auction sale conducted through an agent has been confirmed fin the name of the highest bidder subject to the approval of the principal, there is a contract of sale on the grant of the approval".

8. The position of law is clear that a contract of sale may be made either by a private agreement between the parties or by public auction, but however made, it must contain the ordinary essentials of a contract, namely, an offer by one party to the other, and an acceptance of that offer by the party to whom it was made. The acceptance may be subject to an approval by some person on the execution of a formal contract in which case there is no binding agreement until the approval is given or a formal contract is executed. In Muthu Pillai v. Secy. of State (A I R 1923 Mad. 582), a house was put up for sale by Government and the auction was held by the Tehsildar. The defendant was the highest bidder and a report of the sale was forwarded to the Collector for confirmation. Before the sale was confirmed the defendant at his own request was allowed to occupy the house on the condition that he would quit it whenever required. The sale was not confirmed and when a suit was brought against the defendant for the recovery of possession he contended that, he was entitled to possession as the sale was completed. It was held that there was no completed contract. Thus to have an enforceable contract there must be an offer and an unconditional acceptance. A person who makes an offer has the right of withdrawing it before acceptance. Somasundarm Pillai v. Provincial Government or Madras (A I R 1947 Mad. 366). It was competent for the appellants to have withdrawn the offer before their bid was accepted. It is true that they deposited earnest money but there is no provision in the conditions that they would in such event forfeit even that earnest money. Under condition No. 17 if the entire money due from a person is not paid within the prescribed period the earnest money deposited by him can be forfeited. It clearly implies that if he withdraws his bid before acceptance under condition No. 9 the earnest money is not liable to forfeiture, there being no other clause applicable for forfeiture except condition No. 17.

9. It was next contended that on the approval of the bid of the appellants by Mr. Bhatti on 27th of May 1962 the property would be deemed to vest in them from the date of auction I.e. 15th of January 1962 and being earlier in time than the bid which was held in favour of the respondent en the 3rd of February 1962, the respondent cannot claim any right or title in it. Reliance was placed on Sham Singh and others v. Vir Bhan and others (A I R 1942 Lah. 10:), to contend that when the bid was approved the property is deemed to have vested in the purchaser from the time when the property was sold. The learned Judges of the Full Bench did not lay down this principle on the basis of common law or the law which may be applicable in all situations and circumstances but their judgment was based on section 65 of the Civil Procedure Code as is manifest from the observations. "No doubt it is only when an order confirming the sale is passed" that the sale becomes absolute, but as laid down in section 65 when a sale has become absolute the property is deemed to have vested in the purchaser from the time when the property was sold and not the time when the sale became absolute" It, is provided in section 65 of the Civil Procedure Code: "Where immovable property is sold in execution of a decree and such sale has become absolute the property shall be deemed to have vested in the purchaser from the time when the property is sold and not from the time when the sale becomes absolute". It clearly implies from the words "deemed to have vested" that under the general law the property sold in auction vests in. the purchaser not from the time when it is auctioned or sold but from the time the sale becomes absolute. The general law is that the property vests in a person only when the transaction of sale is complete. It was under section 65 that a retrospective vesting of title in respect of immovable property sold in auction was provided. In cases of private sales or sales through, auction, wherever the Legislature intended to give a retrospective effect to the vesting of title it has expressly so provided. Such a provision is only an exception to the general principle of law that a property vests in a person only when the transaction of sale is complete. Section 47 of the Registration Act provide a similar exception. It reads as : "A registered document shall operate from the time from which it would have commenced to operate if no registration thereof had been required or mad and not from the time of its registration". Section 49 provides "No document required by section 17 or by any provision of the Transfer of Property Act, 1882, to be registered shall (a) affect any immovable property comprised therein". A document which requires registration under section 17 doe not affect any immovable property comprised therein till it ha been registered but as soon as it has been registered it take effect not from the date of registration but retrospectively from the date of its execution. It is by virtue of specific provision in a Statute that two registered deeds executed by same person in respect of the same property to two different persons at two different times, the one which is executed first has under section 47 priority over the other though the former deed was registered subsequently to the latter. Thus if the intention had been to create any right or interest in the auction‑purchaser from the date of the auction there would have been a specific provision like section 65 of th Code of Civil Procedure or section 47 of the Registration Act made in the Displaced Persons (Compensation and Rehabilitation Act or the Schedule or the Scheme and at any rate in the Terms and Conditions laid down by the Chief Settlement Commissioner under paragraph 9 of the Settlement Scheme No. VI. In the absence of any such provision the auction sale becomes complete only after the approval is given by the competent authority as required under condition No. 9.

10. In this view of the matter the highest bid given by the appellants in the auction held on the 15th of January 1962 did not create any right in their favour. The subsequent suction held on the 3rd of February 1962 was not violative of any provision of law or the vested right of any person. On the approval of the highest bid of respondent No. 4 on 6/7th of April 1962 a completed contract of sale came into existence and he acquired a vested right in the property. The property thereafter was not available for transfer and that being so the approval of sale in favour of the appellants subsequently by Mr. Bhatti on the 27th of May 1962 had no legal effect. We find no merit in this appeal which is dismissed with costs. S. A. H. Appeal dismissed.