maddala thathaiah vs union of india

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Hey there,

This was a case of standing offer. Standing Offer is an agreement between a supplier and buyer where the supplier agrees to provide the desired goods and services to the supplier as and when asked at a predetermined price. A standing offer is not a contract. It is only valid for a set period after which it needs to be renewed. 

Here is the summarized version of the case for your help.

The facts giving rise to this appeal by special leave, are these:

The Dominion of India, as the owner of the Madras and Southern Mahratta Railway, represented by the General Manager of that railway, invited tenders for the supply of jaggery to the railway grain shops. The respondent submitted his tender for the supply of 14,000 imperial maunds of cane jaggery during February and March 1948. The tender form contained a note in Para 2 which was meant for the quantity required and the described dates of delivery. This note was:

“This Administration reserves the right to cancel the contract at any stage during the

tenure of the contract without calling up the outstandings on the unexpired portion of the

contract”.

The Deputy General Manager of the Railways, by his letter, dated January 29, 1948, accepted this tender. The letter asked the respondent to remit a sum of Rs. 7,900 for security and said that on receipt of the remittance, official order would be placed with the respondent. In his letter, dated February 16, 1948, the Deputy General Manager reiterated the acceptance of the tender subject to the respondent’s acceptance of the terms and conditions printed on the reverse of that letter. Among these terms, the terms of delivery stated: Programme of delivery to be 3,500 maunds on March 1, 1948; 3,500 maunds on March 22, 1948; 3500 mounds on April 5, 1948; and 3500 mounds on April 21, 1948. At the end of the terms and conditions was a note that the administration reserved the right to cancel the contract at any stage during the tenure of the contract without calling up the outstandings on the unexpired portion of the contract. The dates for the delivery of the four installments were slightly changed by a subsequent letter, dated February 28, 1948. By his letter, dated March 8, 1948, the Deputy General Manager informed the respondent that the balance quantity of jaggery outstanding on date against the order, dated February 16, 1948, be treated as canceled and the contract closed. The protests of the respondent were of no avail as the railway administration took its stand against the stipulation that the right to cancel the contract at any stage was reserved for it. Ultimately, the respondent instituted the suit against the Union of India for recovering damages resulting from a breach of contract. The trial Court dismissed the suit holding that the railway administration could cancel the contract without giving any reason whenever it liked, without making itself liable to pay any damages. The High Court held that the clause reserving the right in the appellant to cancel the contract was void and given the trial Court has not decided the issue about damages, remanded the suit for disposal after dealing with that matter. The Supreme court upheld the judgment of the high court and dismissed the petition.

I hope I could answer your query.

With regards,

Samayeta Bal