1. Election petition challenging a member's election on grounds of disqualification under Section 7(d) of the Representation of the People Act, 1951, due to a government mining lease. (Para 1 )
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1964 Supreme(SC) 163
SUPREME COURT OF INDIA
P.B. GAJENDRAGADKAR, C.J.I., M. HIDAYATULLAH, K.C. DAS GUPTA, J.C. SHAH, AND RAGHUBAR DAYAL, JJ.
C. V. K. Rao, Appellant
Versus
Dantu Bhaskara Rao, Respondent.
Civil Appeal No. 1072 of 1963.
Advocates Appeared
Mr. K. R. Chaudhuri, Advocate, for Appellant; Mr. A. V. Vishwanatha Sastri, Senior Advocate, (Mr. T. V. R. Tatachari, Advocate, with him), for Respondent.
Advocates:
A.V.VISHWANATHA SASTRI, K.R.CHAUDHARY, T.V.R.TATACHARI
A.V.VISHWANATHA SASTRI, K.R.CHAUDHARY, T.V.R.TATACHARI
A right of pre-emption in a mining lease, allowing the government to purchase minerals in preference to others upon notice, does not constitute a 'subsisting contract for the supply of goods' for disqualification purposes under Section 7(d) of the Representation of the People Act, 1951.
Headnote:(A) Representation of the People Act, 1951 - Section 7(d) - Disqualification of a member of Legislative Assembly - Subsisting contract for supply of goods - Mining lease containing a right of pre-emption for the Government - Whether such a clause amounts to a contract for the supply of goods - A reservation of a right to obtain minerals in preference to others, without an obligation to buy or a concluded agreement for specific quantities, does not constitute a subsisting contract for the supply of goods. (Paras 3, 4)
(B) Course of business - A contract may itself be the start of the business, and the phrase "in the course of business" would still be applicable. (Para 4)
Facts of the case:
An election petition was filed challenging the election of a candidate on the ground of disqualification under Section 7(d) of the Act. The candidate held a mining lease from the State Government. The lease contained a clause granting the Government a right of pre-emption over the minerals. The Election Tribunal declared the election void, but the High Court reversed this decision.
Findings of Court:
The right of pre-emption reserved to the Government does not amount to a concluded contract for the supply of goods as there is no obligation on the Government to buy nor any compulsion on the lessee to sell unless a notice is served.
Issues: Whether a clause in a mining lease conferring a right of pre-emption on the Government constitutes a "subsisting contract" for the supply of goods within the meaning of Section 7(d) of the Representation of the People Act, 1951.
Ratio Decidendi: A contract requires an offer and its acceptance. A mere reservation of a right to purchase goods in preference to others, where no specific quantity is agreed upon and no obligation to purchase exists until a notice is issued, is not a subsisting contract for the supply of goods.
Result: Appeal dismissed.
Legal Category Hierarchy
Table of Contents
2. Whether a right of pre-emption clause in a mining lease constitutes a subsisting contract for the supply of goods to the government under Section 7(d) of the Act. (Para 4 )
3. A right of pre-emption is a reservation of a right to prior purchase and not a concluded contract for the supply of goods requiring offer and acceptance. (Para 3 , 4 , 5 )
4. A reservation of a right of pre-emption by the government does not amount to a subsisting contract for the supply of goods for disqualification purposes. (Para 4 , 5 )
5. Appeal dismissed; High Court decision reversing the Election Tribunal's voiding of the election is upheld. (Para 5 )
6. What constitutes a subsisting contract for the supply of goods under Section 7(d) of the Representation of the People Act, 1951?
A subsisting contract requires a concluded agreement based on an offer and its acceptance. A mere reservation of a right by the government to obtain goods in preference to others does not constitute a concluded contract for the sale of goods. (Para 4 )
7. Does a right of pre-emption clause in a mining lease disqualify a candidate under Section 7(d) of the Representation of the People Act, 1951?
No. A right of pre-emption reserves the government's right to prior purchase of minerals but does not create an obligation to buy or a compulsion to sell until a notice is served. (Para 4 , 5 )
8. Does a contract need to be part of an existing course of business to trigger disqualification under Section 7(d)?
No. A contract may itself be the start of the business, and the phrase in the course of business would still be applicable even if no prior transactions exist. (Para 4 )
Judgment
HIDAYATULLAH, J. :
The respondent Dentu Bhaskara Rao was returned to the Andhra Pradesh Legislative Assembly from Kakinada constituency at the last general election. The appellant C.V. K. Rao was his closest competitor. There were two other candidates but they obtained very few votes and they have not shown any further interest. The appellant filed an election petition to question the election of the respondent on many grounds : one such ground was that the respondent was disqualified under S. 7(d) of the Representation of the People Act, 1951 (43 of 1951). The respondent had obtained a mining lease from the State of Andhra Pradesh on April 13, 1960, though on the date he filed his nomination paper he had not begun operations under that lease. The appellant took objection to the nomination of the respondent on the ground that he held a contract from the Andhra Pradesh Government within the prohibition by S.7(d) of the Act, but the Returning Officer overruled his objection. The Election Tribunal later held that he was disqualified under S. 7(d) of Act 43 of 1951 and declared the election void. On appeal, the High Court of Andhra Pradesh reversed the decision and the present appeal has been filed on a certificate granted by the High Court.
2. Section 7(d) reads as follows :-
7. A person shall be disqualified for being chosen as and for being, a member of either House of Parliament or the Legislative Assembly or Legislative Council of a State
(a) x x x
(b) x x x
(c) x x x
(d) if there subsists a contract entered into in the course of his trade or business by him with the appropriate Government for the supply of goods to, or for the execution of any works undertaken by, that Government".
The mining lease was in the standard form and after setting out the consideration for the lease, it described in Parts I to III, the area of the lease, the description of the area, liberties, powers and privileges to be exercised and enjoyed by the lessee and the restrictions and conditions as to their exercise. In Part IV it described the liberties, powers and privileges reserved to the State Government and in Part V and VI the rents and royalties reserved by the lease and certain other provisions relating to them. Part VII then dealt with the covenants of the lessee in respect of payment of rents, royalties, taxes etc. One such covenant was in Cl. 21 and was headed "Right of Pre-emption" and it conferred on the State Government a right, of pre-emption of the minerals lying in or upon the land demised or elsewhere under the control of the lessee. That clause was interpreted by the Tribunal as a contract entered in the course of trade or business by the respondent with the State Government for the supply of goods to that Government. The High Court held that there was no such contract.
3. The disqualification which results from S.7(d) is conditioned by a number of circumstances. First, there must be a subsisting contract (that is to say in actual existence) between the appropriate Government and the candidate. Then the contract must be in the course of the trade or business of the candidate and, finally, it must be inter alia for the supply of goods to such Government. The appropriate Government according to the definition of the expression is the Government of Andhra Pradesh. The High Court in reaching its conclusion interpreted Cl. 21 of Part VII of the lease and held that the mining lease was not a contract, that Cl.21 did not amount to a contract and that Cl. 21 even if a contract was not a contract for the supply of goods to the Government. The conclusion is assailed by the appellant. It is convenient to quote the clause at this stage :
"21(a) The State Government shall from time to time and at all times during the said term have the right (to be exercised by notice in writing to the lessee) of pre-emption of the said minerals (and all products thereof) lying in or upon the said lands hereby demised or elsewhere under the control of the lessee
