M/S. PADIA TIMBER COMPANY (P) LTD.versusTHE BOARD OF TRUSTEES OF VISAKHAPATNAM PORT TRUST THROUGH ITS SECRETARY

                         [2021] 1 S.C.R. 229                            229


           M/S. PADIA TIMBER COMPANY (P) LTD.                           A
                                 v.
  THE BOARD OF TRUSTEES OF VISAKHAPATNAM PORT
          TRUST THROUGH ITS SECRETARY
                  (Civil Appeal No. 7469 of 2008)                       B
                        JANUARY 05, 2021
        [NAVIN SINHA AND INDIRA BANERJEE, JJ.]
        Contract – Offer and acceptance of offer – Whether the
acceptance of a conditional offer with a further condition results
                                                                        C
in a concluded contract, irrespective of whether the offerer accepts
the further condition proposed by the acceptor – Held: It is a
cardinal principle of the law of contract that the offer and
acceptance of an offer must be absolute – When the acceptor puts
in a new condition while accepting the contract already signed by
the proposer, the contract is not complete until the proposer accepts   D
that condition – An acceptance with a variation is no acceptance –
It is, in effect and substance, simply a counter proposal which must
be accepted fully by the original proposer, before a contract is made
– High Court overlooked s.7 of the Contract Act – Both the Trial
Court and the High Court over-looked the main point that, in the
                                                                        E
response to the tender floated by the Respondent-Port Trust, the
Appellant had submitted its offer conditionally subject to inspection
being held at the Depot of the Appellant – This condition was not
accepted by the Respondent-Port Trust unconditionally –
Respondent-Port Trust agreed to inspection at the Depot of the
Appellant, but imposed a further condition that the goods would be      F
finally inspected at the showroom of the Respondent-Port Trust –
This condition was not accepted by the Appellant – It could not,
therefore, be said that there was a concluded contract – There being
no concluded contract, there could be no question of any breach
on the part of the Appellant or of damages or any risk purchase at
                                                                        G
the cost of the Appellant – Contract Act, 1872 – s.7.
      Allowing the appeal, the Court
      HELD : 1.1. It is a cardinal principle of the law of contract
that the offer and acceptance of an offer must be absolute. It can
                                                                        H
                                229
230           SUPREME COURT REPORTS                     [2021] 1 S.C.R.


A     give no room for doubt. The offer and acceptance must be based
      or founded on three components, that is, certainty, commitment
      and communication. However, when the acceptor puts in a new
      condition while accepting the contract already signed by the
      proposer, the contract is not complete until the proposer accepts
      that condition. An acceptance with a variation is no acceptance.
B
      It is, in effect and substance, simply a counter proposal which
      must be accepted fully by the original proposer, before a contract
      is made. [Para 56][247-B-C]
            1.2. The High Court overlooked Section 7 of the Contract
      Act, 1872. Both the Trial Court and the High Court over-looked
C     the main point that, in the response to the tender floated by the
      Respondent-Port Trust, the Appellant had submitted its offer
      conditionally subject to inspection being held at the Depot of the
      Appellant. This condition was not accepted by the Respondent-
      Port Trust unconditionally. The Respondent-Port Trust agreed
D     to inspection at the Depot of the Appellant, but imposed a further
      condition that the goods would be finally inspected at the
      showroom of the Respondent-Port Trust. This Condition was not
      accepted by the Appellant. It could not, therefore, be said that
      there was a concluded contract. There being no concluded
      contract, there could be no question of any breach on the part of
E     the Appellant or of damages or any risk purchase at the cost of
      the Appellant. The earnest deposit of the Appellant is liable to
      be refunded. [Para 59][247-F-H; 248-A-B]
           Haridwar Singh v. Bagun Sumbrui and Ors. AIR 1972
           SC 1242 and Union of India v. Bhim Sen Walaiti Ram
F          (1969) 3 SCC 146: [1970] 2 SCR 594 – relied on.
           Mahesh Transport Co. v. T. & D. Workers’ Union, AIR
           1974 SC 868 and M. V. Shankar Bhat and Anr. v. Claude
           Pinto since (D) by Lrs. and Ors., (2003) 4 SCC 86:
           [2003] 1 SCR 1212 – held inapplicable.
G
           Rajasthan State Electricity Board and Others v. Dayal
           Wood Works AIR 1998 AP 381; Fateh Chand v.
           Balkishan Das AIR 1963 SC 1405: [1964] 1 SCR 515;
           G.M.T.A.P. Co-op. Mkts. Ltd. v. Dy. Registrar, Co-op

H
    M/S. PADIA TIMBER CO. (P) LTD. v. THE BOARD OF                     231
      TRUSTEES OF VISAKHAPATNAM PORT TRUST

      Societies, Raichur AIR 1998 Karnataka 354; Marimuthu             A
      Gounder v. Ramaswamy Gounder and Ors. AIR 1979
      Madras 189; A.K.A.S. Jamal v. Moola Dawood Sons &
      Co. AIR 1915 Privy Council 48; M/s Saraya Distillery,
      Sardarbaggar v. Union of India and Anr. AIR 1984
      Delhi 360; Murlidhar Chiranjilal v. M/s Harishchandra
                                                                       B
      Dwarkadas and Anr. AIR 1962 SC 366 : [1962] 1 SCR
      653; State of Maharashtra and Anr. v. Digambar
      Balwant Kulkarni AIR 1979 SC 1339 : [1979] 3
      SCR 188; Visakhapatnam Port Trust, Visakhapatnam
      and Anr. v. Bihar Alloy Steels Ltd. and Ors. 1991 (1)
      A.L.T. 582; Raghunandhan Reddy v. The State of                   C
      Hyderabad thr. The Secretary to Government Revenue
      Department AIR 1963 AP 110; Jawahar Lal Burman v.
      Union of India, AIR 1962 SC 378 : [1962] SCR 769;
      U.P. Rajkiya Nirman Nigam Ltd. v. Indure Pvt. Ltd. and
      Ors. AIR 1996 SC 1373 : [1996] 2 SCR 386 – referred
                                                                       D
      to.
                      Case Law Reference
[1964] 1 SCR 515               referred to            Para 35
[1962] 1 SCR 653               referred to            Para 35
                                                                       E
[1979] 3 SCR 188               referred to            Para 35
AIR 1974 SC 868                held inapplicable      Para 46
[2003] 1 SCR 1212              held inapplicable      Para 46
[1962] SCR 769                 referred to            Para 46
                                                                       F
[1996] 2 SCR 386               referred to            Para 46
AIR 1972 SC 1242               relied on               Para 56
[1970] 2 SCR 594               relied on               Para 57
      CIVIL APPELLATE JURISDICTION : Civil Appeal No. 7469             G
of 2008.
      From the Judgment and Order dated 10.10.2006 of the High Court
of Judicature at Andhra Pradesh at Hyderabad in Appeal No. 2196 and
2197 of 2000.
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232            SUPREME COURT REPORTS                          [2021] 1 S.C.R.


A           Kailash Vasdev, Sr. Adv., Devashish Bharuka, Justine George,
      Ms. Savshree, Ravi Bharuka, Gopal Singh, Manish Kumar, Srikaanth S.,
      Advs. for the appearing parties.
            The Judgment of the Court was delivered by
            INDIRA BANERJEE, J.
B
             1. The short question involved in this appeal is, whether the
      acceptance of a conditional offer with a further condition results in a
      concluded contract, irrespective of whether the offerer accepts the
      further condition proposed by the acceptor. This question does not appear
      to have been addressed by the High Court or the Court below.
C
             2. This appeal is against a common Judgment and Order dated
      10.10.2006 passed by the High Court of Judicature at Hyderabad in
      Appeal Nos.2196 and 2197 of 2000 confirming a Judgment and Order
      dated 31.3.2000 of the Additional Senior Civil Judge, Visakhapatnam
      allowing the suit being O.S. No.106 of 1993 filed by the Respondent-
D     Port Trust against the Appellant for damages, and dismissing O.S. No.450
      of 1994 filed by the Appellant for refund of earnest deposit.
            3. On or about 17.7.1990, the Respondent-Port Trust floated a
      tender for supply of Wooden Sleepers. The tenders were due to be
      opened on 01.08.1990.
E
            4. Clauses 15 and 16 of the tender are extracted hereinbelow:-
            “15. The purchaser will not pay separately for transit
            insurance and the supplier will be responsible till the entire
            stores contracted for arrive in good condition at destination.
            The consignee will as soon as but not later than 30 days of
F
            the date of arrival of stores at destination notify the supplier
            of any loss, or damage to the stores that may have occurred
            during transit.
            16. In the event of the supplies being found defective in any
            matter the right to reject such materials and return the same
G           to the supplier and recover the freight by the Port is reserved.”
             5. Pursuant to the aforesaid tender, the Appellant submitted its
      offer on or about 01.08.1990. It was a specific condition of the offer of
      the Appellant that inspection of the Sleepers, as per the requirement of
      the Respondent-Port Trust, would have to be conducted only at the depot
H
M/S. PADIA TIMBER CO. (P) LTD. v. THE BOARD OF TRUSTEES 233
OF VISAKHAPATNAM PORT TRUST [INDIRA BANERJEE, J.]

of the Appellant. The Appellant did not accept Clauses 15 and 16 of the          A
Tender and rather made a counter proposal. In accordance with the
terms and conditions of the tender, the Appellant deposited Rs.75,000/-
towards earnest deposit, along with its quotation.
      6. On or about 02.08.1990, the Controller of Stores of the
Respondent-Port Trust informed the tenderers that the opening of the             B
tenders had been postponed to 08.08.1990.
      7. On 08.08.1990, the Appellant submitted its revised quotation
and/or offer, reiterating that inspection as per the requirement of the
Respondent-Port Trust would have to be conducted only at the depot of
the Appellant. After the tenders were opened certain discussions took            C
place between the Appellant and the Tender Committee of the
Respondent-Port Trust.
        8. By a letter dated 11.10.1990, the Appellant agreed to supply
wooden sleepers to the Respondent-Port Trust on the terms and
conditions stipulated in the said letter. The Appellant reiterated that the      D
Respondent-Port Trust could inspect the goods to be supplied, at the
factory site of the Appellant at Vepagunta, Visakhapatnam, as this would
facilitate re-transit of rejected goods to the depot of the Appellant, without
additional financial burden.
        9. The Appellant made it clear to the Respondent-Port Trust,             E
that if the Respondent-Port Trust still required inspection at the site of
the Respondent-Port Trust, the Appellant would charge 25% above the
rate quoted by the Appellant for the supply of wooden sleepers. The
said letter is extracted hereinbelow for convenience:-
       1. “We are agreeable to supply the B.G Track Indian sale                  F
       wood sleepers F.D.R V.P.T site by our own transportation.
       2. With regard to inspection clause you can inspect the material
       at our factory site at Vepagunta, Visakhapatnam. This will
       facilitate us to retransist the rejected materials if any to our
       the depot without any additional financial commitment. If you
                                                                                 G
       still require inspection, at your site we will charge 25% extra
       in our rate.
       3. As the tender committee had mentioned during the
       discussion on 10.10.90, we are agreeable to the condition
       for the 100 % payment a weekday, after acceptance of the
       materials.                                                                H
234            SUPREME COURT REPORTS                          [2021] 1 S.C.R.


A           4. We charge 24 % interest on all belated payments.
            5. We can immediately supply two thousand of BG Tracks
            sleepers and the supply can be completed as per your
            requirement.
            6. We are regular supplier of sleepers to Indian Railways. We
B           wish to extend our transaction with the V.P.T.
            7. We will execute 10% of security deposit as on bank
            guarantee and also you have refund to our E.M.D amount of
            Rs 75,000/- awaiting your favourable order.”

C            10. Thereafter, further correspondence ensued between the parties.
      By another letter dated 20.10.1990 addressed to the Controller of stores
      of the Respondent-Port Trust, the Appellant reiterated that it had not
      agreed to inspection at the General Stores of the Respondent-Port Trust.
      The Appellant made it clear that, in the event the Respondent-Port
      Trust insisted on inspection at the General Stores of the Respondent-
D     Port Trust, the Appellant would charge 24% extra instead of 25% as
      mentioned in its earlier letter. The said letter dated 20.10.1990 was duly
      received by the Respondent-Port Trust.
              11. By a letter dated 29.10.1990, written in response to the
      quotations dated 1.8.1990, 8.8.1990 and the letter dated 20.10.1990 of
E     the Appellant, the Respondent-Port Trust informed the Appellant that
      the Respondent-Port Trust had accepted the offer of the Appellant for
      supply of wooden sleepers at the rate quoted by the Appellant. Though
      the Respondent-Port Trust agreed that the Inspection Committee would
      inspect the Wooden Sleepers at the site of the Appellant, the Respondent-
F     Port Trust imposed the further condition that the Appellant would have
      to transport the Wooden Sleepers to the General Stores of the
      Respondent-Port Trust by road, at the cost of the Appellant and the
      final inspection would be made at the General Stores of the Respondent-
      Port Trust. The Respondent-Port Trust also requested the Appellant to
      extend the delivery period of the sleepers until 15.11.1990.
G
             12. By a letter dated 30.10.1990 written in response to the letter
      dated 29.10.1990, the Appellant informed the Controller of Stores of the
      Respondent-Port Trust that the Appellant was not accepting the terms
      and conditions stipulated in the said letter dated 29.10.1990, which were
      not as per the Appellant’s offer. The Appellant also declined to extend
H     the validity of its offer, since prices had gone up.
M/S. PADIA TIMBER CO. (P) LTD. v. THE BOARD OF TRUSTEES 235
OF VISAKHAPATNAM PORT TRUST [INDIRA BANERJEE, J.]

       13. By the aforesaid letter dated 30.10.1990, the Appellant rejected     A
the proposal of the Respondent-Port Trust and requested that the earnest
money deposited by the Appellant be returned to the Appellant.
       14. It appears that on the same day, i.e. 30.10.1990, the Controller
of Stores of the Respondent-Port Trust put up an Office Note, seeking
sanction of the Chairman of the Respondent-Port Trust for placing orders        B
on the Appellant for supply of 10,596 Broad Gauge Track Sleepers and
761 Broad Gauge special size sleepers, at a total cost of Rs.67,96,764
odd, for which a Letter of intent cum purchase order dated 29.10.1990
had been issued by the Respondent-Port Trust.
      15. A purchase order No. G 101126 90-91 dated 31.10.1990 was              C
issued to the Appellant from the office of the Controller of Stores of the
Respondent-Port Trust, requesting the Appellant to supply 10596 Broad
Gauge Track Sleepers and 761 Broad Gauge Special Sleepers of Ist
Class Salwood as per the latest Indian Railway Standards, on the terms
and conditions specified in the Purchase Order and the Special Conditions
of purchase appended thereto, according to the specifications and at the        D
rates mentioned in the Purchase Order.
        16. The Letter of intent and the purchase order were followed by
a letter dated 12.11.1990, written in response to the letter dated 30.10.1990
of the Appellant. By the aforesaid letter, the Respondent-Port Trust
requested the Appellant to supply the materials ordered as per the              E
purchase order, inter alia, contending that the purchase order had duly
been placed on the Appellant within the period of validity of the price
quoted by the Appellant, after issuing a letter of intent to the Appellant,
accepting its offer. The Appellant was warned that if supply was not
made as per the purchase order, risk purchase would be made at the              F
cost of the Appellant and the Earnest Deposit of Rs.75,000 would be
forfeited. The Respondent-Port Trust also noted that the Appellant had
not made the security deposit, to which the purchase order was subject.
       17. By another letter dated 19.11.1990, the Respondent-Port Trust
requested the Appellant to commence supply of materials. In response            G
to the said letter, the Appellant wrote a letter dated 27.11.1990 to the
Respondent-Port Trust, contending that that there was no concluded
contract between the Appellant and the Respondent-Port Trust and
once again requested that the earnest money deposited by the Appellant
with the Respondent-Port Trust be refunded to the Appellant.
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236            SUPREME COURT REPORTS                           [2021] 1 S.C.R.


A           18. On or about 03.9.1991, that is, after ten months, the
      Respondent-Port Trust placed an order for supply of wooden sleepers
      on M/s. Chhawohharia Machine Tools Corporation, for supply of wooden
      sleepers at a much higher rate.
             19. The Respondent-Port Trust has contended that, by reason of
B     refusal of the Appellant to discharge its obligation of supplying the
      requisite number of sleepers, as required by the Respondent-Port Trust,
      to the Respondent-Port Trust, in terms of the contract, at the rate quoted
      by the Appellant in its revised bid, the Respondent-Port Trust had been
      constrained to invoke the risk purchase clause as contained in Paragraph
      16 of the Special Conditions of purchase, appended to the purchase
C     order dated 31.10.1990and purchase the wooden sleepers at a higher
      rate from a third party, incurring losses, for which the Respondent-Port
      Trust was entitled to claim damages. It is the case of the Respondent-
      Port Trust that the conditions stipulated in the purchase order, including
      the Special Conditions of Purchase constitute the terms of a binding
D     contract.
             20. According to the Appellant the negotiations between the
      Appellant and the Respondent-Port Trust did not fructify into a concluded
      contract, since the Respondent-Port Trust did not accept the conditions
      of the offer of the Appellant fully and the Appellant did not agree to the
E     terms and conditions on which the the Respondent-Port Trust insisted,
      particularly the condition of final inspection at the General Stores of the
      Appellant.
             21. On or about 10.4.1992, the Respondent-Port Trust filed the
      suit being O.S. No.106 of 1993 in the Court of II Additional Subordinate
F     Judge, Visakhapatnam against the Appellant, seeking damages for breach
      of contract to the tune of Rs.33,19,991/- along with interest thereon.
      The Appellant duly filed its written statement in the said suit on or about
      23.3.1994.
            22. In or about June, 1994, the Appellant filed the suit being O.S.
G     No.450 of 1994 in the Court of Subordinate Judge, Visakhapatnam
      claiming refund of earnest money deposited by the Appellant with the
      Respondent-Port Trust along with interest @ 24% per annum from
      24.4.1991 to 23.4.1993, costs and other consequential reliefs. The
      Respondent-Port Trust filed a written statement denying its liability to
      refund the earnest deposit.
H
M/S. PADIA TIMBER CO. (P) LTD. v. THE BOARD OF TRUSTEES 237
OF VISAKHAPATNAM PORT TRUST [INDIRA BANERJEE, J.]

        23. The two suits being O.S. No.106/1993 and O.S. No.450/1994         A
were clubbed together and heard by the First Additional Senior Civil
Judge, Visakhapatnam. In the first suit, the following issues were framed
for trial:-
      (i)    Whether the Appellant committed breach of contract?
      (ii)   Whether the Respondent-Port Trust was entitled to recover        B
             the suit amount from the defendant?
      (iii) To what relief was the Respondent-Port Trust entitled?
      24. In O.S. 450/1994 (the second suit), the issues were:-
      (i) Whether the Appellant was entitled to refund of earnest             C
          money with interest as claimed from the Respondent-Port
          Trust.
      (ii) Whether the suit (second suit) was barred by limitation?
      (iii) To what relief, if any, was the Appellant entitled?
                                                                              D
      25. Since the two suits were clubbed together and the issues in
the two suits were interlinked, common evidence was recorded for the
two suits. While one V. Adinarayana, who had been working in the Stores
Department of the Respondent-Port Trust at the material time, was
examined on behalf of the Respondent-Port Trust, Shri G. C. Padia, who
was the Director of the Appellant was examined on behalf of the               E
Appellant.
      26. The two suits were disposed of together, by a common
judgment and order dated 31.3.2000. While the first suit was decreed in
favour of the Respondent-Port Trust, the second suit filed by the Appellant
was dismissed.                                                                F

      27. After discussing the pleadings and the contentions of the
respective parties, the Trial Court found that it had been admitted that
the Respondent-Port Trust had invited tenders for supply of wooden
sleepers, pursuant to which the Appellant had submitted its bid.
                                                                              G
        28. The Trial Court held that the Respondent-Port Trust had
accepted the offer of the Appellant and issued a letter of intent cum
purchase order on 29.10.1990, that is, within the period of validity of the
price quoted by the Appellant. The price quoted by the Appellant was
valid till 31.10.1990.
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238            SUPREME COURT REPORTS                           [2021] 1 S.C.R.


A            29. The Trial Court rejected the contention of the Appellant that
      the Appellant had revoked its offer before acceptance thereof by the
      Respondent-Port Trust, and held that there was a concluded contract
      between the Appellant and the Respondent-Port Trust, since the
      Respondent-Port Trust had accepted the tender submitted by the
      Appellant on 29.10.1990, while the price quoted by Appellant was still
B
      valid. The Trial Court held that the contract was concluded on 29.10.1990
      when the letter of intent was issued by the Respondent- Port Trust.
             30. The Trial Court observed that, in order to determine whether
      or not there was a concluded contract between the Appellant and the
      Respondent-Port Trust, the crucial question was whether the tender
C     submitted by the Appellant had been accepted by the Respondent-Port
      Trust within 31st October, 1990, being the stipulated period of validity of
      the quotation given by the Appellant. The Trial Court found that
      acceptance of the purchase order was completed as against the
      Appellant, when the letter of intent cum purchase order was dispatched
D     from the end of the Respondent-Port Trust.
             31. In arriving at the finding that there was a concluded contract
      between the Respondent-Port Trust and the Appellant, the Trial Court
      relied on Section 4 of the Indian Contract Act, 1872, which is set out
      hereinbelow for convenience:
E           “4. Communication when complete.—The communication
            of a proposal is complete when it comes to the knowledge
            of the person to whom it is made.
            The communication of an acceptance is complete,—

F           as against the proposer, when it is put in a course of
            transmission to him, so as to be out of the power of the
            acceptor;
            as against the acceptor, when it comes to the knowledge of
            the proposer.
G           The communication of a revocation is complete,—
            as against the person who makes it, when it is put into a course
            of transmission to the person to whom it is made, so as to be
            out of the power of the person who makes it;
            as against the person to whom it is made, when it comes to his
H           knowledge.”
M/S. PADIA TIMBER CO. (P) LTD. v. THE BOARD OF TRUSTEES 239
OF VISAKHAPATNAM PORT TRUST [INDIRA BANERJEE, J.]

       32. The Trial Court found that it had been proved that there was       A
a concluded contract between the Appellant and the Respondent-Port
Trust, but the Appellant had admittedly not supplied the wooden sleepers
to the Respondent-Port Trust. Once it was proved that there was a
concluded contract and the defendant that is, the Appellant before this
urt, had admittedly not supplied the goods as per the terms of the purchase
                                                                              B
order, it had to be held that the defendant had committed breach of
contract. The Trial Court, in effect, held that the fact that the Appellant
had received the letter of intent and endorsed the receipt thereof within
31st October, 1990, established the case of the Respondent that the
contract had been concluded.
      33. The Trial Court held that the Appellant having committed            C
breach of its obligations under a concluded contract with the Respondent-
Port Trust, the Respondent Port Trust was entitled to damages as
claimed in the suit being O.S. No.106 of 1993. In awarding damages to
the Respondent-Port Trust, the Trial Court took note of Section 73 of the
Contract Act which is set out hereinbelow for convenience:                    D
       “73. Compensation for loss or damage caused by breach of
       contract.—When a contract has been broken, the party who
       suffers by such breach is entitled to receive, from the party
       who has broken the contract, compensation for any loss or
       damage caused to him thereby, which naturally arose in the             E
       usual course of things from such breach, or which the parties
       knew, when they made the contract, to be likely to result from
       the breach of it.”
      34. The Trial Court held that in case of breach of a contract for
supply of goods, the Port could claim the difference between the              F
contracted price and the market price of such goods at the place of
delivery, as damages. If there was no available market price at the
nearest place, the price prevailing in the controlling market could be
considered.
      35. The Trial Court considered the judgments in Rajasthan State         G
Electricity Board and Others v. Dayal Wood Works1; Fateh Chand
v. Balkishan Das2; G.M.T.A.P. Co-op. Mkts. Ltd. v. Dy. Registrar,
Co-op Societies, Raichur 3;Marimuthu Gounder v. Ramaswamy
1
  AIR 1998 AP 381
2
  AIR 1963 SC 1405
3
  AIR 1998 Karnataka 354                                                      H
240             SUPREME COURT REPORTS                          [2021] 1 S.C.R.


A     Gounder and Ors.4 cited by the Appellant and the judgments in A.K.A.S.
      Jamal v. Moola Dawood Sons & Co. 5; M/s Saraya Distillery,
      Sardarbaggar v. Union of India and Anr.6; Murlidhar Chiranjilal v.
      M/s Harishchandra Dwarkadas and Anr.7; State of Maharashtra
      and Anr. v. Digambar Balwant Kulkarni8 cited by the Respondent-
      Port Trust.
B
            36. Relying on the judgment of the Division Bench of Delhi High
      Court in M/s Saraya Distillery, Sardarbaggar v. Union of India and
      Anr. (supra), the Trial Court held that proof of actual repurchase was
      not necessary for claiming damages.
C           37. The Trial Court rejected the contention of the Appellant of
      delay in calling for tenders from a third party, on the ground that the
      Respondent-Port Trust being a statutory authority and not being a private
      individual, was required to follow its rules and procedures in calling for
      tenders and accepting the tender of a third party.

D           38. The Trial Court found that the contract was enforceable till its
      completion or its abandonment. The rescission of the contract and
      consequential forfeiture of security deposit was proper and within the
      terms of the contract.
             39. In Rajasthan State Electricity Board and others v. Dayal
E     Woods Works (supra), cited on behalf of the Appellant before the Trial
      Court, the High Court had found on facts that there was no concluded
      contract for supply of sleepers and consequently the plaintiff was entitled
      to refund of security deposit.
            40. In Fateh Chand (supra), cited on behalf of the Appellant
F     before the Trial Court, a five-Judge Bench of this Court held:-
                   “10 …...In assessing damages the Court has, subject
                   to the limit of the penalty stipulated, jurisdiction to
                   award such compensation as it deems reasonable
                   having regard to all the circumstances of the case.
                   Jurisdiction of the Court to award compensation in
G
                   case of breach of contract is unqualified except as to
      4
        AIR 1979 Madras 189
      5
        AIR 1915 Privy Council 48
      6
        AIR 1984 Delhi 360
      7
        AIR 1962 SC 366 (V49 C57)
      8
H       AIR 1979 SC 1339
M/S. PADIA TIMBER CO. (P) LTD. v. THE BOARD OF TRUSTEES 241
OF VISAKHAPATNAM PORT TRUST [INDIRA BANERJEE, J.]

             the maximum stipulated; but compensation has to be             A
             reasonable, and that imposes upon the Court duty to
             award compensation according to settled principles.
             The section undoubtedly says that the aggrieved party
             is entitled to receive compensation from the party who
             has broken the contract, whether or not actual
                                                                            B
             damage or loss is proved to have been caused by the
             breach. Thereby it merely dispenses with proof of
             “actual loss or damage”; it does not justify the award
             of compensation when in consequence of the breach
             no legal injury at all has resulted, because
             compensation for breach of contract can be awarded             C
             to make good loss or damage which naturally arose
             in the usual course of things, or which the parties
             knew when they made the contract, to be likely to
             result from the breach.
             11. …..In all cases, therefore, where there is a               D
             stipulation in the nature of penalty for forfeiture of
             an amount deposited pursuant to the terms of contract
             which expressly provides for forfeiture, the court has
             jurisdiction to award such sum only as it considers
             reasonable, but not exceeding the amount specified
             in the contract as liable to forfeiture.”                      E

        41. In Marimuthu Gounder (supra), also cited by the Appellant,
before the Trial Court, a Division Bench of Madras High Court held that
proof of actual damage was a sine qua non to seek damages and in
G.M.T.A.P. Co-op. Mkts. Ltd. v. Dy. Registrar, Co-op Societies,
Raichur (supra) a Single Bench of Karnataka High Court held that            F
penalty could not be imposed on a milling agent for default in supply of
rice, in the absence of pre-estimation of the loss suffered on account of
the default, even though the contract may have provided for imposition
of penalty.
     42. In Murlidhar Chiranjilal (supra), cited on behalf of the           G
Respondent-Port Trust this Court held:-
      “9. The two principles on which damages in such cases are
      calculated are well-settled. The first is that, as far as possible,
      he who has proved a breach of a bargain to supply what he
                                                                            H
242            SUPREME COURT REPORTS                         [2021] 1 S.C.R.


A           contracted to get is to be placed, as far as money can do it, in
            as good a situation as if the contract had been performed;
            but this principle is qualified by a second, which imposes on
            a plaintiff the duty of taking all reasonable steps to mitigate
            the loss consequent on the breach, and debars him from
            claiming any part of the damage which is due to his neglect
B
            to take such steps: (British Westinghouse Electric and
            Manufacturing Company Limited v. Underground Electric
            Railways Company of London [(1912) AC 673, 689] ). These
            two principles also follow from the law as laid down in Section
            73 read with the Explanation thereof. If therefore the contract
C           was to be performed at Kanpur it was the respondent’s duty
            to buy the goods in Kanpur and rail them to Calcutta on the
            date of the breach and if it suffered any damage thereby
            because of the rise in price on the date of the breach as
            compared to the contract price, it would be entitled to be re-
            imbursed for the loss. Even if the respondent did not actually
D
            buy them in the market at Kanpur on the date of breach it
            would be entitled to damages on proof of the rate for similar
            canvas prevalent in Kanpur on the date of breach, if that
            rate was above the contracted rate resulting in loss to it. But
            the respondent did not make any attempt to prove the rate for
E           similar canvas prevalent in Kanpur on the date of breach.
            Therefore it would obviously be not entitled to any damages
            at all, for on this state of the evidence it could not be said
            that any damage naturally arose in the usual course of things.”
             43. In State of Maharashtra and Anr. v. Digambar Balwant
F     Kulkarni(supra), cited on behalf of the Respondent-Port Trust this Court
      held that a contract could not be rescinded after the expiry of the due
      date for the purpose thereof. Abandonment of the contract work after
      expiry of the due date for the purpose would amount to breach, giving
      rise to a claim for damages against the party in breach.
G            44. In A.K.A.S. Jamal v. Moola Dawood Sons & Co. (supra),
      the Privy Council held that a plaintiff who sues for damages owes the
      duty of taking all reasonable steps to mitigate the loss consequent upon
      the breach and cannot claim as damages any sum which is incurred due
      to his own neglect.

H
M/S. PADIA TIMBER CO. (P) LTD. v. THE BOARD OF TRUSTEES 243
OF VISAKHAPATNAM PORT TRUST [INDIRA BANERJEE, J.]

      45. The High Court has dismissed the appeals filed by the               A
Appellant, holding that the Trial Court had, on consideration of the entire
evidence and materials available on record decreed the suit filed by the
Respondent-Port Trust and dismissed the claim of the Appellant.
      46. Observing that the main submission made on behalf of the
respective parties before the High Court swirled around whether there         B
was any concluded contract or not, the High Court noted the following
judgments cited on behalf of the Appellant in this regard:-
       (i)    Visakhapatnam Port Trust, Visakhapatnam and Anr. v.
              Bihar Alloy Steels Ltd. And Ors.9
       (ii) Raghunandhan Reddy v. The State of Hyderabad thr.                 C
            The Secretary to Government Revenue Department 10
       (iii) Mahesh Transport Co. v. T. & D. Workers’ Union11
       (iv) M.V. Shankar Bhat and Anr. v. Claude Pinto since (D)
            by Lrs. and Ors.12                                                D
                                                          13
       (v)    Jawahar Lal Burman v. Union of India
       (iv) U.P. Rajkiya Nirman Nigam Ltd. v. Indure Pvt. Ltd.
            And Ors.14
       47. In the judgment and order under appeal, the High Court has
not discussed any of the judgments referred to above. The High Court          E
simply recorded the contention of the Appellant that there was no
previous approval of the Board of Trustees as contemplated under Section
34(1) of the Major Port Trusts Act, 1963, and therefore, no enforceable
contract.
      48. In Visakhapatnam Port Trust, Visakhapatnam and Anr. v.              F
Bihar Alloy Steels Ltd. and Ors. (supra) a Division Bench of the High
Court held:
               “17. In the instant case the provisions of S. 34
               prescribe the manner in which a contract is to be
               made on behalf of the Board of Trustees and further            G
9
   1991 (1) A.L.T. 582
10
    AIR 1963 AP 110
11
   AIR 1974 SC 868
12
    (2003) 4 SCC 86
13
   AIR 1962 SC 378
14
   AIR 1996 SC 1373                                                           H
244            SUPREME COURT REPORTS                          [2021] 1 S.C.R.


A                  sub-section (3) contains a prohibition that a contract
                   not made in accordance with the earlier portions of
                   Section shall not be binding on the Board. It has
                   been held by the Supreme Court in its decision
                   reported in H.S. Rokhy v. New Delhi Municipality AIR
                   1962 SC 554 that the effect of such a prohibition as
B
                   is contained in sub-sec. (3) of S. 34 renders the
                   contract itself void and unenforceable. In that case
                   the controversy was about estoppel against New
                   Delhi Municipal Corporation which was governed
                   by the Punjab Municipal Act, 1911, which contains
C                  a similar provision viz., S. 47.”
             49. In Visakhapatnam Port Trust, Visakhapatnam and Anr. v.
      Bihar Alloy Steels Ltd. and Ors. (supra) this Court held that the promise
      as contained in the letter of Traffic Manager to lease an area of port
      trust was void and unenforceable against the Board of Trustees, there
D     being no contract made in accordance with Section 34 of the Major Port
      Trusts Act.
            50. In Raghunandhan Reddy v. The State of Hyderabad thr.
      The Secretary to Government Revenue Department (supra),a Division
      Bench of the High Court held:
E           “8. It is a well-established principle of law that only when an
            offer is accepted that the contract is concluded and binds the
            parties. It is equally well-settled that before an offer is
            accepted, the offerer can withdraw his offer, but if the
            acceptance is conditional or is not final, then there is no
F           concluded contract.”
             51. The judgment of this Court in Mahesh Transport Co. v.
      Transport and Dock Workers’ Union (supra),whichrelates to the validity
      and propriety of the reference of an industrial dispute under Section
      10(1) of the Industrial Disputes Act, 1947, apparently has no relevance
G     to the issues involved in this case. In M.V. Shankar Bhat and Anr. v.
      Claude Pinto since (D) by Lrs. and Ors. (supra),this Court held that
      an agreement which was subject to ratification by heirs under a will who
      were not parties to the agreement did not create a conclusive contract.
      The relevance of the judgment is unexplained.

H
M/S. PADIA TIMBER CO. (P) LTD. v. THE BOARD OF TRUSTEES 245
OF VISAKHAPATNAM PORT TRUST [INDIRA BANERJEE, J.]

      52. In U.P. Rajkiya Nirman Nigam Ltd. v. Indure Pvt. Ltd.               A
And Ors. (supra) this Court held that a contract by a Government
Notification is not binding unless it is executed in accordance with its
Articles of Association.
       53. The High Court found that there was no dispute that tenders
had been called for and that it was the case of the Respondent Port           B
Trust that the offer of the Appellant had in fact been accepted and
purchase order issued on 31st October, 1990 under registered Post that
had been acknowledged but refused by the Appellant. The High Court
also recorded the contention of the Appellant that in the absence of
previous approval from the Board of Trustees of the Respondent-Port
Trust, under the proviso to Section 34(1) of the Major Port Trust Act         C
1963, there could be no enforceable contract. Even though the High
Court referred to the submission of the Appellant that the letter of intent
was subject to ratification by the Board and and the only witness of the
Respondent-Port Trust had admitted that no contract had been concluded,
the High Court did not deal with the same. The High Court observed:           D
      “….The main reliance placed by the Visakhapatnam Port Trust
      under Clause 16 of the tender conditions in Ex.A.1, was that
      in the event of non-supply of the material, the Port Trust has
      right to cancel the contract itself whereas the case of the
      Company was that there was no contract at all. Therefore,               E
      one has to see whether there was really any concluded or
      enforceable contract before one could blame the other. There
      has been a quite re-assertion through the evidence on behalf
      of the Port Trust by P.W.1. There is a reference to a mention in
      Ex.A.8 as to the ratification by the Board, which according to
      the M/s Padia Timber Company Pvt. Ltd., nothing is                      F
      forthcoming. Further, P.W.1 during his cross-examination,
      stated that it is true that the contract was not concluded.
      However, that itself cannot be a reflection on the nature of
      intent, which could follow the facts and circumstances in the
      documents, which are staring at. It is to be seen that even             G
      according to the M/s Padia Timber Company Pvt. Ltd., and
      as per its letter dated 27.11.1990 ex.A.10, the M/s Padia
      Timber Company Pvt., Ltd., admitted about the receipt of the
      letter dated 29.10.1990 and the acceptance of tender which
      is valid for three months. Therefore, having regard to the
                                                                              H
246            SUPREME COURT REPORTS                       [2021] 1 S.C.R.


A           letter in Ex.A.10 mentioning about the acceptance of the tender
            on 29.10.1990, it is not open to the M/s Padia Timber
            Company Pvt. Ltd., to fall back and say that there was no
            acceptance at all nor there was any concluded contract. The
            Court below was rightly held that the tender of the defendant
            was duly accepted on 29.10.1990 which was followed by the
B
            purchaser order on 31.10.1990 and that itself is more enough
            to show that there was concluded and enforceable contract.
            Thus, nothing lies in the mouth of the M/s Padia Timber
            Company Pvt. Ltd., to say that there was no concluded
            contract. Further, having regard to facts and circumstances
C           and admittedly there being no steps at all in terms of such
            acceptance, the breach squarely falls only on the M/s Padia
            Timber Company Pvt. Ltd. and therefore, the Visakhapatnam
            Port Trust has rightly forfeited the amount and the Court
            below was rightly held that the said plaintiff namely the
            Visakhapatnam Port Trust is entitled for the amounts as
D
            claimed. Following the same and consequently to the said
            findings which go to the very root of the case itself, the claim
            as made by the M/s Padia Timber Company Pvt. Ltd., for
            refund in the other suit also squarely falls to ground with the
            self-same reasons. Hence, we do not find any merits in these
E           appeals...”
             54. With the greatest of respect, the High Court has cursorily
      dealt with the contentions of the Appellant and has not even discussed
      the cases that had been cited on behalf of the Appellant.
            55. The Trial Court relied on Section 4 of the Contract Act, but
F     completely overlooked Section 7. Section 7 of the Indian Contract Act,
      1872 is set out hereinbelow for convenience:-
            “7. Acceptance must be absolute.—In order to convert a
            proposal into a promise the acceptance must— —In order to
            convert a proposal into a promise the acceptance must—”
G
            (1) be absolute and unqualified;
            (2) be expressed in some usual and reasonable manner, unless
            the proposal prescribes the manner in which it is to be
            accepted. If the proposal prescribes a manner in which it is
            to be accepted, and the acceptance is not made in such
H
M/S. PADIA TIMBER CO. (P) LTD. v. THE BOARD OF TRUSTEES 247
OF VISAKHAPATNAM PORT TRUST [INDIRA BANERJEE, J.]

         manner, the proposer may, within a reasonable time after the          A
         acceptance is communicated to him, insist that his proposal
         shall be accepted in the prescribed manner, and not otherwise;
         but, if he fails to do so, he accepts the acceptance.”
        56. It is a cardinal principle of the law of contract that the offer
and acceptance of an offer must be absolute. It can give no room for           B
doubt. The offer and acceptance must be based or founded on three
components, that is, certainty, commitment and communication.
However, when the acceptor puts in a new condition while accepting
the contract already signed by the proposer, the contract is not complete
until the proposer accepts that condition, as held by this Court in Haridwar
Singh v. Bagun Sumbrui and Ors.15An acceptance with a variation is             C
no acceptance. It is, in effect and substance, simply a counter proposal
which must be accepted fully by the original proposer, before a contract
is made.
      57. In Union of India v. Bhim Sen Walaiti Ram16,a three-Judge
Bench of this Court held that acceptance of an offer may be either             D
absolute or conditional. If the acceptance is conditional, offer can be
withdrawn at any moment until absolute acceptance has taken place.
       58. In Jawahar Lal Burman v. Union of India (supra), referred
to by the High Court, this Court held that under Section 7 of the Contract
Act acceptance of the offer must be absolute and unqualified and it            E
cannot be conditional. However, in the facts and circumstances of that
case, on a reading of the letter of acceptance as a whole, the Appellant’s
argument that the letter was intended to make a substantial variation in
the contract, by making the deposit of security a condition precedent
instead of a condition subsequent, was not accepted.                           F
       59. The High Court also overlooked Section 7 of the Contract
Act. Both the Trial Court and the High Court over-looked the main
point that, in the response to the tender floated by the Respondent-Port
Trust, the Appellant had submitted its offer conditionally subject to
inspection being held at the Depot of the Appellant. This condition was        G
not accepted by the Respondent-Port Trust unconditionally. The
Respondent-Port Trust agreed to inspection at the Depot of the Appellant,
but imposed a further condition that the goods would be finally inspected
15
     AIR 1972 SC 1242
16
     (1969) 3 SCC 146                                                          H
248              SUPREME COURT REPORTS                         [2021] 1 S.C.R.


A     at the showroom of the Respondent-Port Trust. This Condition was not
      accepted by the Appellant. It could not, therefore, be said that there was
      a concluded contract. There being no concluded contract, there could
      be no question of any breach on the part of the Appellant or of damages
      or any risk purchase at the cost of the Appellant. The earnest deposit of
      the Appellant is liable to be refunded.
B
             60. Since we hold that the Appellant was neither in breach nor
      liable to damages, it is not necessary for us to examine the questions of
      whether the compensation and/or damages claimed by the Respondent
      Port Trust was reasonable or excessive, whether claim for damages
      could only be maintained subject to proof of the actual damages suffered,
C     and whether the Respondent Port Trust had taken steps to mitigate losses.
      We also need not embark upon the academic exercise of deciding
      whether prior approval of the Board of Trustees is a condition precedent
      for creation of a valid contract for supply of goods, or whether post
      facto ratification by the Board would suffice.
D           61. The Appellant was entitled to refund of earnest money
      deposited with the Respondent-Port Trust. The earnest money shall be
      refunded within four weeks with interest @ 6% per annum from the
      date of institution of suit No.450 of 1994 till the date of refund thereof.
             62. The appeal is, accordingly, allowed. The Judgment and order
E     of the High Court under appeal as also the common judgment and order
      of the Trial Court in O.S. No.106 of 1993 and O.S. No.450 of 1994 are
      set aside. There will be no order as to costs.

      Bibhuti Bhushan Bose                                         Appeal allowed.
F




G




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