Decided on February 24,1970



- (1.) THE facts giving rise to these two appeals are these: On 25-11-1955, the State of Madras (hereinafter referred to as the plaintiff) represented by the Director of medical Services, invited tenders for the supply of articles of diet etc. to the City hospitals for a period of one year commencing from 1st of April 1956 and ending with the 31st March 1957. This notice had as its annexure, a schedule which showed the articles required and the approximate quantity estimated and needed for each hospital in the city. On an acceptance of the tender, the tenderer had to execute a stamped agreement Manickam Chetty, the respondent in O. S. A. 116 of 1966 (hereinafter referred to as the defendant) offered to supply, besides other items, (1) 13,33,500 lbs. of boiled hand-pounded rice at Re. 0-3-5 per lb; (2)63960 tons of gingili oil at Re. 0-12-91/2 per lb. and (3) 1,1151 tons of casuarina firewood at Rs. 57-14-0 per lb. He had also sent along with this tender, an amount of Rs. 9100 as earnest money which was liable to be forfeited to Government in the event of failure on his part to fulfil the contract. He also agreed to bind himself to the other conditions prescribed in the tender notification. Since he did not send the certificate of income-tax verification and the certificate showing a clearance of the sales tax as contemplated by clause 16 of the conditions of tender, by letter dated 25-11-1956 he was called upon to produce these certificates before the 5th february 1956. Meanwhile, the Government, by G. O. No. 944 Health, dated 12-31956, permitted the Director of Medical Services, to accept the defendant's tender and the latter in his turn on 14-3-1956 accepted his tender for the supply of the abovesaid three items, viz. , hand-pounded rice, gingili oil and casuarina firewood, at the rates quoted by him. He also directed him to make a security deposit of ten per cent of the total value of the supplies undertaken and to enter into a stamped agreement.
(2.) ON 26-3-1956, after the receipt of the above letter of acceptance from the director, the defendant wrote to him stating that because of the delay in the acceptance, he was unable to make arrangements in advance for the supply of hand-pounded rice and that he would only be in a position to supply the other two items as undertaken. The Director, in his turn, drew his attention to clause 23 in the Tender Conditions, which inter alia provided for a cancellation of the contract accompanied by a forfeiture of the earnest money, followed by a claim for damages which would be the difference between the price which was accepted and the price ultimately paid by the hospital authorities for the procurement of the articles concerned. The defendant sent a reply to this letter, stating that it was never his intention to wriggle out of the contract and requesting for a month's time for the supply of the handpounded rice. He also wanted permission for the supply of polished mill-rice of fine quality till then. Meantime indents were made to him by the different hospitals for the supply of the articles in respect of which his tender was already accepted. The Kasturba gandhi Hospital for women and children sent him an indent on 25-3-1955 for 100 lbs. of gingili oil and one ton of firewood, and against this, the defendant had supplied only the firewood called for. He did not supply the gingili oil. By a memo dated 3-4-1956, he was informed, that if he did not supply them before 4-4-1956, they would resort to local purchases which would lead to the recovery of the difference of cost from him. On 29-1-1956, the General Hospital had indented for the supply of 60 bags of hand-pounded rice on or before 4-4-1956. He did not supply this item. so, on 6-4-1956, by Ex. P. 16 he was informed that if the supply was not made immediately, they would resort to local purchases at his risk. On 11-4-1956, after receipt of these indents from these hospitals, the defendant addressed a letter to the Director of Medical Services, intimating him that he had made arrangements to begin the supplies from 12-4-1956, and stating that he had informed this fact to all the local hospitals from whom he had received indents. He further requested the Director to stop the local purchases at his risk.
(3.) ON 12-4-1956, the Dean of the Stanley Hospital informed him by a letter dated 10-4-1956, that due to his default, departmental purchase of rice of 200 lbs. was made from one Thanikachala Nadar at Re. 0-4-3 per lb. and that as such a sum of rs. 104-2-3 being the difference in cost was recoverable from him. On 16-4-1956, the defendant supplied 1,929 lbs. of hand-pounded rice as against a demand of 6000 lbs. to the Stanley Hospital, and by Ex. P. 20 he was informed that if the balance was not supplied before the 19th of that month, they would resort to local purchases at his risk. On 2-4-1956, the Women and children's Hospital had indented for the supply of 30 bags of boiled hand-pounded rice and 200 lbs. of gingili oil on or before 7-4-1956. The defendant supplied only ten bags of rice and 68 lbs. of gingili oil till 24-4-1956. This hospital informed him that if the articles were not supplied before 24-4-1956, they would arrange for local purchases. On 1-4-1956, the Royapettah Hospital made an indent for the supply of hand-pounded boiled rice and this was not supplied. So, this hospital had purchased four bags of rice on 11-4-1956 departmentally and written the letter Ex. P. 24 to him. Meantime, the Director, by Ex. P. 21, permitted the defendant to pay security deposit amount at 5 per cent of the total value, instead of at 10 per cent as originally required. Thus, during this period, the different hospitals proceeded on the footing that acceptance of the defendant's tenders by the Director amounted to a concluded contract.;

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