Seth Bikhraj Jaipuria Vs. Union of
India  INSC 228 (24 July 1961)
CITATION: 1962 AIR 113 1962 SCR (2) 880
CITATOR INFO :
R 1962 SC 779 (6,7) R 1963 SC1417 (19) RF
1963 SC1685 (9) R 1964 SC1714 (10) RF 1966 SC 580 (21) R 1967 SC 203 (7) R 1968
SC1218 (6) D 1969 SC 903 (23) F 1972 SC 915 (9) R 1977 SC 536 (17) F 1977
SC2149 (8) RF 1980 SC1285 (9) R 1988 SC2149 (13) F 1989 SC1160 (26)
Contract-Divisional Superintendent of Railway
placing orders-Contract not expressed to be in name of Governor-general and not
executed on behalf of Governor-GeneralWhether binding on Government-Government
of India Act, 1935 (26 Geo. 6 Ch. 2) s. 175 (3).
In the year 1943 the Divisional
Superintendent, East Indian Railway placed certain purchase orders with the
appellant for the supply of food grains for the employees of the East Indian
Railway. The orders were not expressed to be made in the name of the Governor-General
and were not "executed on behalf of the Governor-General as required by S.
175 (3) of the Government of India Act, 1935. They were signed by the
Divisional Superintendent either in his own hand or in the hand of his Personal
Assistant. Some deliveries of food grain s were made under these orders and
were accepted and paid for by the Railway Administration. But the Railway
Administration declined to accept further deliveries of food grains. The
appellant sold the balance of foodgrains under the purchase orders and filed a
suit to recover the difference between the price realised by sale and the
contract price. The respondent resisted the suit inter alia on the ground that
the contracts were not binding on it.
Held, that the contracts were not binding on
the respondent and it was not liable for damages for breach of the contracts.
Under s 175 (3) of the Government of India Act, 1935, as it stood at the
relevant time, the contracts had:
(a) to be expressed to be made by the
Governor-General, (b) to be executed on behalf of the Governor-General and (F)
to be executed by officers duly appointed in that behalf and in such mariner as
the Governor-General directed or authorised.
The 881 authority to a person to execute
contracts may be conferred not only by rules expressly trained and by formal
notifications issued in this behalf but may also be specially conferred. The
evidence in the case showed that such authority was specially conferred upon
the Divisional Superintendent. But the contracts were not expressed to be made
by the Governor-General and were not executed on his behalf The provisions of
s. 175(3) were mandatory. The object of enacting these provisions was that the
State should not be saddled with liability for unauthorised contracts and hence
it was provided that the contracts trust show on their face that they were made
by the GovernorGeneral and executed on his behalf in the manner prescribed by
the person authorised.
State of Bihar v. M/s. Karam Chand Thapar and
(1962) 1 S. C. R. 827, followed.
Liverpool Borough Bank v. Turner, (1861) 30
L. J. Ch. 379, Municipal Corporation of Bombay v. Secretary of State, I.
L. R. (1903) 29 Bom. 580, Kessoram Poddar and
Co., v. Secretary of State for India, I. L. R. (1927) 54 Cal. 969 S. C. Mitra
and Co., v. Governor-General of India in Council, I.L.R. (1950) 2 Cal. 431,
Secretary of State v. Yadavgir Dharamgir, I. L. R. (1936) 60 Bom. 42, Secretary
of State v.
G.T. Sarin and Co., 1. L. R. (1930) 11 Lah.
375, U. I'. Government v. Lal Nanhoo Mal Gupta, A. 1. R. (1960) All.
420, and Devi Prasad Sri Krishna Prasad Ltd.
v. Secretary of State, I. L. R. (1941) All. 741, referred to.
S. K. Sen v. Provincial P. W. D., State of
Bihar, A. 1. R.
(1960) Pat., Chatturbhui Vithaldas Jasani v.
Moreshwar Prashram, (1954) S. C. R. 817,J. K. Gas Plant Mfg., Co.
(Rampur) Ltd. v. King Emperor, (1947) F. C.
R. 141, Moreshwar Pangarkar v. State of Bombay, (1952) S. C. R. 612, State of
Bombay v. Purshottam Jog Naik, (1952) S. C. R. 674 and State of U.P. v. Manbodhan
Lal Srivastava, (1958) S. C. R. 533, distinguished.
CIVIL APPELLATE JURISDICTION: Civil Appeal
No. 86 of 1959.
Appeal by special leave from the judgment and
order dated March 27, 1957, of the Patna High Court in Appeal from Original
Decree No. 359 of 1948.
A. V. Viswanatha Sastri and S. P. Varma, for
882 H. N. Sanyal, Additional
Solicitor-General of India, R. Ganapathy Iyer and T. M. Sen, for the
1961. July, 24. The Judgment of the Court was
delivered by SHAH, J. Bikhraj Jaipuria-hereinafter called the appellantis the
sole proprietor of a grocery business conducted in the name and style of
"Rajaram Vijai Kumar" in the town of Arrah in the State of Bihar. In
the months of July and August, 1943, the, Divisional Superintendent, East
Indian Railway under three "-'purchase orders' agreed to buy and the
appellant agreed to sell certain quantities of food grains for the employees of
the East Indian Railway.
The 'following table sets out the purchase
prices, the commodities, the dates of purchase orders, the quantities and the
rates and the method of supply.
Purchase Date of Kinds Quantity Rates.
Order purchase of No. orders. commodities.
(1) (2) (3) (4) (5)
69. 20-7-1943. Gram 1st 1000 mds. @ Rs. 15/ quality.
per md. (plus cost of new bags not exceeding Rs. 75/per 100 bags) F.O.R. any
E.I.Rly. station in Bihar.
76. :4-7-1943. Rice 1000 mds. @ Rs. 22-8-0
Dhenki (plus cost of Medium bags not exquality. ceeding Rs.75 883 (1) (2) (3)
(4) (5) per cent) per md. F.O.R. any station on the division.
ii. Wheat 5000 mds. @ Rs. 20-8-0 white per md.
with as per bags F.O.R.
sample. any station on E.I.R. on the
106. 24-8-1943. Rice 15000 mds. @ Rs. 24/medium
per md. with quality. out bags F.O.R. E.I.
Rly. station in Bihar.
Purchase orders Nos. 69 and 76 were signed by
S.C. Ribbins, Personal Assistant to the Division at Superintendent and purchase
order No. 106 was signed by the Divisional Superintendent. Under the purchase
orders delivery of grains was to commence within seven days' of acceptance and
was to' be completed within one month. The appellant delivered diverse
quantities of foodgrains from time to time but was unable fully to perform the
contracts within, the period stipulated. Between July.), 20, 1943 and August of
4, 1943, he supplied 3465 maunds of rice and between September 1, 1943 and
September 19, 1943 he supplied 1152 maunds 35 seers of wheat. In exercise of
the powers conferred by cl.(b) of Sub-r. (2) of r.81 of the Defence of India
Rules, the Government of Bihar by notification No. 12691-P.C. dated September
16, 1943 directed that commodities named in column I of the schedule shall not,
from and including September 20, 1943 and until further notice, be sold at any
primary source of supply or by the proprietor, manager or employee of any mill
in the Province of Bihar at prices exceeding those 884 specified in the second
column of the schedule. The controlled rat-. of rice (medium) was Rs. 18/per
standard maund, of wheat (red) Rs. 17/-, of wheat (white) Rs. 18/and of gram
Rs. 12-8-0. The Sub-Divisional Magistrate, District Arrah issued on September
21, 1943, a price-list of controlled articles fixing the same prices as were
fixed for wheat, rice and gram by the notification issued by the Government of
Bihar. By cl. (2) of the notification, a warning was issued that in the event
of the dealers selling controlled articles at rates exceeding those fixed or
withholding stocks of such articles from sale, "they will be liable to
prosecution under r.81 (1) of the Defence of India Rules." By a
telegraphic communication dated Sep. tember 28, 1943, the Divisional
Superintendent informed the appellant that under the purchase orders, food
grains tendered for delivery will not, unless despatched before October 1,
1943, be accepted, and barring a consignment of 637 maunds 20 seers accepted on
October 7, 1943, the Railway Administration declined to accept,delivery of food
grains offered to be supplied by the appellant after October 1, 1943. The appellant
served a notice upon the Divisional Superintendent coraplaining of breach of
contract and sold between February la and February 23, 1944 the balance of
foodgrains under the purchase orders which were lying either at the various
railway stations or in his own godowns. The appellant then called upon the
Railway Administration to pay the difference between the price realised by sale
and the contract price and failing to obtain satisfaction, commenced an action
(Suit No. 359/48A) in the court of the First Additional Subordinate Judge,
Patna for a decree for Rs. 2,89,995-15-3 against the Dominion of India. The
appellant claimed Rs.
2,32,665-12-0 being the difference between
the contract price and the price realised, Rs.42,709-10-3 as interest and Rs. 14,620-9-0
as freight, wharf.
885 age, cartage, price of packing material,
labour charges and costs incurred in holding the sale. The appellant submitted
that under the terms of the purchase orders, supply was to commence within
seven days of the date of receipt of the orders and was to be completed within
one month, but it was not intended that time should be of the essence of the
contract, and in the alternative that the Railway Administration had waived the
stipulation as to time in the performance of the contracts and therefore he was
entitled, the Railway Administration having committed breach of ,the contracts,
to recover as compensation the difference between the contract price and the
price for which the grains were sold. The suit was resisted by the Dominion of
India contending inter alia that the appellant had no cause of action for the
claim in the suit, that the contracts between the appellant and the Divisional
Superintendent Dinapur were not valid and binding upon the Government of India
and that the contracts were liable to be avoided by the Government, that time
was of the essence of the contracts, that stipulations as to time were not
waived, and that no breach of contract was committed by the East Indian Railway
Administration and in any event, the appellant had not suffered any loss as a
result of such breach. By the written statement, it wag admitted that the East
Indian Railway through the Divisional Superintendent, Dinapur had by three
orders set out in the plaint agreed to buy and the appellant had agreed to sell
the commodities specified therein, but it was denied that the Divisional
Superintendent had been ""given complete authority to enter into
contracts for the supply of foodgrains." The trial court held that time was
not of the essence of the contracts and even if it was, breach of the
stipulation in that behalf was waived. It further_held that the plea that the
contracts were void because they were not in accordance with the 886 provisions
of s. 175 (3) of the Government of India Act, 1935, could not be.permitted to
be urged, no such plea having been raised by the written statement. Holding
that the Divisional Superintendent was authorised to enter into the contracts
for purchase of foodgrains, and that he had committed breach of contracts the
trial Judge awarded to the appellant Rs. 1,29,460-7-0 with interest thereon at
the rate of 6% per annum from October 1, 1943, to the date of the institution
of the suit and further interest at 6% on judgment. Against that decree, an
appeal was preferred by the Union of India to the High Court of Judicature at
Patna and the appellant filed cross-objections to the decree appealed from. The
High Court held that time was of the essence of the contracts, but the Railway
Administration having a accepted the goods tendered after the expiration of the
period prescribed thereby, the stipulation as to time was waived. The High
Court further held that by the notification under r. 81 of the Defence of India
Rules, performance of the contracts had not been rendered illegal but the
Divisional Superintendent had no authority to enter into contracts to purchase
food grains on behalf of the Railway Administration and that in any event, the
contracts not having been expressed to be made by the Governor-General and not
having been executed on behalf of the GovernorGeneral by an officer daily
appointed in that behalf and in manner prescribed, the contracts were
unenforceable. The High Court also held that the appellant was not entitled to
a decree for compensation because he had failed to prove the ruling market rate
on the date of breach viz, October 1, 1943. The High Court also observed that
the trial court erred in awarding interest prior to the date of the suit and in
so holding, relied upon the judgment of the PrivyCouncil in Bengal Nagpur
Railway Co., Ltd. v. Ruttanji Ramji and others (1).
(1) L. R. (1938) 65 J. A. 66.
887 In this appeal by the appellant, two
questions fall to be determined, (1) whether relying upon the purchase orders
signed by the Divisional Superintendent which were not made and executed in the
manner prescribed by s.175 (3) of the, Government of India Act 1935, the
appellant could sue the Dominion of India for compensation for breach of
contract, and (2) whether the appellant has proved the ruling market rate on
October 1, 1943 for the commodities in question. , The finding that the Railway
Administration had waived the stipulation as to the performance of the
contracts within the time prescribed though time was under the agreement of the
essence, is not challenged before us on behalf of the Union of India. If the
finding as to waiver is correct, manifestly by his telegraphic intimation dated
September 28, 1943, that the foodgrains not despatched before October 1, 1943,
will not be accepted the Divisional Superintendent committed a breach of the
Section 175 (3) of the Government of India
Act as in force at the material time provided :
"Subject to the provisions of this Act,
with respect to the Federal Railway Authority, all contracts made in the
exercise of the executive authority of the Federation or of a Province shall be
expressed to be made by the GovernorGeneral, or by the Governor of the
Province, as the case may be, and all such contracts and all assurances of
property made in the exercise of that authority shall be executed on behalf of
the Governor-General or Governor by such persons and in such manner as he may
direct or authorise." The Federal Railway Authority had not come. into
being in the year 1943: it was in fact never set up. The contracts for the
supply of foodgrains were undoubtedly_ made in the exercise of executive 888
authority of the Federation. The contracts had therefore under s. 175(3), (a)
to be expressed to be made by the Governor-General, (b) to be executed on
behalf of the Governor-General, and (e) to be execrated by officers duly
appointed in that behalf and in such manner as the Governor-general may direct
or authorise. But no formal contracts were executed for the supply of food
grains by the appellant : he had merely offered to supply foodgrains by letters
addressed to the Divisional Superintendent and that officer had by what are
called "purchase orders" accepted those offers. These purchase orders
were not expressed to be made in the name of the Governor-General and were not
executed on behalf of the Governor-General. The purchase orders were signed by
the Divisional Superintendent either in his own hand or in the hand of his
Personal Assistant. In the first instance it has to be considered whether the
Divisional Superintendent had authority to contract on behalf of the Railway
Administration for buying food grains required by the Railway Administration.
By Ex.M-2 which was in operation at the material time, all instruments relating
to purchase or hire, supply and conveyance of materials, stores, machinery,
plant, telephone lines and connections, coal etc. could be executed amongst
others by the Divisional Superintendent; but contracts relating to purchase of food
grains are not covered by that authority. Under item 34 which is the residuary
item, all deeds and instruments relating to railway matters other than those
specified in items 1 to 33 may be executed by the Secretary of the Railway
Board. It is common ground that there is no other item which specifically
authorises the making and execution of contracts relating to purchase of
foodgrains; deeds and instruments relating to purchase of food grains therefore
fall within item 34. The Secretary to the Railway Board had not executed these
purchase orders : but the trial Court held 889 that the Divisional
Superintendent was authorised to enter into contracts with the appellant for
the supply of foodgrains. In so holding, the trial judge relied upon the
evidence of Ribbins, Grain Supply Officer and Personal Assistant to the
Divisional Superintendent, Dinapur. The High Court disagreed with that view.
The High Court observed that the authority of the officer acting on behalf of
the Governor-General "must be deduced from the express words of the Governor-General
himself expressed by rules framed or by notification issued, under s. 175(3).
No notification has been produced in this case showing that the Divisional
Superintendent had been authorised by the Governor General to execute such
contracts on his behalf, nor has any rule been produced which conferred
authority upon the Divisional Superintendent to make such contracts."
After referring to paragraph 10 of the notification, Ex. M2 items 1 to 34, the
High Court observed:
"Therefore this notification rather
shows that the Divisional Superintendent had no authority to execute the
contracts for the purchase of food grains." In our view, the High Court
was in error in holding that the authority under s. 175(3) of the Government of
India Act, 1935 to execute the contract could only be granted by the Governor
General by rules expressly promulgated in that behalf or by formal
notifications. This court has recently held that special authority may validly
be given in respect of a particular contract or contracts by the Governor to an
officer other than the officer notified under the rules made under s. 175(3).
In The State of Bihar v. M/s. Karam Chand Thapar and Brothers Ltd.(,),
Venkatarama Aiyar J. speaking for the court observed :
(1) (1962) 1 S.C.R. 827.
890 It was further argued for the appellant
that there being a Government notification of a formal character we should not
travel outside it and find authority in a person who is not authorised
thereunder. But s. 175 (3) does not prescribe any particular mode id which
authority must be conferred.
Normally, no doubt, such conferment will be
by notification in the Official Gazette, but there is nothing in the section
itself to preclude authorisation being conferred ad hoc on any person, and when
that is established, the requirements of the section must be held to be
satisfied." In that case, an agreement to refer to arbitration on behalf
of the Government of Bihar was executed by the Executive Engineer whereas by
the notification issued by the Government of Bihar under s.175 (3) all
instruments in that behalf had to be executed by the Secretary or the Joint
Secretary to the Government. This Court on a consideration of the
correspondence produced in the case agreed with the High Court that the
Executive Engineer had been specially authorised by the Governor acting through
his Secretary to execute the agreement for reference to arbitration. Section
175 (3) in terms does not provide that the direction or authority given by the
Governor-General or the Governor to a person to execute contracts shall be
given only by rules or by notifications, and the High Court was in our judgment
in error in assuming that such authority can be given only by rules expressly
framed or by formal notifications issued in that behalf.
In para 5 of the plaint, the appellant
"'That for the purposes and under the
authority conferred as noted in the para 3 above in July and August, 1943 the
said E. 1. Rly. through its then Divisional Superintendent, Dinapur, by three
diverse orders agreed to buy and the plaintiff agreed to sell the following
commodities at the rates mentioned against them, 891 By para 3 of the written
statement, the Dominion of India accepted the allegations made in para 5 of the
plaint. It is true that by paragraph 1, the authority of the Divisional
Superintendent to enter into contract with, trading firms dealing in foodgrains
for the supply of foodgrains was denied and it was further denied that the
Divisional Superintendent "was invested with complete authority to enter into
contracts for the purchase of food supplies and to do all that was necessary in
that connection." There was some inconsistency between the averments made
in paragraphs 1 and 3 of the written statement, but there is no dispute that
the purchase orders were issued by the Divisional Superintendent for and on
behalf of the East Indian Railway Administration. Pursuant to these purchase
orders, a large quantity of foodgrains was tendered by the appellant: these
were accepted by the Railway Administration and, payments were made to the
appellant for the grains supplied.
Employees of the Railway Administration wrote
letters to the appellant calling upon him to intimate the names of the railway
stations where grains will be delivered and about the date when the supply.
will commence. They fixed programmes for inspection of the goods, kept 'wagons
ready for accepting delivery, held meetings on diverse occasions for settling
programmes for the supply of grains, rejected grains which were not according
to the contract, entered into correspondence with the appellant about the
return of empty bags accepted bills and railway receipts and made payments,
returned certain bills in respect of the grains tendered beyond the period of
contract and did diverse other acts in respect of the goods which could only be
consistent with the contracts having been made with the authority of the
Railway Administration granted to the Divisional Superintendent. There is also
the evidence of Ribbins which clearly supports the vie* that the agreements to
purchase foodgrains by the Divisional 892 Superintendent were part of a. scheme
devised by the Railway Administration at the time of the, serious famine in
1943 in Bengal. In cross-examination, Ribbins stated:
"When the Bengal famine arose in
April-May 1943, the (necessity for a scheme of) arrangement of supplying
foodgrains to E. I. Railway employees arose ... A scheme was drawn up for
carrying out this work in writing. In other words orders were received from
Head Office Calcutta about it. The Deputy General Manager, Grains, Calcutta
issued the necessary orders ... The agent or General Manager as he is called
appropriated the above functionary. He must have done so presumably under
orders ... The entire scheme did subsequently get the assent of the Railway
Board. From time to time order came with instruction from Head Office. All such
directions should be in the office of D. Supdt., Dinapur. Some posts had to be
created for carrying out this scheme. Originally one post of Asstt. Grain Supply
Officer was created. Subsequently, two posts were created one on a senior scale
and the other as Asstt. in Dinapur Dv. staff had to be appointed to be in
charge of the grain shops.
They were exclusively appointed to work the
grain shop Organisation. The Railway made some arrangement in some places for
accommodation and additional storage...Grain shops were located At these places
when accommodation was made for additional storage." Ribbins was for some
time a Grain Supply Officer under the East Indian Railway and he admitted that
orders similar.to the purchase orders in question in this litigation were drawn
up in cyclostyled forms "as per orders from the Head Office." The
witness stated that the instructions of the Head Office were "in the
office file". None of these documents were, however, produced or tendered
in evidence by the Railway Administration.
893 The evidence on the whole establishes
that with a view to effectuate the scheme devised by the Railway Board for
distributing foodgrains to their employees at concessional rates, arrangements
were made for procuring foodgrains.
This scheme received the approval of the
Railway Board and Railway Officers were authorised to purchase, transport and
distribute foodgrains. If, in the implementation of the scheme, the foodgrains
were received by the Railway Administration, special wagons were provided and
goods were carried to different places and distributed and payments were made
for the foodgrains received by the Railway Administration after testing the supplies,
the inference is inevitable that the Divisional Superintendent who issued the
purchase orders acted with authority specially granted to him. The evidence of
Ribbins supported by abundant documentary evidence establishes beyond doubt
that the Divisional Superintendent though not expressly authorised by the
notification Ex. M-2 to contract for the purchase of foodgrains, was specially
authorised to enter into these contracts for the purchase of foodgrains.
The question still remains whether the purchase
orders executed by the Divisional Superintendent but which were not expressed
to be made by the Governor-General and were not executed on behalf of the
Governor-General, were binding on the Government of India. Section 175(3)
plainly requires that contracts on behalf of the Government of India shall be
executed in the form prescribed thereby ; the section however does not set out
the consequences of non-compliance.
Where a statute requires that a thing shall
be done in the prescribed manner or form but does not set out the consequences
of non-compliance, the question whether the provision was mandatory or
directory has to be adjudged in the light of the intention of the legislature
as disclosed by the 894 object, put-pose and scope of the statute. If the
statute is mandatory, the thing done not in the manner or form prescribed can
have no effect or validity : if it is directory, penalty may be incurred for
non-compliance, but the act or thing done is regarded as good. As observed in
Maxwell on Interpretation of Statutes 10th Edition p. 376 :
"It has been said that no, rule can be
laid down for determining whether the command is to be considered as a mere
direction or instruction involving no invalidating consequences in its
disregard, or as imperative, with an implied nullification for disobedience,
beyond the fundamental one that it depends on the scope. and object of the
enactment. It may perhaps be found generally correct to say that nullification
is the natural and usual consequence of disobedience, but the question is, in
the main governed by considerations 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. The whole scope and purpose of the statute under consideration
must be regarded." Lord Campbell in Liverpool Borough Bank v. Turner(1)
observed "No universal rule 'can be laid down as to whether mandatory
enactments shall be considered directory only or obligatory with an implied
nullification for disobedience. It is the duty of Court of justice to try to
get at the real intention of the Legislature by carefully attending to the
whole scope of the statute to be construed." It is clear that the
Parliament intended in enacting the provision contained in s. 175(3) that (1)
(1861) 30 L. J. Ch. 379 895 the State should not be saddled with liability for
unauthorised contracts and with that object provided that the contracts must
show on their face that they are made on behalf of the State, i. e., by the
Head of the State and executed on his behalf and in the manner prescribed by
the person authorised. The provision, it appears, is enacted in the public
interest, and invests public servants with authority to bind the State by
contractual obligations incurred for the purposes of the State.
It is in the interest of the public that the
question whether a binding contract has been made between the State and a
private individual should not be left open to dispute and litigation ; and that
is why the legislature appears to have made a provision that the contract must
be in writing and must on its face show that it is executed for and on behalf
of the head of the State and in the manner prescribed. The whole aim and object
of the legislature in conferring powers upon the head of the State would be
defeated if in the case of t contract which is in form ambiguous, disputes are
permitted to be raised whether the contract was intended to be made for and on
behalf of the State or on behalf of the person making the contract. This
consideration by itself would be sufficient to imply a prohibition against a
contract being effectively made otherwise than in the manner prescribed. It is
true that in some cases, hardship may result to a person not conversant with
the law who enters into a contract in a form other than the one prescribed by
law. It also happens that the Government contracts ,ire sometimes made in
disregard of the forms prescribed ; but that would not in our judgment be a
ground for holding that departure from a provision which is mandatory and at
the same time, salutary may be permitted.
There is a large body of judicial opinion in
the High Courts in India on the question whether 896 contracts not ill form
prescribed by the Constitution Acts are binding upon the State. The view has
been consistently expressed that the provisions, under the successive
Constitution Acts relating to the form of contract between the Government and
the private individual are mandatory and not merely directory.
In Municipal Corporation of Bombay v.
Secretary of State (1), the true effect of s. 1 of Si. 22 and 23 Vic. c. 41
fell to be determined. The Governor-General of India in Council and the
Governors in Council and officers for the time being entrusted with the
Government were, subject to restrictions prescribed by the Secretary of State
in Council, empowered to sell and dispose of real and personal estate vested in
Her Majesty and to raise money on such estate and also to enter into contracts
within. the respective limits for the purposes of the Act. it was provided that
the Secretary of State in Council. may be named as a party to such deed,
contract, or instrument and the same must be expressed to be made on behalf of
the Secretary of State in Council by or by the order. of the Governor-General
in Council or Governor in Council, but may be executed in other respects in
like manner as other, instruments executed by or on behalf of him or them
respectively in his or their official capacity, and may be enforced by or
against the Secretary of State in Council for the time being. In a suit between
the Government of Bombay and the Municipal Corporation of Bombay, the latter
claimed that it was entitled to remain in occupation on payment of a nominal
rent, of an extensive piece of land because of a resolution passed by the
Government of Bombay sanctioning such user. Jenkins C. J. in delivering the
judgement of the Court observed.
"I think that a disposition in 1865 of
Crown' (1) I. L. R. (1905) 29 Bom. 580.
897 lands by the Governor in Council was
dependent for its validity on an adherence to the forms prescribed, and that
therefore the Resolution was not a valid disposition of the property for the
interest claimed." In Kessoram Poddar and Co. v. Secretary of State for
India (1), it was held that in order that a contract may be binding on the
Secretary of State in Council., it must be made in strict conformity with the
provisions laid down in the statute governing the matter and if it is not so
made, it is not valid as against him.
The same view was expressed in S. C. Mitra
and Co. v. Governor-General of India in Council (2), Secretary of State v.
Yadavgir Dharamgir(3), Secretary. of State and another v.
G. T. Sarin and, Company U. P. Government v.
Lala Nanhoo Mal Gupta Devi Prasad Sri Krishna Prasad Ltd. v. Secretary of State
(6), and in S. K. Sen v. Provincial P. Way D. State of Bihar(7).
But Mr. Viswanatha Sastri on behalf of the
appellant contended that this court in Chatturbhuj Vithaldas Jasanth v.
Moreshwar Parashram (8) has held that a contract for the supply of goods to the
Government which is not in the form prescribed by Art. 299 (1) of the Constitution
which is substantially the same form as s. 175 (3) of the Government of India
Act, 1935) is not void and unenforceable. In that case, the election of
Chatturbhuj Jasani to the Parliament was challenged on the ground that he had a
share or interest in a contract for the supply of goods to the Union
Government. It was found that Jasani was partner of a firm, which had entered
into contracts with the Union Government for the supply of goods and these
contracts subsisted on November 15, 1951 and (1) I.L.R. (1927) 54 Cal. 969.(2)
I.L.R. (1950) 2 Cal. 431., (3) I.L.R. (1936) 60 Bom. 42.(4) I.L.R. (1930) 11
(5) A.I.R. (1960) All. 420. (6) I.L.R. (1941)
All. 741 (7) (7) A.I.R. (1960) Pat. 159. (8) (1954) S. C.R. 817.
898 February 14, 1952 respectively the last
date for filing nominations and the date of declaration of the results of the
election. This court held that Jasani was disqualified from being elected by
virtue of the disqualification set out in s. 7 (b) of the Representation of the
People Act 43 of 1951. The contracts in that case were admittedly not in the
form Prescribed by Art. 299 (1) of the Constitution, and relying upon that
circumstance, it was urged that the contracts were void and had in law no
existence. In dealing with this plea, Bose J. speaking for the court observed :
"We feel that some reasonable meaning
must be attached to article 299(1). We do not think the provisions were
inserted for the sake of mere form. We feel they are there to safeguard
Government against unauthorised contracts. If in fact a contract is
unauthorised or in excess of authority it is right that Government should be
safeguarded. On the other hand, an officer entering into a contract on behalf
of the Government can always safeguard himself by having recourse to the proper
form. In between is a large class of contracts, probably by far the greatest in
numbers, which though authorised, are for one reason or other not in proper
form. It is only right that an innocent contracting party should not suffer
because of this and if there is no other defect or objection we have no doubt
Government will always accept the responsibility. If not, its interests are
safeguarded as we think the Constitution intended that they should be."
The learned Judge also observed:
"It would, in our opinion, be disastrous
to hold that the hundreds of Government officers who have daily to enter into a
variety of contracts, often of a petty nature, and sometimes in an emergency,
cannot contract orally or through correspondence and that every petty contract
must be effected by a ponderous legal document couched in a particular
form." 899 The rationale of the case in our judgment does not support the
contention that a contract on behalf of a State not in the form prescribed is
enforceable against 'the State. Bose J. expressly stated that the
"Government may not be bound by the contract, but that is a very different
thing from saying that the contract ",as void and of no effect, and that
it only meant the principal (Government) could not be sued; but there will be
nothing to prevent ratification if it was for the benefit of the
Government." The facts proved in that case clearly establish that even
though the contract was not in the form prescribed, the Government had accepted
performance of the contract by the firm of which Jasani was a partner, and that
in fact there subsisted a relation between the Government and the firm under
which the goods were being supplied and accepted by the Government. The
agreement between the parties could not in the case of dispute have been enforced
at law, but it was still being carried out according to its terms : and the
Court held that for the purpose of the Representation of the People Act, the
existence of such an agreement which was being carried out in which Jasani was
interested disqualified him. It was clearly so stated when Bose J.
"Now section 7 (d) of the Representation
of the People Act does not require that the contracts at 'which it strikes
should be enforceable against the Government ; all it requires is that the
contracts should be for the supply of goods to the Government. The contracts in
question are just that and so are hit by the section".
Reliance was also placed by counsel for the
appellant upon cases decided under s.40 of the Government of India Act, 1915,
which was continued in operation. even after the repeal of the Act, 1915, by
the 9th schedule to the Government of India 900 Act; 1985. Section 40
prescribed the manner in which the business of the Governor-General in Council was
to be conducted. It provided that all orders and other proceedings of the
Governor-General in Council shall be expressed to be made by the
Governor-General in Council and shall be signed by a Secretary to the
Government of India or otherwise as the Governor-General in Council may direct
and shall not be called in question in any legal proceeding on the ground that
they were not duly made by the Governor-general in Council.
In J.K. Gas Plant Manufacturing Co., (Rampur)
Ltd., v. King Emperor (1), certain persons were accused of offences committed
by them in contravention of cls. (5) and (8) of the Iron and Steel (Control of
Distribution) Order, 1941, which order was not expressed to be made by the Governor
General in Council as required by s. 40(1) of the 9th schedule to the
Constitution Act. The Federal Court held that the scope and purpose of the Act
did not demand a construction giving a mandatory rather than a directory effect
to the words in s. 40: for, in the first instance, the provision that all orders
of the Governor-General in Council shall be expressed to be made by the Governor-general
in Council did not define how orders were to be made but only how they are to
be expressed; it implied that the process of making an order preceded and was
something different from the expression of it. Secondly, it was observed, the
provision, was not confined to orders only and included proceedings and in the
case of proceedings, it was still clearly a method of recording proceedings
which had already taken place in the manner prescribed rather than any form in
which the proceedings, must take place if they are valid. Thirdly, it was
observed, that the provision relating to the signature by a Secretary to the
Government of India or other person indicated that it was a provision as (1)
(1947) F.C.R. 141.
901 to the manner in which a previously made
order should be embodied in publishable form, and it indicated that if the
previous directions as to the expression of the order and proceedings and as to
the signature were complied with, the order and proceedings shall not be called
in question in a court of law on one ground only.
The rule contained in s. 40 (1) was in the
view of the court one of evidence which dispensed with proof of the authority
granted by the Governor-general in respect of orders or proceedings which
complied with the requirements prescribed : the making of the order or the
proceedings was independent of the form of the order or proceedings expressing
it. But it cannot be s aid that the making of the contract is independent of
the form in which it is executed. The document evidencing the contract is the
sole repository of its terms and it is by the execution of the contract that
the liability ex contract of either party arises.
The principle of J. K. Gas Plant
Manufacturing Co.'s case has therefore no application in the interpretation of
s. 175 (3) of the Government of India Act, 1935.
Reliance was also placed upon Dattatreya
Moreshwar Pangarkar v. The State of Bombay (1) and The State of Bombay v.
Purshottam Jog Naik(2). In both these cases,
orders made by the Government of Bombay under the Preventive Detention Act were
challenged on the ground that the orders did not comply with the requirements
of Art. 166 of the Constitution.
Article. 166 substantially prescribes the
same rules for authentication of the orders of the Governor of a State as s. 40
to the 9th schedule of the Government of India Act, 1935 prescribed for the
authentication of the orders of the Governor-General and the Governors. In the
former case, this court observed that (1) (1952) S.C.R. 612.
(2) (1952), S.C.R. 674.
902 the Preventive Detention Act contemplates
and requires the taking of an executive decision for confirming a detention
order under s. 11 (1) and omission to make and authenticate that decision in
the form set out in Art. 166 will not make the decision itself illegal, for the
provisions in that article are merely directory and not mandatory. In the
latter case, an order which purported to have been made in the name of the
Government of Bombay instead of the Governor of Bombay as required by Art. 166
was not regarded as defective and it was observed that in any event, it was
open to the State Government to prove that such an order was validly made. The
court in those cases therefore held that the provisions of Art. 166 are
directory and not mandatory. , These cases proceed on substantially the same
grounds on which the decision in J. k. Gas Plant and Manufacturing Co.'s case ,
proceeded, and have no bearing on the interpretation of s. 175 (3) of the
Government of India Act, 1935.
Reliance was also placed upon the State of
U.P. v. Manbodhan Lal Srivastava(1) in which case this court held that the
provisions of Art. 320 el. (3) (e) of the Constitution relating to the consultation
with the Public Service Commission before discharging at public servant are
The fact that certain other provisions in the
Constitution are regarded as merely directory and not mandatory, is no ground
for holding that the provisions relating to the form of contracts are not
mandatory. It may be said that the view that the provisions in the Constitution
relating to the form of contracts on behalf of the Government are mandatory may
involve hardship to the unwary. But a person who seeks to contract with the
Government must be deemed to be fully aware of (1) (1958) S.C.R. 533.
903 statutory requirements as to the form in
which the contract is to be made. In any event, inadvertence of an officer of
the State executing A contract in manner violative of the express statutory
provision, the other contracting party acquiescing in such violation out of
ignorance or negligence will not justify the court in not giving effect to the
intention of the legislature, the provision having been made in the interest of
the public. It must therefore be held that as the contract was not in the form
required by the Government of India Act, 1935, it could not be enforced at the
instance of the appellant and therefore the Dominion of India could not be sued
by the appellant for compensation for breach of contracts.
We are also of the view that the High Court
was right in holding that the appellant failed to prove that he was entitled to
compensation assuming that there was a valid and enforceable contract. The
appellant claimed that he was entitled to the difference between the contract
price and the price realised by sale of the food grains offered after October
1,1943 but not accepted by the Railway Administration. The High Court rightly
pointed out that the appellant was, if at all, entitled only to compensation
for loss suffered by him by reason of the wrongful breach of contract committed
by the State, such compensation being the difference between the contract price
and the ruling market rate on October 1,1943, and that the appellant had failed
to lead evidence about the ruling market rate on October 1,1943. The trial
judge held that the "control price-list xxx was reliable for ascertaining
the measure of damages in the case". This document was a notification
relating to the controlled rates in operation in the district of Arrah, by
which the sale of food grains at prices exceeding the rates prescribed was made
an offence. The appellant had obviously the option of delivering foodgrains at
an railway station F. O. R. in the Province of 904 Bihar, and there is no
evidence on the record whether orders similar to Ex.M-2 were issued by the
authorities in other districts of the Bihar State. But if the grains were
supplied in the district of Arrah, the appellant could evidently not seek to
recover price for the goods supplied and accepted on and after October 1, 1943,
at rates exceeding those fixed by the notification; for, by the issue of the
control orders, on the contracts must be deemed to be superimposed the
condition that foodgrains shall be sold only at rates specified therein. If the
grains were to be supplied outside the district of Arrah, the case of the
appellant suffers from complete lack of evidence as to the ruling rates of the
foodgrains in dispute on October 1, 1943. The High Court was therefore right in
declining to award damages.
On the view taken by us, this appeal must
stand dismissed with costs.