Dominion Of India vs Raj Bahadur Seth Bhikhraj … on 27 March, 1957

JUDGMENT

Kanhaiya Singh, J.

1. This is an appeal by the Union of India representing the railway administration from a Judgment and Decree of the 1st Additional Subordinate Judge, Patna dated 30th June, 1948, which decreed the respondents’ suit for damages for breach of three contracts.

1a. In 1943 the Divisional Superintendent, East Indian Railway (now Eastern Railway) Dinapore, entered into contract with the plaintiff for supply of food-grains to the railway. These contracts were made by means of three purchase orders, No. 69, dated 20-7-1943, No. 76 dated 24-7-1943 and No. 106 dated 24-8-1943. The plaintiff agreed to supply to the railway administration 10,000 maunds of gram of the first quality at the rate of Rs. 15 per maund under the first contract, 1000 maunds of dhenki rice of medium quality at the rate of Rs. 22/8 per maund and 5000 maunds of white wheat at the rate of Rs. 20/8 per maund under the second contract and 15,000, maunds of rice of medium quality at the rate of Rs. 24 per maund under the third contract.

The delivery of all the goods under the first and third contracts was to be made P. O. R. at any station on the East Indian Railway in the State of Bihar, while that the second contract was to be made P. O. R. at any station on the East Indian Railway within the Dinapore division. The terms of all the three contracts were identical, that is, all the three purchase orders provided that the supply should commence within seven days from the date of the receipts of the orders and should be completed within one calender month.

All the purchase orders were received by the plaintiffs on the very day they were made, that is, on 20-7-1943, 24-7-1943 and 24-8-1943, respectively. He made some supplies under the different contracts but could not supply the entire quantity of goods by the stipulated dates. On 24-9-1943 the railway intimated to the plaintiff by a telegram that the outstanding goods under the three purchase orders would not be accepted unless despatched before 1-10-1943.

The railway administration refused to accept the goods delivered after 1-10-1943. Thereupon, the plaintiff after giving notice to it resold, by public auction between 18-2-1944 and 23-2-1944, the goods stored at the” various railway stations or in his godown at those places. The price fetched at the auction sales was far less than the price the railway administration had agreed to pay under the different purchase orders.

The plaintiff, therefore, claimed as damages the difference between the contractual price and the price he got by resale. The plaint was subsequently amended, and by the amendment the plaintiff alternatively claimed as damages the difference between the stipulated price and the market price of those commodities on the relevant dates. The case of the plaintiff is that the time was not of the essence of the contract, and the refusal by the railway administration to accept the deliveries after 1-10-1943 was wrongful and in breach of the contracts. Alternatively the plaintiff pleaded that even if time be regarded as of the essence of the contract, there was waiver on the part of the railway administration, and notwithstanding the expiration of the time fixed by the different contracts, the contracts were kept alive.

His case further was that although the railway administration abruptly fixed 1-10-1943 as the last date of supply, the plaintiff would have supplied the entire quantity stipulated for, within a reasonable time, but for the impediments, deliberately put by the railway officials. It is said that immediately on receipt of the telegram he advised his agents to take steps to deliver the goods at the station on the East Indian Railway but as there was no space in the railway godowns, abstractions were put in his way in taking the goods to the railway station platforms or enclosures still it is alleged that his agents succeeded in some cases in taking and stocking large number of bags on the railway platform on the East Indian Railway at Dumraon, Buxar and Arrah.

He asserted that the railway mala fide terminated the contracts as due to the fall in prices it had no intention to accept the foodgrains. He has also taken the plea that the railway contributed to the delay in supply of the stipulated materials, inasmuch as if did not supply railway wagons and had no sufficient accommodation in the railway, godown for strorage of the goods. He averred that the railway had authorised him to keep the goods in his own godown until the congestion in the, railway godowns was relieved and that in pursuance of this arrangement he had stored the grains in his own godown. He urged that the railway was liable to compensate him for the loss he had incurred due to the breach of the contract on its part. The entire claim was laid at Rs. 995/15/3 including interest, railway freight and wharfage for goods sent and refused, railway and coolie charge, publication, of notices of auction sales and service of notice under Section 80 of the Civil Procedure Code.

2. The railway administration denied the entire liability for damages. Its defence was three-fold, first that the time was of the essence of the contract and that, at any rate by the telegram of date 28-9-1943 the time was, by mutual consent, extended to 1-10-1943 and was made of the essence of the contract was void ab initio and was not binding on the railway administration because the Divisional Superintendent had no authority to enter into contracts on behalf of the railway administration and thirdly, that there was frustration of the contracts as the imposition of control over the prices of foodgrains under the Defence of India Rules made it illegal and thus impossible for the railway to perform the contracts, as the contractual rate of price was higher than the control rates. It denied emphatically that there was any understanding between it and the plaintiff either for supply of wagons or for storage of the goods in the plaintiff’s godown. The other allegations in the plaint were also denied.

3. The following issues were framed by the learned Subordinate Judge:

“1. Has the plaintiff any cause of action for the suit?

2. Whether the contracts between the plaintiff and the Divisional Superintendent E. I. R, Dinapore is valid and binding on the defendant and can the defendant avoid these contracts?

3. Whether time was of the essence of these contracts as set up by defendants? If so, were they waived?

4. Was there any breach of contract by the East Indian Railway and did the plaintiff suffer any loss consequential on such breach? If so, what is the amount of damage to which the plaintiff is entitled?

5. Is the plaint liable to be rejected for want of averment regarding the service of notice under Section 80, C. P. C., as alleged by the defendant?

6. To what relief, if any, is the plaintiff entitled?”

3a. The learned Subordinate Judge held that time was not of the essence of the contract, and even if it was of the essence of the contract, it had been waived. He further held that there was no extension of time. He negatived the defence that the contracts were void, because they were not made in accordance with the provisions of Section 175 (3) of the Government of India Act, 1935, as this plea, in his opinion had not been taken in the written statement.

He further held that the Divisional Superintendent had authority to make the contracts as the railway administration had failed to show any standing order or rule debarring the Divisional Superintendent from entering into such contracts. He, however, disbelieved the plaintiff’s case of resale of the goods and the price fetched at the resale. He did not accept the market rates or prices as alleged by the plaintiff. He, therefore, accepted the control price of the different commodities as mentioned in the control price list, exhibit 5 (m) in force in the District of Shaha-bad in the months of September. 1943, to February, 1944, and held that the difference between the contractual price and the price as mentioned in the control price list was the correct measure of damages in this case.

He disallowed the plaintiff’s claim on account of the publication of sale notices as well as on Recount of the service of notices under Section 80, Civil Procedure Code. He, therefore, reduced the claim of the plaintiff and gave him a modified decree for a sum of Rs. 129.460/7/ with interest thereon at the rate of 6 per cent, per annum from 1-10-J943 to the date of the institution of the suit and thereafter future interest at 6 per cent, per annum until realisation besides costs of the suit amounting to Rs. 2677/11/-.

3b. The learned Government Advocate appearing for the appellant contended that time was of the essence of the contract, and when the plaintiff failed to keep the date stipulated in the contract the time was, my mutual consent, extended till 1-10-1943. His submission is that all the food grains delivered prior to 1-10-1943 were accepted by the railway administration and paid for but when in spite of the extension of the time of delivery the plaintiff i’aiied to deliver the food grains as stipulated for, the railway admini stration put an end to so much of the contract as had not been performed. He urged that the refusal was fully justified, and the railway administration was not liable in damages for breach of contract.

He further contended that it was a mercantile contract and, therefore, stipulations as to time are prima facie, to be regarded, as essential in connection with such a contract. Mr. P.R. Das appearing for the respondent argued, on the other hand, that having regard to the nature ol the transaction and the conduct of the parties time was not, and could not be of the essence of the contract. His alternative argument was that at all events, the stipulation about time had been waived, and the refusal of the food grains was in breach of the contract, and that the railway administration was liable to compensate the plaintiff for the loss in consequence of the breach. He also assailed the argument that the contracts were mercantile contracts.

3c. The contention of the learned Government Advocate that the contracts in question are mercantile contracts cannot be accepted as correct. The general rule no doubt is that in a mercantile contract time is of the essence of the contract. Save in mercantile contracts stipulations as to time are, in the absence of express or im-plied evidence to the contrary presumed not to be of the essence of the contract. The question is whether these contracts can be regarded as mercantile contracts. Mercantile contracts, as the very words- signify, are contracts of merchants that is to say, relating to trade or commerce.

The reason for this general rule is obvious. A mercantile contract is not always an isolated transaction but a link in a chain of transactions and if A does not keep his contract with B, then B may not be able to keep his contract with C so that punctual performance may go to the whole consideration for the sale, “vide footnote at page 57 of Halsbiiry’s Laws of England, Volume 29, 2nd Edition. As Lord Cairns observed in Bowes v. Shand, (1377) 2 App Cas 455 at p. 463 (A), merchants are not in the habit of placing upon their contracts stipulations to which they do not attach some value and importance. Prima facie, two merchants may be deemed to have intended that time should be of the essence of the contract.

The sole object of confining the contracts of the parties to a particular time within which goods bargained must be supplied and accepted is that the parties may know their position and take steps towards fulfilment of their respective parts of the contract. If it were not so, efficient con-duct of trade and business will be difficult, and mercantile consequences of the failure will be grave. Therefore, in such contracts adherence to the given time become imperative and is accordingly registered an essential feature of such contracts.

These considerations, however, do not rule private transactions. The question that falls; for determination is whether the railway administra-tion can be regarded as merchant’s dealings in grains. It is common ground that the grains were needed for consumption of the railway staff. The railway was not dealing in grains, and the food grains were not purchased by it for the purposes of trade or commerce, nor was there any idea of making profit, it was not a case of mutual obligation between different persons.

The learned Government Advocate contended that in this case also the railway administration had to discharge its obligation towards its employees, and, therefore, the contracts were mercantile in nature. Nevertheless the mutuality of obligation which constitutes the essential ingre-dient of mercantile contracts was wanting. It is true that the food grains were needed for supply to railway employees, but there was no question of trade or commerce in this transaction.

The railway was not dealing in grains. When, both parties are engaged in business and they make contracts for sale and purchase of articles for business purposes and not for private consumption, the contracts fall within the category of mercantile contracts. The commericial element is paramount in such contracts. This is not the position here. The railway supplied food-grains to its employees not for purposes of business or gain but to free them from the trouble of procuring food grains during those days of scarcity. In my opinion, strictly speaking, these contracts are not mercantile contracts, and accordingly there is no presumption that the stipulations as to time are of the essence of the impugned contracts.

4. When the presumption applicable to commercial contracts is not available to the defendant, in order to determine whether or not time should be regarded of the essence of these contracts, we have to consider the terms of the contracts and the intention of the parties. The principles which govern the determination of such questions are laid down both in the Contract Act and the Sale of Goods Act. Section 55 of the Contract Act Provides as follows :

“When a party to a contract promises to do a certain thing at or before a specified, time, or certain things at or before specified times, and fails to do any such thing at or before the specified time, the contract, or so much of it as has not been performed, becomes voidable at the option of the promisee if the intention of the parties was that time should be of the essence of the contract.

If it was not the intention of the parties that time should be of the essence of the contract, the contract does not become voidable by the failure to do such thing at or before the specified time; but the promisee is entitled to compensation from the promisor for any loss occasioned to him by such failure.

If, in case of a contract voidable on account of the promisor’s failure to perform his promise at the time agreed, the promisee accepts performance of such promise at any time other than that agreed, the promisee cannot claim compensation for any loss occasioned by the non-performance of the promise at the time agreed, unless at the time of such acceptance, he gives notice to the promisor of his intention to do so”.

5. Section II of the Indian Sale of Goods Act, 1930 lays down as follows :

“Unless a different intention appears from the terms of the contract stipulations as to time of payment are not deemed to be of the essence of a contract of sale. Whether any other stipulation as to time is of the essence of the contract or not depends on the terms of the contract.”

6.It will be seen that under both the Contract Act and the Sale of Goods Act there is no legal presumption that time is of the essence of the contract. Whether or not time should be regarded as an essential condition of the contract is purely a question of intention of the parties. In one respect, the Sale of Goods Act, differs from the Contract Act, and it is this. Where the contract relates to sale of goods, under Section 11 of the Sale of Goods Act, stipulations as to time of payment are not deemed to be of the essence of the contract of sale, unless a different intention appears from the terms of the contract.

It does not say affimatively when time is of the essence of the contract. It provides a negative presumption that in respect of sale of goods time of payment is, in absence of any intention to the contrary, not of the essence of the contract. In other respect both under the Contract Act and the Sale of Goods Act it becomes purely a question of fact whether or not time was of the essence of the contract, and its determination depends upon the intention of the parties to be gathered from the terms of the contract and the surrounding circumstances of the case.

There is no presumption one way or the other as to time of delivery of the goods under both the Acis. In this case we are concerned with the questions Whether or not time of delivery of the goods was of the essence, and so far as this question is concerned, there is thus no legal presumption applicable to the present case. The decision of this question rests upon the particular facts of this case. Therefore, the important question that falls for determination is whether the stipulation as to the time of delivery of the food grains was of the essence of the contract. This tabes me to the examination of the terms of the three contracts.

7. All the three contracts exhibits, 6, 6 (a), and 6 (b) are in similar words. I would, therefore, reproduce here only the term’s of the first contract (exhibit 6) :

“East India Railway. Purchase Order Form No. 69. Suppliers Copy, Accounts Copy Reserve Store Keeper’s Copy.

Office Copy. Divisional Superintendent

Office,

E. I Railway Post Khagaul,
Mr Jaipuria. Dist. Patna. 20th July, 1943.

Sd. Illegible. 24 7 To,

Messrs. / Mr. Jaipuria

C/o. Sub-Divisional Officer, Arrah. Dear Sir.

Your offer No. dated 19-7-1943.

I accept your offer for supplying the following food stuffs at the rate quoted against each inclusive/exclusive of the cost of bags and bag-ging for any station on the E I. R. in the province of Bihar/U.P. The supply should be commenced by you within seven days from the date of receipt of this letter and completed within one calendar month.

Please acknowledge receipt.

Yours faithfully. Sd./ R. C. Ribbin, For Divisional Superintendent.”

8. They provide expressly not only that the entire contracted quantity of food grains should be supplied within the specified period but also that the supply should commence from the given time It was contended by Mr. P.R. Das that the supply of the food grains was essential and that the contracts did not authorise the railway ad-ministration to refuse delivery of the goods if effected after the expiration of the stipulated date. In his opinion no fixed date was mentioned, but only a period of one month for supply was provided in the contracts. This contention found favour with the learned Subordinate Judge and he held that time was not of the essence of the contract.

The grounds on which his conclusion was based may be summarised as follows: (1) the third, contract evidenced by purchase order No. 106 was granted although the previous two contracts being purchase orders Nos. 69 & 76 had not been fully performed and there were left only three days for compliance, (2) the urgency of food grains to prevent possible dislocation in administration by reason of discontentment of the railway staff precluded the possibility of refusal by the railway administration even when punctuality was not maintained which, in turn indicated that time was not an essential condition, (3) there was a previous contract, being purchase, order No. 57 (c) dated 10-7-1943, under which 1,600 bags had been accepted between 11-7-1943 and 19-7-1943, (4) at the time of entering into, the contract the plaintiff’s hands were full, he haying made contracts to supply food grains to various other authorities namely, the State of Bihar, the Tatas and other concerns, which indicated that there could have been no question of a fixed time-table for the completion of the contract and (5) there was lack of space in the railway godowns and wagons were not provided to facilitate the supply.

These reasons, taken singly or collectively, do not warrant the conclusion reached by the learned Subordinate Judge. When the third contract, being purchase order No. 106 was entered into the plaintiff had still time to perform the previous two contracts. The supply under the first contract had already commenced and a mere apprehension of failure of supply did not provide a valid reason for victimising the plaintiff by withholding, further contracts with him.

It will be seen that the railway administra-tion had not overlooked the position of supply under the previous two contracts. At the time of the third contract, the Divisional Superintendent, Dinapur, addressed a letter dated 24-8-1943, exhi-bit A (17) to the plaintiff intimating to him the despatch of the third purchase order and requiring immediate reply as to the compliance of the previous contracts.

9. The letter runs as follows:

"E. I.  Ry.   NO/P.A./P.O./43C    Dinapur   24th August, 1943,
 

Mr.  Rajaram Vijaikiamar, Chowk Arrah,
 

I have sent you this day a purchase Order for 15.000 maunds of medium quality usna rice. Please let me know in due course the station wherefrom you want to supply this rice so that I may depute the Stock verifier or some one else to check the commodity before despatch. This will expedite payment of your bills.

Please also let me know by return when you intend supplying gram, rice and, wheat already ordered, as otherwise I shall have to make other arrangement for supply of these commodities. Sd./- S. C. R. 24.6. For Divisional Superintendent.”

10. The last paragraph of the letter is important. It underlines the urgency of the railway administration for food-grains. The plaintiff was asked to intimate by return of post his ability to complete the contracted supply so th’at the railway administration could make other arrangement. This, instead of supporting the conclusion cf the learned Subordinate Judge, points to the contrary, it is rather indicative of the fact that time was of the essence of the contract otherwise the warning to the plaintiff of the preparedness of the railway administration to make other arrangement for supply of the food grains was meaningless.

A reference to another contract being purshase order No. 57 (c) was wholly irrelevant. The circumstances of the two contracts may differ, and two disconnected contracts cannot be considered together to spell cut the terms of the impugned sontracts. Similarly the various contracts which the plaintiff had made with other person? were not even remotely a relevant consideration. There is nothing to show that the railway administration was aware of the engagements entered into by the plaintiff. Assuming it was aware that the plaintiff’s hands were full this fact, in the ab-sence of any evidence to the contrary, rather thaws the other way.

It is likely that in view of the possibility of the failure on the part of the plaintiff to perform the contracts in time, in view of his existing obligation the railway administration stipulated that the time should be of the essence of the contract, because it needed food grains urgently. The finding of the learned Subordinate Judge that there was congestion in the railway godown is wholly speculative. The letters, exhibits 9, 9(b) and 9(v) prove nothing. They do not relate to the contracts in suit, it seems that the plaintiff had stored goods in the railway godown unauthorisedly’.

The railway administration asked him to remove the goods from the godown or pay wharfage for the same. In fact, it emphasised in one of the letters that the plaintiff had turned, the railway goods-shed into his private godown. The railway could not but have ordered removal of the consignments from the railway premises unless they were booked for carriage. These letters do not afford evidence of congestion. The evidence on this pqint is lacking.

There is not a single instance in which the railway refused to accept the delivery of food-grains made before 1-10-1943. It seems that in order to explain away his failure to comply with the contracts the plaintiff took the false plea that the railway administration had authorised him to keep goods in his godown due to congestion in tile railway godown. There is no reliable evidence to support it. This plea is quite contrary to the terms of the contracts and there is no evidence to show that subsequently this term was super-added to them.

11. The learned Subordinate Judge was further wrong in thinking that the regular supply of food grains was interrupted due to failure of the railway administration to supply wagons. The railway administration had not undertaken to supply wagons. The very terms of the contracts renel this contention Under the first and third contracts, exhibits 6 and 6(b) the plaintiff had stipulated to deliver the goods f.o.r. at any station of the East Indian Railway in the State of Bihar, and under the second contract, exhibit 6(a), delivery was to be made f.o.r, at any station of the aforesaid railway within the Dinapur Division which extends from Jhajha to Moghal Sarai.

The seller had the option to deliver the goods at any station of the East Indian Railway in the State of Bihar in respect of two contracts and at any station of this railway in the Dinapur Division in respect of the other contract. There was a stipulation as to the date or the time when the goods will be taken by the plaintiff to the railway station. The railway could not possibly have kept wagons at every station in anticipation of the arrival of the goods. There is no dispute that there was dearth of railway wagons in 1943 due to war conditions but paucity of wagons is no ground for placing upon the railway an obligation to supply wagons, when there was no such, condition in the contracts.

It was not the business of the plaintiff to worry for wagons, as his function was at an end the moment he delivered the goods to the railway authorities at any of the stations mentioned in the contracts. It is manifest that the provision for wagons by the railway was not a condition precedent to the performance of the contracts by the seller, and therefore the argument that time was not the essential factor of the performance because time could not be kept in view of the difficulty of the railway to ensure regular supply of wagons cannot be accepted as correct.

12. Mr. P.r. Das contended with some vehe
mence that f.o.r. contracts mean that the seller
has undertaken to load the goods into the railway
wagons and therefore there was an implied con
tract by the railway to supply wagons. I am unable to assent to this argument. There is no in
variable rule that in the case of all f.o.r. contracts it is not sufficient to reach the goods to a
railway station; the goods must also be loaded
in the wagons. It is really a question of contract
or of usage of the railway concerned. In paragraph 308, volume 29 of Halsbury’s Laws of England, Second Edition page 228, the incidence of
f.o.r. contracts is laid down as follows :

“Under a ‘free alongside’ contract (f.a.s.) the seller undertakes to deliver the goods alongside the ship at his own expense, and under a free on rail contract (f.o.r.) the seller undertakes to deliver the goods into railway wagons or at the station (depending on the practice of the particular railway) at his own expense. These contracts differ from the ordinary inland contract of sale only in respect of the place at which delivery is to be made, which puts on the seller an item of cost over and above that of the goods themselves and also prima facie fixes the point at which the property passes and the risk falls upon the buyer and the price becomes payable.”

Thus loading into railway wagons is not one of the indispensable conditions of, the f.o.r, contracts. Under f.o.r. contracts delivery may be made at the railway station also. There is no evidence to prove what in fact was the practice of the East Indian Railway. In fact, no such case was made out by the plaintiff in the plaint or in evidence. Mr. P. R. Das referred to letters exhibit 9(t) dated 5-8-1943, exhibit A(17) dated 24-8-1943 and exhibit A (11) dated 26-8-1943 and the telegram, exhibit C(7) dated 28-9-1943. and said that they showed that the practice of the East Indian Railway was that goods had to be loaded in wagons. In the letter, exhibit 9(t) the railway wrote to the plaintiff that he should arrange to receive payment on presentation of railway receipt in the office of the Divisional Superintendent.

In the other letters and telegram the word despatch has been used. His contention is that the word ‘despatch’ and the condition that payment would be made on presentation of the railway receipt showed that the food grains had to be loaded into wagons. According to him, there could be no despatch, and the plaintiff would never get railway receipt, unless the food grains had been put into railway wagons. I do not think these letters support his contention. The word despatch does not necessarily imply movement of the wagons. There will be despatch so far as the plaintiff; is concerned if the food-grains had been consigned to the railway.

Similarly the plaintiff could get railway re-ceipt immediately after the food grains were finally made over to the railway, irrespective of the question whether the food grains were loaded into wagons or not. In my opinion, there is no satisfactory evidence to prove the alleged practice of the East Indian Railway. It is noteworthy that the plaintiff never pleaded in the plaint that the railway had undertaken to supply wagons, much less there was an averment that the goods had to be loaded into wagons. The plaintiff had alleged that the supply of wagons was necessary only for carriage of goods from railways to any station on the East Indian Railway.

In paragraph 9 of the plaint it is specifically stated that with regard to commodities which the plaintiff had stocked or had arranged to supply from any place which had to be served by any foreign railway station, the understanding between the plaintiffs agent and the authority was that the letter would help the plaintiff by arranging wsgons and the plaintiff would have to pay the costs of the carriage of goods to that station from any connecting station on the East Indian Railway. There is thus no sufficient material to sustain the contention that the nature of the contract imptliedly imposed upon the plaintiff an obligation to deliver the goods in railway wagons.

13. It is then pointed out that the railway administration had in fact taken steps for supply of wagons. It seems that at the request of the plaintiff the railway administration had written letters to some other railways, such as the then O. T. Railway (now North Eastern Railway) requesting for supplying wagons to the plaintiff. The railway administration, did that not because it was bound by the terms of the contract to provide wagons, but by way of help to the plaiatiff so that the supply may not be retarded. In its letter to the plaintiff dated 27-8-1943 exhibit A(12) it made the position clear. Its relevant portion reads as follows:

“The fact that you intend supplying these from stations on the O. and T. Railway and that you are not getting wagons for the same cannot be taken as an excuse, as this Administration is not concerned with the source of your supply and beyond requisitioning the O. and T. Railway authorities to meet with your demand for wagons which has already been done twice, nothing more can be done”.

I think there was no obligation on the railway administration to supply wagons and the contention is devoid of any force.

13a. The learned counsel for the respondent referred to the existing form of purchase order, exhibit 19. This purchase order no doubt provides specifically that time was of the essence of the contract. The express provisions making time of the essence of the contract in exhibit 19 does not warant the inference that prior to the introduction of new form of purchase order in 1948. time in such railway contracts was not an essential officer. If will not be unreasonable to suppose that even previously the intention of the railway was that stipulation as to time should be of the essence of the contract, but when it found that the language In which this intention was expressed was liable to be misinterpreted, it changed the phraseology and made provision to that effect in clearer words to silence such arguments. In my opinion exhibit 19 does not provide a guide to the construction of the impugned contract.

14. It is clear that the reasons given by the learned Subordinate Judge do not support his conclusion, and he overlooked several countervailing factors which point to the contrary. The common case of the parties is that these contracts were entered into during abnormal times. In paragraph 3 of the plaint, the plaintiff himself has emphasised the urgency of food grains for the railway administration. The war had brought about acute shortage of food grains and notorious Bengali famine of 1943 worsened the position, causing abnormal rise in prices. The necessity of efficient administration of the railway was never so great as during the war period.

Paragraph 3 of the plaint recites that it be-came necessary for the railway administration to acquire and store various commodities of foodstuff for supply to the railway employees as it was apprehended then that there would be grave and great dislocation in the work impeding discharge by the railway of their duties as carriers. This was the position when the railway administration entered into contracts with the plaintiff for sale and purchase of food grains.

If the contentment of the railway employees was necessary for efficient administration of the railway, it was equally necessary that the supply of food grains should be regular and not desultory. When food grains were becoming scarce and prices were rising abnormally and the railway administration apprehended serious dislocation work, if the railway employees were. In such a situation, to be left free to arrange for their food-grains It would be wrong to suppose that the railway administration attached no importance to the time of performance as provided in the contract. Placed in such a precarious position, it would fee wholly-unwise for any person to permit deterioration to the administration by not having firm contracts to ensure regular supply.

These three contracts fixed two dates the date before which, the supply must commence and also the date of which the performance was to be com-pleted. If really the time was not of the essence of the contract it seems wholly useless to fix a time for the commencement of the supply. It is indicative of the feet that the necessity of food-grains was so great that the railway administration could ill-afford to wait until the last date of delivery. It would appear that the parties intended that not only the entire quantity should be delivered within the stipulated period but also the supply should commence immediately.

It would seem that time was of the essence of the contract. The question is whether the inference suggested by these facts is nullified by the subsequent conduct of the parties. Mr. Das argued that the subsequent conduct of the parties indicated the other way. His submission is that even after the expiry of the time the railway administration accepted tender of goods from the plaintiff and insisted upon immediate compliance with the contract, and in this connection he referred to the correspondence between the parties. I de not think, this contention is well founded.

The letters relied upon by the learned counsel are exhibits A(17), dated 24-8-1943, A(12) dated 37-8-1943, 9(23) dated 9-9-1943 (which is the same as exhibits A(19), A(38) dated 10-9-1943 and A(13) dated 15-9-1943. I have already discussed the letter, exhibit A(17) earlier in another connection. The other four letters were written after the time for delivery under the first twq contracts had already, expired. By the letter, exhibit A(12), the Divisional Superintendent drew the attention of the plaintiff to the fact that breach of the contract had occurred due to failure of the plaintiff to supply the goods within the stipulated time.

Nevertheless, he wanted to know from the plaintiff a definite time within which he would be able to comply with the orders. In its letter, exhibit 9(23) the railway asked the plaintiff to state the name of “the stations on the East Indian Railway from where the commodities were to be supplied. The letter of the Divisional Superintendent, exhibit A(38) is an acknowledgment of the receipt of goods on different dates. The Divisional Superintendent further asked the plaintiff, to submit necessary bills to facilitate payment without delay.

From this it will appear that the food-grains were received by the railway after the expiration of the stipulated dates of the supply. By the letter, exhibit A(13) the Divisional Superintendent informed the plaintiff that certain consignment of foods was not acceptable as the quality was inferior. In short, these letters show that certain goods, though delivered after the expiry of the dates assigned by the contract, were accepted by the railway and further that the railway did like the plaintiff to supply the outstanding food-grains under the different contracts. What will be the effect of the subsequent actions of the railway administration on the original contract is a different question altogether, to which I shall presently advert.

But there is nothing in its conduct as disclosed by the said correspondence to indicate even by implication that observation of the time limit described in the contracts was not in contemplation of the parties at the time when the contracts were executed. Further, what passed between the parties subsequent to the execution of the contracts does not afford any evidence as to the actual intention of the parties at the time when the contracts were made As laid down by their Lordships of the Privy Council in the case of Jamshed Khodarma Irani v. Burjorji Dhunjibhaj, 43 Ind App 26: (AIR 1915 PC 831 (B), an intention to make time of the essence of the contract
“must appear from what has passed prior to the contract, the construction of which cannot be affected in the contemplation of equity by what takes place after it has once been entered into,”

The facts of that case were no doubt different but the principle laid down therein is applicable to the present case also. In that case the respondent before the Privy Council had agreed in writing to sell his leasehold interest and the contract provided that the conveyance was to be prepared and received within two months from the date of the agreement. The document was not completed and the appellant instituted a suit for specific performance. The question raised there was whether time was of the essence of the contract. Subsequent to the contract a correspondence ensued between the parties’ respective Bombay solicitors as to two matters of title.

In the course of this correspondence the respondent’s solicitors, upon three occasion stated without contradictions that time was of the essence of the contract. Subsequently, the appellant changed his solicitors, and his new solicitors wrote to the respondent’s solicitors contending for the first time that time was not of the essence of the contract. The High Court of Bombay held that the subsequent correspondence between the parties supported the view that it was the intentiom of the parties that time should be of the essence of the contract. Their Lordships of the Privy Council negatived this reasoning and hald that the correspondence subsequent to the contract cannot be looked at, and the intention of the parties to make time of the essence of the contract must be inferred from what passed between the parties before but not after the contract is made.

Therefore, in order to judge whether or not the parties intended time to be of the essence, regard should be had to the “express stipulations-between the parties, the nature of the property, or the surrounding circumstances,” I have discussed above that the contracts between the parties expressly provided that the delivery should be completed within the time prescribed by the contracts; and the attendant circumstances of the case indeed support the view that both parties did make time of the essence. On a consideration of the evidence, I am of opinion that time was of the essence of the contracts as made.

15. The next question is what was the effect of the acceptance of the goods by the railway tendered after the expiration of the time limits in the contracts. The statement in paragraph 10 of the plaint show that the railway accepted the food-grains consigned by the plaintiff after the expiration of the time of the contracts. This is also supported by the letter of the railway, exhibit A (38) dated 10-9-1943. and the other correspondence that passed between the parties subsequent to the contracts also supports that time limits prescribed in the contracts were waived by the railway.

I need not dilate upon this question as the learned Government Advocate candidly admitted that they would constitute waiver if the defence of the railway that time was extended was not acceptable. His contention is that by mutual consent of the parties the time for the performance of the contract was extended up to 1-10-43 and that the food-grains delivered to the railway before that date were accepted and paid for by the-railway, but all tenders made after 1-10-1943 were refused by the railway. One consignment of goods was no doubt accepted by the railway on 7-10-1943″ ” that is, after the expiration of the extended time, This the learned Government Advocate explained by saying that in fact the goods had been booked prior to 1-10-1943.

His submission is that in view of the extension of the time of performance till 1-10-1943, acceptance, of the goods delivered by the plaintiff prior to that date did not amount to waiver on the part of the railway administration. The admitted position, therefore, is that if there was no extension of time, the railway administration had already waived the right to insist upon the strict performance of the contracts. This takes me to the consideration of the question whether time for the performance of the contracts had been extended up to 1-10-1943.

16. The learned Government Advocate con-tended that time was extended twice, first on 2nd or 3rd September, 1943, by agreement between the parties till 21st September, 1943, and relied upon the programme of supplies exhibit K(1) in support of this contention. The second extension was granted by the railway on 28th September, 1943. till 30th September, 1943, by a telegram exhibit C(7). This second extension was not by agreement between the parties, but it was urged by him that this extension was accepted and acted upon by the plaintiff. The plaintiff denied that there was an extension.

17. In my opinion, there was no extension of time for the completion of the contracts so as to bind the plaintiff. Exhibit K(1) bears no date and is welly unintelligible without the aid of the elucidation given by Mr. B.C. Ribbins (D.W. 11), who was then the Personal Assistant to the Divisional Superintendent, Dinapore. Mr. Ribbins has deposed that the programme, exhibit K(1) was drawn up on 2nd or 3rd September, 1943. When the plaintiff defaulted in the supply of the food grains he sent him a telegram on 1st September. 1943, exhibit C(4) asking him to send his representative to his office.

Accordingly, the plaintiff met him on 1st or 2nd September, 1943, and when he was told that default had taken place under the first two contracts, he promised to deliver the goods within the stipulated time. Mr. Ribbins gave him a pencil and paper and asked him to draw out a programme of supply. The plaintiff requested him to write out the programme himself as he did not know English. The evidence of Mr. Ribbins is that at the dictation of the plaintiff he wrote exhibit K(1) showing the different dates of supply, the quantity of grains to be supplied end the stations where the delivery would be given.

The programme of supplies, exhibit K(1) read with the evidence of Mr. Ribbins shows that the plaintiff agreed bo supply’ 16,000 maunds of rice of medium quality and 5,000 maunds of wheat by 21-9-1943 and that rice was to be supplied at the rate, of 1,000 maunds per day on 6th to 9th September at Arrah, on 10th to 17th September, at Dinapore and on 18th to 21st September at Buxar. His evidence further shows that 5.000 maunds of wheat were to be supplied from Sasaram, Bhabhua, Buxar. Behea and Arrah. 5,000 maunds of wheat and 1000 out of 16,000 maunds of rice, as mentioned in exhibit K(1) have reference to the second contract, being purchase order No. 76 dated 24-7-1943. This programme of supplies does not relate to the first contract under which the plain-tiff had undertaken to supply 10,000 maunds of gram.

Mr. Ribbins has stated that the question of gram was discussed at that time. It may have been discussed, but gram was certainly not part of the contract as evidenced by exhibit K(1). There is some reference to gram in this document, but it has been scored through. It was denied en behalf of the plaintiff that exhibit K(1) was written at his dictation. There is no reason to disbelieve the evidence of Mr. Ribbins, especially, when the plaintiff has not been examined in this case. It is difficult, however, to found a case of extension on the strength of Exhibit K(1) which is so vague and so unintelligible.

On the face of it, the document does not relate to any agreement about extension of time. It is headed as ‘office note on the programme of inspection.’ Mr. Ribbins calls it a programme of supplies. There is no reason why this document did hot recite explicitly that the dates were being extended for the completion of the supply of food-grains. Further, there is no explanation why the very expression used by Mr. Ribbins, namely, programme of supplies, was not entered therein. Apart from this, it cannot be regarded as incorporating an agreement extending the time of performance. Mr. Ribbins has deposed that it relates to the second and third contracts.

It evidently does not relate to the first contract, because gram which was the subject-matter, of the first contract is not covered by the agreement Exhibit K-1. But the third contract was entered into on 24-8-43, and the due date for performance of the contract was 30-9-43. Therefore, so far as the supply of 15,000 maunds of rice of medium quality under the third contract was concerned, there was not, and could never have been any, question of extension of time on the date Exhibit K-1 was written. On the 2nd or 3rd September, 1943, there was enough time left to the plaintiff for performance of the third contract.

It is true that he had failed to supply the grains as stipulated in the second contract of date 24-7-43, and the date of performance had already expired before Exhibit K-l was written. It will be entirely anomalous to call this exhibit as an agreement for extension of time. While under the third contract the plaintiff had to complete, the supply by 30-9-43. under Exhibit K-l the last date set for the supply of the grains was 21-9-43.

Therefore, the position under this exhibit, in the light of the evidence of Mr. Ribbins was this: although the plaintiff had defaulted to perform the first two contracts there was extension of time only with respect to the second contract dated 24-7-43.

The agreement which forms the subject-matter of the first contract, though discussed, was not included in Exhibit K-l, So far as the third contract was concerned, there was no question of extension as the time for performance of the contract had not expired. Strictly speaking, in respect of the third contract, Exhibit K-l operated to restrict, rather than extend, the time of performance since the due date for the performance of the third contract was 21-9-43. It is difficult, therefore, to characterize Exhibit K-l as an agreement for extension of time. It follows that the defence of express agreement about ex-tension of time altogether fails.

18. Then, there is a further fact. In its written statement the railway administration did not take the plea that there was an express agreement for extension of time till 21-9-43. This question was raised for the first time in evidence and that too at a very late stage. Mr. Ribbins was the last but one witness examined on behalf of the defendant, and for the first time he spoke about extension of time by virtue of Exhibit K-l on 17-5-48 when there was no time for the plaintiff to adduce evidence in rebuttal. Again, there was no issue either on this point.

When the defendant did not raise any such defence, it cannot be entertained simply because evidence was adduced on this point. As observed by their Lordships of the Privy Council in Siddik Mahomed Shah v. Mt. Saran, AIR 1930 PC 57 (1) (C), where a claim has never been made in the defence presented no amount of evidence can be looked into a plea which was never put forward. On this ground also, this defence of the railway must be rejected.

19. Coming to the second extension, the question is whether there was a valid extension of time till 30-9-43 by virtue of the telegram, Exhibit C-7 dated 28-9-53. It rums as, follows:

To,

Rajaram Vijaykumar Jaipuria, Chowk Arrah. Note that goods still to be supplied against this office-purchase orders Nos. 69, 76 & 106, dated 20/7, 24/7 and 24/8 respectively will not be accepted unless despatched before first October next.

Divisional Superintendent,

Sd. S. C. R. 28/9. For Divisional” Superintendent,

Dinapore, 28-9-1943.”

This telegram does not assist the railway at all. The law on this point has been clearly and suc-cinerly laid down in paragraph 282, page 166. Volume 80 of Halsbury’s Laws of England, Third Edition.

“In cases where time is not originally of the essence of the contract or where a stipulation making time of the essence has been waived, time may be made of the essence, where there is unreasonable delay, by a notice from the party who is not in default fixing a reasonable time for completion and stating that, in the event of non-completion within the time so fixed he intends to enforce or abandon the contract. But the time fixed must be reasonable having regard to the position of things at the time when the notice is given, and to all the circumstances of the case.”

The position is the same so far as the law in this country is concerned. Section 63 of the Contract Act empowers a promise to dispense with or remit, wholly or in part, the performance of the promise made to him, or to extend the time for such parformance, or to accept instead of it any satisfaction which he thinks fit. When the plaintiff made delay in supplying the contracted quantity of food-grains, it was open to the railway to fix a date for completion of the contract. In that case even where time was not of the essence, it will be made of the essence by such extension of time for performance. But, it is not open to a promise to fix arbitrarily a date, which in the circumstances of the case, will be difficult to keep. The time must be reasonable.

By this telegram the railway administration allowed barely two days’ time to the plaintiff to complete the delivery of the goods remaining un-tendered. Having regard to the nature of the contracts it was impossible for the plaintiff to complete the performance within two days. This period can hardly be regarded as reasonable. It ts always open to a party forbar from insistence on the performance of the contract by the due date, but the forbearing party is not entitled to fix a date of its own accord which will benefit it and put the other party at a disadvantage for instance to undo the effect of the waiver on its part or to render the other part liable for damages, if the performance was not done by the extended date.

This was an entirely unilateral act designed solely for the benefit of the defendant. The unreasonableness of this extension is patent. The learned Government-Advocate attempted to justify it on the ground that this was accepted and acted upon by the plaintiff. There is however, no clear evidence that the plaintiff assented to the extension of the time. In paragraph 12 of the plaint, the plaintiff, no doubt stated that on receipt of this telegram he advised his agents to take steps to deliver goods at the station on the East Indian Railway. In fact, on 28-9-43 some food-grains were delivered to the railway.

This does not afford any evidence of voluntary acceptance of extension. All that the plaintiff did was to speed up the supply. This non-duct of the plaintiff does not warrant the conclusion that the extension of time was assented to by him. Further, as in the case of express agreement, there is no specific defence that there was extension of time by virtue of this telegram. In my opinion, this extension of time was not agreed to by the plaintiff and was not legally valid so as to bind him.

20. It follows from the above that time was no doubt of the essence of the contract, but this time limit was waived by the railway and there was no extension of the time either by express agreement or by implication.

21. It was next contended by the learned Government Advocate that the three contracts were automatically dissolved by supervening illegality due to subsequent change in the law making them illegal and the railway authority was accordingly absolved from all liability under them. His submission has been that on 16-9-43 the Governor of Bihar fixed the maximum price of different commodities, including rice, wheat and gram (which form the subject-matter of the impugned contracts) in exercise of the powers conferred upon him under the Defence of India Rules. Similarly the Sadar Sub-Divisional Magistrate of Arrah promulgated an order on 21-9-43 fixing the whole sale prices per maund and retail price Per rupee of the different commodities, including rice, wheat and gram, in exercise of the newer conferred upon him under the Defence of India Rules, The wholesale prices of the commodities mentioned in the price list of controlled, commodities published by the Sub-Divisional Magistrate are the same as in the notification issued toy the Governor which runs as follows:

“The 16th September, 1943.

No. 12691-P. C. In exercise of the powers conferred by Clause (b) of Sub-rule (2) of Rule 81 of the Defence of India Rules, the Governor of Bihar is pleased to direct that the commodities named in Column 1 of the Schedule below, whether old crop or new crop, shall not 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 higher than those specified in the second column of the Schedule from and including the 2oth September, 1943 and until further notice.

2. Any Court trying any contravention of this Order may direct that any property in respect of which the Court is satisfied that the Order has been contravened shall be forfeited to His Majesty.

Commodities.

Price per standard maund.

Rs.

Rice (coarse).

17.

Rice (Medium).

18.

Wheat (red).

17.

Wheat (white).

18.

Gram.

12/8.

By order of the Governor of Bihar,
E. T. Prlndeaux, Secy.”

The order issued by the Sub-Divisional Magistrate Exhibit 5 (m) is to the following effect.

“Maximum prices of controlled articles fixed under Defence of India Rules, Rule 81 (2) (b).

In exercise of my powers under Rule 81 (2) (b) of the Defence of India Rules, I order that until further orders the commodities specified below shall not be sold at prices, wholesale and retail in excess of the wholesale and retail prices shown against each commodity.

Offenders will be prosecuted under Defence of India Rules, Rule 81 (4) :

Name of commodity
Wholesale prices per maund.

Retail price per rupee.

Rs.

As.

P.

Sr.

Ch.

Wheat local red.

17
0
0

2.

4.

    ”     white.

18
0
0

2.

2.

Gram local.

12
8
0

3.

10.

Rice medium
18
0
0

2.

2.

    ”     coarse
17
0
0

2.

4.

N. B. : — It is hereby ordered under Rule 81 (2) of the Defence of India Rules that dealers must not refuse or avoid to sell a reasonable quantity of controlled articles at the maximum prices fixed for the same to any customer.

2. Dealers are warned that in the event of their selling controlled articles at rates higher than those fixed for them or withholding stocks of such articles from sale they will be liable to prosecution, under Rule 81 (4) of the Defence of India Rules punishable with imprisonment for three years or with fine or with both.

Sd./   S. K.   Ahsan. Sadar Sub-Divisional Magistrate,    Arrah, 21-9-43.
 

To.....for information and wide publication.
 

Sd, B. Girwardhar Prasad. Price Control Officer. Shahabad, Arrah."
 

The orices fixed by the notiflcat:on issued by the Governor and by the order of the Sub-Divisional Magistrate are far below the contract rates. The learned Government-Advocate contended that it was illegal for the plaintiff to charge and also for the railway to pay prices of wheat, gram and rice in excess of the prices fixed by the aforesaid control orders. He urged that the subsequent change, in the law which was beyond the control of the parties operated to release the railway from performing so much of the contract as remained unperformed. It is well settled that where the performance of the contract is rendered impossible due to unexpected emergence of a fundamentally different situation which no party could have foreseen and which happened in spite of them, frustration of the contract occurs and the contractor is absolved from liability.

22. The law on this point is embodied in Section 56 of the Contract Act which provides for avoidance of the contract on grounds of impossibility of performance. It lays down as follows :

“An agreement to dp an act impossible in itself is void. A contract to do an act which, after the contract is made, become impossible or by reason of some event which the promisor could aot prevent unlawful becomes void when the act becomes impossible or unlawful.

Where one person has promised to do something which he knew or with reasonable diligence, might have known, and which the promisee did not know to be impossible or unlawful such promisor must make compensation to such prcmisee for any loss which such promisee sustains through the non-performance of the promise.”

Under Section 56 a contractor is excused of the performance of the contract if (1) the act agreed to be done is inherently impossible of execution; and (2) after the contract is made, the performance of it is rendered impracticable because of supervening impossibility, physical or legal. But the promisor cannot be released from the obligation to perform the contract if he knew or with reasonable diligence, might have known, that the act agreed to be done was impossible or unlawful of which the other party, namely, the pro-mise, was ignorant. In the present case, the frustration of the contract arose because of the imposition of control over the prices under the Defence of India Rules which the parties did not know, and must not have known, with any amount of diligence.

If the performance of a contract is rendered unlawful because of subsequent change in the law, there is automatic discharge of the contract under Section 56 of the Contract Act. The true scope and effect of this section cattle up for consideration before the Supreme Court in the case of Satyabrata Ghose v. Mungeeram Bangur and Co, 1954 SCR 310 : (AIR 1954 SC 44) (D). Their Lordships have observed that the first paragraph of Section 53 speaks of something which is impossible inherently or by its very nature, and no one can obviously be directed to perform such an act, and that the second paragraph enunciates the law relating to discharge of contract by reason of supervening impossibility or illegality of the act agreed to be done.

Their Lordships further observed that the doctrine of frustration is really an aspect or part of the law in discharge of the contract by reason of supervening impossibility or illegality of the act agreed to be done end hence comes within the purview of Section 56 of the Contract Act. There is, therefore, no dispute and Mr. P.R. Das did not contest the proposition that any subsequent change in law rendering the performance of the contract illegal would frustrate the contract automatically.

His contentions, however, are two-fold, first that the notification of the Governor and the order circulated by the Sub-Divisional Magistrate did not apply to contracts made before, and, secondly that even if they did apply the contracts in question are not hit by them. The first contention is without substance & cannot be accepted as correct. On a proper construction of the cantrol orders, they prohibit sale of commodities affected by them at a rate higher than the rates fixed therein.

23. In order to attract their application what is important is that the sale must take place sub-sequent to their promulgation. It is, however, of no consequence whether the sale takes place to pursuance of a contract made before or after their enforcement. It is the price which is sought to be controlled. Manifestly enough it will not apply to contracts which have already been executed prior to the enforcement of the said control orders. But in respect of executory contracts which have not been fully performed before the imposition of the price control the sale at a price higher than that mentioned therein will be unlawful.

In order to attract their application the important thing is the sale and not how that sale has been brought about, whether by virtue of a con-tract made before or after the dates of the enforcement of the said control orders. In other words, speaking, it is not a case of retrospective operation of the orders. They do not apply to sales that had already taken place before their enforcement, but they do affect the existing rights of sale and purchase, whether those rights arise under a contract made before or after their enforcement. It is not the date of the contract which will determine their application but the date of sale taking place after their enforcement.

The ratio decidendi of the case of West T. Gwynee, (1911) 2 Ch. 1 (E), in my opinion, governs the present case also. In that case the plaintiffs were assignees of a lease dated July, 31, 1874, made between the defendant and certain lessees whereby certain premises at Battersee were demised for the term of 94 1/4 years from March, 25, 1874. at yearly rent of £ 640. In 1892, the Conveyancing and Law of Property Act was passed. “Section 3 of the said Act prohibited the execution of fine by the lessor for giving the lessee a licence br consent to assign in respect of “all leases containing a covenant, condition, or agreement against assigning, underletting, or parting with the possession or disposing of the land or property leased without licence or consent.”

The only question involved in that case was whe-ther Section 3 of the Conveyancing and Law of Property Act, 1892, applied to a lease executed before the commencement of the Act, and there was a unanimous decision, that the section applied to all leases whether executed before or after the commencement of the Act. I would reproduce here the observations of Buckley L.J., which described the legal position more precisely :

“During the argument the words retrosoective and retroactive, have been repeatedly used, and the question has been stated to be whether Section 3 of the Conveyancing Act, 1892, is retrospective. To my mind the word, retrospective is inappropriate, and the question is not whether the section is retrospective. Retrospective operation is one matter. Interference with existing rights is another. If an Act provides that, as at a past date the law shall be taken to have been that which it was not, that Act I understand to be retrospective. That is not this case.

The question here is whether a certain provision as to the contents of leases is addressed to the case of all leases or only of some, namely, leases executed after the passing of the Act. The question is as to the ambit and scope of the Act, and not as to the date as from which the new law, as enacted by the Act, is to be taken to have been the law.”

Lower down, he observed further as follows :

“As matter of principle an Act of Parliament is not without sufficient reason taken to be retrospective. There is so, to speek a presumption that it speaks only as to the future. But there is no like presumption that an Act is not intended to interfere with existing rights. Most Acts of Parliament, in fact dp interfere with existing rights. To construe this section I have simply to read it and, looking at the Act in which it is contained to say what is its fair meaning.”

Here also, these control orders affect the existing rights as between the promisor and the promisee, and this is really the purpose and object of the control orders. If it were not so, then a large number of sales will be outside their purview, but such a construction will be destructive of the very object those orders have in view. In my opinion, these control orders apply to all” sales taking place after their enforcement no matter whether those sales were brought about in pursuance of the contracts de prior to their promulgation. I would, therefore, overrule the first contention.

24. The second contention of Mr. P.R. Das is weighty and must be given effect to. I shall first take up the notification issued by the Governor. It has only a limited application. It purports to fix the prices of different commodities at primary source of supply, or where the sale is by a proprietor, manager or employee of a mill. But if the sale takes place at a different place and by different persons, then this notification, has no application. It postulates two fundamental conditions, the sale must have taken place at the primary source of supply, or the sale must be by a person who is a proprietor, manager or employee of a mill. If these conditions are non-existent, the sales are not hit by this notification.

The first condition, admittedly does not apply. The only question therefore, is whether the plaintiff is a proprietor, manager or employee of a mill. If he is not the notification does not affect the sales under these contracts. The defendant did not adduce any evidence to prove in what capacity the plaintiff made the sales. The learned Government-Advocate, however, rested his contention entirely upon the allegations in Paragraph 1 of the plaint and urged that on his own showing the plaintiff was a proprietor of a mill. Paragraph 1 runs as follows :

“That the plaintiff is the sole proprietor of a grain supply business which is popularly known as Rajaram Vijai Kumar and has his Head Office at Mahalla Chauk within the town of Arrah and his business of grain supply extends over to various places in the province of Bihar and the plaintiff has opened various Branch Offices and Godowns for his said business and the plaintiff is a partner in a firm known as Jaipuria Mills at Nokha in Shehabad District and at various places in U. P. and the firm Jaipuria Mills operating at various towns in Bihar and U. P. including Nokha had been operating as agent of the plaintiff’s firm Rajaram Vijai Kumar.”

In my opinion, the allegations in this paragraph do not support his contention. There is no mention therein that the railway administration entered into contract with the plaintiff as a proprietor of a mill. On the contrary, there is unequivocal averment that the plaintiff carries on an independent business of supplying grain, popularly known as Rajaram Vijai Kumar. The plaintiff is the sole proprietor of the concern Rajaram Vijai Kumar. In absence of any evidence to elucidate the whole position it is difficult to say that the contracts were made with a proprietor of a mill.

The learned Government-Advocate laid great stress upon the statement in paragraph 1 of the plaint to the effect that the plaintiff was a partner in a firm known as Jaipuria Mills. His submission was that the fact that he is a partner of the mill is sufficient evidence to show that he is a proprietor. This, it appears is not quite accurate. Nowhere, the plaintiff has said that he is a partner in a mill. The statement is that he is a partner in a firm known as Jaipuria Mills. It is likely that there is no mill or factory at Nokha, and only the firm of which the plaintiff happens to be a partner has been given the name Jaipuria Mills. There is a clear distinction between a mill and a firm known as Jaipuria Mills.

It does not necessarily follow from this expression that there is also a mill at Nokha and the firm which carries on the milling operation is known as Jaipuria Mills. It is here that oral evidence was necessary to remove the vagueness in the averments of the plaintiff in the said paragraph. In so far as no such elucidating evidence has been given, it is difficult to conclude from it that the plaintiff is a partner in a mill. The word ‘mill’ in the notification has been used obviously in the sense of a factory where the process of milling of rice or paddy is carried on. But, obviously this is not the significant in which the word ‘mill’ has been used in that paragraph.

This view finds further corroboration from the fact that in the long correspondence that took place between the railway & the plaintiff, there is no reference to the plaintiff as a proprietor or partner of a mill. Even the purchase orders, Exhibits 6 (a) and 6 (B) do not show that the contract was with a proprietor of a mill. Exhibit 6 shows that the contract was made with Messrs. Mr. Jaipuria Exhibit 6(a) shows that the contract was with M/s./ Mr. Rajaram Vijai Kumar Jaipuria while according to Exhibit 6-B the contract was with Messrs./Mr. Rajaram Vijai Kumar. It seems that the railway was dealing with the firm Rajaram Vijai Kumar which was variously described by it as Messrs./Mr. Jaipuria, Messrs./Mr Rajaram Vijat Kumar Jaipuria and Messrs./Mr. Rajaram Vijai Kumar. Any way, the railway did not enter into contract with the proprietor of a mill.

This is further confirmed by the series of correspondence that took place between the plaintiff and the railway administration. All the letters have been addressed by the railway to the plaintiff personally and the plaintiff has been referred to as Mr. Jaipuria, or Messrs. Rajaram Vijai Kumar or Mr. Rajaram Vijai Kumar Jaipuria or Mr. Rajaram Jaipuria. The goods were also sold by the plaintiff not as a proprietor of a mill but as proprietor of Rajaram Vijai Kumar.

Reference in this connection may be made to the letters, Exhibit A-12, A-13, A-17, A-19, A-38 and C-7. The railway did not address any letter to Jaipuria Mills’. No doubt Jaipuria Mills, Muzaf-farpur delivered certain goods to the railway but there is nothing to show that the Jaipuria Mills were acting in their own capacity.

On the contrary the letters addressed by them to the railway show that the commodities sold by them were despatched on behalf of and on account of Messrs. Rajaram Vijai Kumar, Arrah, (vide letters Exhibits A-32, A-33, A-34, A-35 and A-37. They were, therefore, acting as agents of the plaintiff, and this is exactly the case of the plaintiff also. It follows that the admissions of the plaintiff contained in paragraph 1 of the plaint do not at all assist the defendant, and, therefore, the aforesaid notification, does not apply to the sales of commodities made by the plaintiff in pursuance of the three contracts.

25. The next question is whether the contracts have been frustrated by reason of the order of the Sadar Sub-Divisional Magistrate, Arrah, dated 21-9-43, Exhibit 5-M. In my opinion this order does not at all affect the sales by the plaintiff pursuant tp the three contracts in question. The reason is obvious. There is nothing to show that the Sadar Sub-Divisional Magistrate was the controller of prices under the Defence of India Rules having jurisdiction over the whole District of Shahabad. In absence of any such evidence, the order cannot, prima facie, have operation beyond the territorial jurisdiction of the Sadar Sub-Divisional Magistrate. Therefore, the maximum prices, wholesale and retail, determined by the Sub-Divisional Magistrate cannot apply to sales taking place outside the territorial the limit of his jurisdiction.

26. It will be observed that the contracts did not provide for delivery of goods to the railway only within the Sadar Sub-Division; rather the contracts gave the plaintiff very wide discretion to deliver the goods at any station on the then East Indian Railway in the State of Bihar in respect of the first and the third contracts and at any station within the Dinapors Division of the said railway in respect of the second contract. The Dinapore Division extends from Jhajha to Mogul Sarai.

It is true that according to the contracts the delivery of the goods could have been made also at the railway stations falling within the territorial ambit of the Sadar Sub-Divisional Magis-trate but at the same time by the terms of the contract, the plaintiff had option to deliver goods elsewhere also. Hence, the goods could be delivered even at the station other than those lying within the jurisdiction of the Sadar Sub-Divisional Magistrate. Therefore, the performance of the contracts was not unlawful notwithstanding the promulgation of the said order.

Unless the subsequent change in law rendered the entire contract illegal, the question of frustration does not arise at all. If the law that was subsequently enacted does not affect the contracts and the contracts could be legally performed despite the change in law, Section 56 of the Contract; Act is not attracted, and there is, strictly speaking no frustration of the contracts. I would, therefore, uphold the contention of Mr. P. R. Das and hold that the performance of the contracts had not been rendered illegal under Section 56 of the Contract Act.

27. The next contention of the learned Government Advo ste, end an important one, is that the three contracts are void and unenforceable against the Government as they have not been executed in accordance with the provisions of Sub-section (3) of Section 175 of the Government of India Act. In support of his contention he relied upon recent decisions of the Supreme Court as to the effect of the violation of the provisions of Article 299 of the Constitution, which I shall presently refer to. These contracts were executed when the Government of India Act. 1935, was in force, but there is absolutely no difference between the provisions of Section 175 (3) of the Government Of India Act and those of Article 299 (1) of the Constitution. Section 175 (3), as in force in 1943, whett the contracts were made provides as follows:

“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 Governor-General, or by the Governor of the Province, as the case may be, and all such contracts and all assurance 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 suck manner as he may direct or authorise,”

28. Article 299(1) of the Constitution lays down as follows:

“A11 contracts made in the exercise of the executive power of the Union or of a State shall be expressed to be made by the president, or by the Governor or by the Rajpramukh of the State as the case may be, and all such contracts and all assurance of property made, in the exercise of that power shall be executed on behalf of the President or the Governor or the Rajpramukh by such persons & in such manner as he may direct or authorise.”

29. The essential requisites of a valid contract and assurance on behalf of the Government under the Government of India Act are (1) 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 Governor-General or by the Governor of the Province, as the case may be; (2) all such contracts & assurance must be executed on behalf of the Governor-General or Governor; (3) they further must be executed by officers duly authorised in this behalf by rules made by the Governor-General or the Governor as the case may be, under Sub-section (3); (4) the execution must be effected in such manner as may be required by the rules thereunder and lastly, as a corollary to the aforesaid provisions ,the contracts and assurances must be in writing.

As will appear, the expression’s “shall he ex-pressed to be made” and “shall be executed” indicate clearly that there must be a document evidencing the contracts and assurance, and oral contracts and oral transfers are wholly invalid and will have no binding force. Article 299 reproduces these essential conditions with this difference that in respect of the Union all contracts and assurarce have to be expressed to be made by the President. It is common ground that the contracts in the instant csse were made by means of purchase orders, Exhibits 6, 6-A and 6-B. There are no other documents. Now, these purchase orders do not at all conform to the provisions of Section 175 (3) of the Government of India Act.

In fact, the entire provisions of Section 175 have been utterly ignored in the matter of the making of these contracts. They have not been expressed to be made by the Governor-General and have not been executed on his behalf and further the officer making the contracts had no authority to enter into such contracts on behalf of the railway administration — All these contracts are almost simi-Jar in language, and in the earlier part of the judgment “I have quoted in full one of these con-tracts namely purchase Order No. 69, Exhibit 9. It will appear that these purchase orders are in form of letters addressed by the Divisional Superintendent of the Dinapore Division of the East Indian Railway to the plaintiff.

Further, all of them have not even been signed by the Divisional Superintendent. It will ap-pear that purchase orders, Exhibits 6 and 6-A have been signed by Mr. R.C. Ribbins, Personal Assistant to the Divisional Superintendent; the last one Exhibit 6-B has no doubt been signed by the Divisional Superintendent himself. The learned Government-Advocate has urged that the provisions of Section 175 (3) are mandatory and not only directory and that the contravention of these provisions is fatal to the plaintiffs’ suit, as it renders the contracts in question wholly unenforceable against the Government. In my opinion, this contention is well founded and supported by authorities.

30. In the case of Chaturbhuj Vithaldas v. Moreshwar Parashram, (1954) SCR 817 at p. 834 : (AIR 1954 SC 236 at p. 243) (F), Bose J., delivering the unanimous judgment of the Supreme Court observed as follows as to the effect of the relation of Article 299 (1) :

“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 were 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 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”.

31. In 1955, the Supreme Court reiterated this proposition of law in a more emphatic language in the case of Thawardas Pherumal v. Union of India, (S) AIR 1955 SC 468 at P. 476 (G). Their Lordships observed as follows :

“It is well settled that Government can only be found by contracts that are entered into in a particular way and which are signed by the proper authority.”

The principle which governs such cases and which has been approved of by the Supreme Court was laid down as far back as 1883 by the House of Lords in Young & Co. v. Mayor & Corporation of Royal Lamington Spa, (1683) 8 App Cas 517 (H). The question involved in that case was whether a contract which did not conform to the provisions of Sub-section (1) of Section 174 of the. Public Health Act, 1875 was void and unenforceable against the Corporation. Sub-section (1) enacted as follows :

“Every contract made by an urban authority where of the value or amount exceeds £50 shall be in writing and sealed with the common seal of such authority.”

What happened in that case was that the defendants, as urban authority under the Public Health Act, 1875, had made a contract under their seal with one Powis for the execution of works for supplying the District with water. The Council, In their capacity or urban authority, as far as they could do so by resolutions not under seal, authorised their engineer and surveyor, Mr. Jer-ram, to enter into a contract for completing the works left not completed by Pawls, Thereupon the said Jerram, as the engineer, agent, and servant of the corporation, and acting within and according to his duties, powers and authorities as such, employed the plaintiffs to complete the unfinished works and also to execute and complete certain additional works upon certain terms then agreed upon between them.

The plaintiffs accepted and entered upon the said employment upon the said terms and completed the whole of the works. The said employment of the plaintiffs was in fact an employment of them by the corporation through the said Jerram as their engineer, agent and servant. The plaintiffs and the said Jerram fully perfomed the said agreement on their several and respective parts. The defendants, the corporation took possession of and accepted and received the benefit of all the works and material, the subject of that litigation and enjoyed the benefit thereof. The corporation paid to the plaintiffs large sums of money from time to time upon certificates of Mr. Jerram but refused to pay other large sums of money from time to time upon certificates of Mr. Jerram bait refused to pay other large sums amounting to between £6000 and £7000, which was the amount claimed by the plaintiffs as still due.

The corporation resisted the plaintiffs claim en the ground inter alia, that the employment of the plaintiffs was an employment of them not under the common seal of the corporation. The question for consideration in that case was whether the absence of the common seal of the corporation in the employment of the plaintiffs was fatal to the plaintiffs right to recover against the corporation. After a review of several decisions bearing on the point, the House of Lords answered the question in the affirmative. Lord Black-burn observed as follows:

“I think bearing in mind this, it is not possible to construe Section 174 as meaning anything else than that when the subject-matler of a contract exceeds £50 in value the contract, must be under seal; and that the distinctions and differences which according to the opinions of the Court of Queens Bench, might dispense with a seal in the case of an ordinary corporation should not do so when the contract was by an urban authority, and related to a subject-matter above that value …..

It is true that this works great hardship upon the now appellants. They hed an agreement but it was not sealed, and though it is possible that if the agreement had been under seal the defendants might have established a defence on the merits to ail or part of what is claimed, it is hard on the appellants that they should not be allowed to raise the question. It is, however, for the legis-lature to determine whether the benefits derived by enforcing a general rule are or are not too dearly purchased by occasional hardships. A Court of law has only to inquire, what has the legislature, though fit to enact?”

In course of his judgment in that case Lord Bramwell observed;

“I must add that I do not agree in the regret expressed at having to come to this conclusion. The legislature has made provisions for the protection of ratepayers, share-holders, and others who must act through the agency of a representative body by requiring observance of certain solemnities and formalities which involve deliberation and reflection. That is the importance of the seal,

It is idle to say there is no magic in a wafer. It continually happens that carelessness and indifference on the one side, and the greed of gain on the other cause a disregard of these safeguards and improvident engagements are entered into. Whether that has been so in this case I have no notion but certainly the ratepayers of Leamington may well be astonished at the amount claimed of them. The decision may be hard in this case on’the plaintiffs, who may not have known the law. They and others must be taught it, which can only be done by its enforcement.”

There is thus unanimity of judicial opinion both here and in England that when a particular statute requires a particular act to be done in a specified manner, to be valid and binding it must be done in that manner, and violation of the previsions of the statute will render the act so done wholly unenforceable at law. The provisions of Section 115 (3) of the Government of India Act, or for the matter of that, the provisions of Article 299 (i) of the Constitution are mandatory and must be strictly complied with in order to constitute a valid contract which could be enforced against the Government.

In this case, the contracts were not executed in strict conformity with the provisions of Section 175 (3) and are therefore wholly unenforceable against the Government with the result that the plain-tiff cannot recover anything from the Government by way of damages even if it was responsible for the breach of the contracts.

32. Mr. Das did not dispute the general pra-position that contracts not complying with the” provisions of Section 175 (3) of the Government of India Act were unenforceable against the government. His reply, however, was (1) that this defence was not available to the defendant because no defence was raised that the contracts were not enforceable because they were not executed as required by Section 175 (3); (2) that this section did not govern contracts made on behalf of the railway administration because authority of the Central Government, and lastly, that in any case there was ratification of the contracts by the railway administration.

33. In support of the first contention Ms. Das relied upon the decision of the Supreme Court in Kalyanpur Lime Works, Ltd. v. State of Bihar, (1954) SCR 958 at P. 969; (AIR 1954 SC 165 at p. 168) (1). One of the pleas taken in that case was that the contract was void under Section 30 of the Government of India Act, 1915, as the conditions laid down in that section had not been complied with. The High Court gave effect to this contention, but the Supreme Court overruled it, because the plea of Section 30 was not raised in the pleadings. In fact, no defence had been raised in that case that the contract was not enforceable because it was not executed as required by that section.

It cannot be disputed that the question whether or not the provisions of Section 175 (3) have been complied with is purely a question of fact, and therefore, has to be pleaded. Unless the facts constituting the invalidity of the contracts are mentioned in the written statement, it is not incumbent upon the plaintiff to establish by evidence that the contracts were valid and legal. The position in the instant case is however, entirely different and the case of Kalyanpure Lime Works Ltd. (I), above referred to is clearly distinguishable on facts.

It is well to remember that the defendant dispute the validity of the contracts on two grounds, first that they are not expressed to be made by the Governor-General end second, that they are not executed, by an officer having authority to execute such contracts. The first ground was established by the allegations of the plaintiff in the plaint itself. It is the admitted case of the parties that the contracts were made by the virtue of the three purchase orders, exhibite 6, 6 (a) and 6 (b).

This is specifically pleaded in the plaint aad the plaintiff produced these purchase orders, in support of his case. The defendant had not alleged any further fact. In order to support its case of non-conformity with the provisions of Section 175 (3) of the Act, the allegations in the plaint were quite sufficient, and no further fact had to be investigated. On the face of them the purchase orders were not expressed to be made by the Governor-General.

It is not a case where the plaintiff can complain that he was taken by surprise at the time of hearing. In fact, on the plaintiff’s own showing the contracts did not conform to the provisions of Section 175 (3) of the Act. As to the authrity of the Divisional Superintendent to make such contracts, the defendant specifically denied that the Divisional Superintendent possessed any such authority. Mr. Das strongly relied upon pararaph 5 of the plaint which the defendant admitted to be correct in paragraph 3 of the written
statement. Paragraph 5 of the plaint nuns as follows:

“That for the purposes and under the authority conferred as noted in the para 3 above in July and August 1943 the said E. R. Rly, through its then Divisional Superintendent, Dinapore by three diverse orders agreed to buy and the plaintiff agreed to sell the following commodities @ the rates mentioned against them:

Purchase order no:

Date of purchase orders
Kinds of commodity
Quantity of commodities
Rate’s

69
20-7-43
Gram 1st, quality
10,000 mds.

@ Rs. 15 per md, (plus cost of new bags not exceeding Rs. 75 per 100 bags) F. O. R. any E. I..R. Station in Bihar.

76

24-7-43
Rice, Dhenki Medium quality
1,000 mds.

@ Rs. 22/8/- (Plus cost of bags not exceeding Rs. 75 per Cent) per md. F. O. R. any station on the division.

Wheat, White as per sample
5,000 mds.

@ Rs. 20/8/- per md., with bags F. O. R. any station on E. I. R. on the division.

109

24-8-43
Rice, Mediumquality
15,000 mds.

@ Rs. 24 per md., without bags F. O. R. E. I. R. station in Bihar.

In this paragraph the plaintiff has given the details of the contracts and he has also referred to the authority of the Divisional Superintendent to excuse the contracts. So far as the authority of the Divisional Superintendent is concerned, he has referred back to the allegations made In paragraph 3 of the plaint, and in paragraph 1 of the written statement the defendant specifically denied the authority of the Divisional superintendent to make such contracts. Therefore, when the written statement is read as a whole the defendant admitted only those allegations in paragraph 5 which related to the details of the contracts.

33a. I think paragraph 5 of the plaint does not assist the plaintiff at all. In my opinion, there is a clear denial in the written statement of the authority of the Divisional Superintendent to bind the railway administration by such contracts. Apart from this, unlike, the case of Kalyan-pur Lime Works Ltd., the defendant raised the specific issue about the unenforcpability of the contracts (vide issue 2 quoted above) and also advanced an argument which of course was negatived by the learned Subordinate Judge on the very ground taken here by Mr. Das.

In my opinion, where the averments in the plaint themselves were sufficient to establish the non-compliances of the provisions of Section 175 (3) : of the Act, it was not necessary for the defendant to raise a further fact, and if those facts :were sufficient to prove the infraction of the Constitutional provisions contained in that section, it becomes the duty of the Court to give effect to those provisions. In this connection, I cannot do better than reproduce here with great respect the observations of Mansfield L. J. in Holman v. Johnson, (1775) 1 Cowp. 341 (J) and of Lindley L. J. in Scott V. Brown, (1892) 2 QBD 724 (K). quoted by Aikman J., in his Judgment in the case of Alice Marry Hills v. William Clarke ILR 27 All 266 at p. 270 (L),
“In Holman v. Johnson (J), Mansfield L.J. said ‘if from the plaintiff’s own slating or otherwise the cause of action appears to arise ex turpi causa or the transgression of a positive law of this country, there the Court says he has no right to be assisted.’ In the case of Scott v. Brown, (K), Lindley L. J., says: ‘No Court ought to enforce an illegal contract or allow itself to be made the instrument of enforcing obligations alleged to arise out of a contract or transaction which is illegal, if the illegality is duly brought to the notice of the Court, and if the person invoking the aid of the Court is himself implicated in the illegality. It matters not whether the defendant has Pleaded the illegality or whether he has not. If the evidence adduced by the plaintiff proves the illegality, the Court will not assist him.”

34. On the basis of these authorities Leake, in his well known book on Contracts 4th Ed. Page 551, summarised, the law in the following way:

“The facts showing illegality either by statute or common law must be pleaded but when the illegality appears from the plaintiffs own evidence, it is the duty of the Court to take judicial notice of the fact, and to give judgment for the defendant, although the illegality is not raised by the pleadings” (quoted in the same Judgment).

The present case stands on” a higher footing. In, this case, the illegality of the contracts appears from the averments of the plaintiff himself in the plaint. Even if there was no pleading to that effect but the evidence adduced by the plaintiff himself established the illegality the Court will not uphold such contracts on the technical ground that no such plea was taken in the written statement. Rule 2 of Order VIII of the Code of Civil Procedure provides that the defendant must raise by his pleading all matters which show the suit not to be maintainable, or that the transaction is either void or voidable in point of law, and all such grounds of defence as is not raised, would be likely to take the opposite party by surprise, or would raise issues of fact not arising out of the plaint, as for instance, fraud limitation, release, payment, performance or facts’ showing Illegality.

In short, this rule requires the defendant to State only those facts which do not, appear from the plaint and which he considers necessary to defeat the plaintiffs claim. If the facts necessary to establish the defence do not appear from the plaint and are not also alleged by the defendant in the written statement, such new facts will not be permitted to be raised at the time of hearing, as apparently they would take the plaintiff by surprise. Howsoever important a fact may be from the point of view of defence, it is not necessary for the defendant to repeat it if it appears from the plaint itself.

This is exactly the position here. The defence of the invalidity of the contracts by reason of infraction of the provisions of Section 175 (3) of the Act is rested upon the averments of the plaintiff himself. It is not a case of raising new defence or raising new matter which will require further investigation. In my opinion, this contention has no substance and must be overruled.

35. Alternatively, Mr. Das contended that there was sufficient evidence to prove that the Divisional Superintendent had authority to execute the contracts. There is no such evidence. The authority must be deduced from the express words of the Governor-General himself expressed by rules framed or by notification issued, under Section 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, Mr. Das attempted to spell out such authority from the evidence of Mr. Ribbins.

We have been taken through his evidence, and I do not find anything, there to show that the Divisional Superintendent had the requisite authority. At the time of hearing the learned Government Advocate produced before us two notifications No. P. 215/41-C and G (Judicial) dated 28-2-42, exhibit M(2) and No. P. 215/42-C & G. (Judicial) dated 16-7-1943, exhibit M (1). The notification of 1942 is of no relevancy. Part X of the notification of 1943 relates to the railway department. Items 1 and 34 of this part are relevant for the present purpose. Item I deals with all instruments relating to purchase or hire, supply and conveyance of materials, stores, machinery plant, telephone-lines and connections coal etc.

The food-grains obviously do not come under the category either of material or stores. They come under a different category altogether. There is no specific provisions about food-grains in this notification. Therefore, the residuary item 34 will apply and deeds and instruments falling under this item must be executed by the Secretary to the Railway Board. Therefore this notification rather shows that the Divisional Superintendent had no authority to execute contracts for the purchase of food-grains. Mr. Das objected to the admission of these notifications in evidence at the late stage.

They are public documents, and there can be no objection to their acceptance in evidence, specially when the plaintiff on whom lay the onus to prove the authority of the Divisional Superintendent did not produce any such notification to prove affirmatively that the Divisional Superintendent had the authority to make the contracts with him. Any way. if these notifications are left out of consideration, there is no evidence on the record to establish the authority of the Divisional Superintendent. Hence. I must hold that the Divisional Superintendent had no authority to make the contracts.

36. Even assuming that the Divisional Superintendent had been duly authorised to enter into contracts for the purchase of food-grains, it is not enough to entitle the plaintiff to recover damages on the strength of these contracts, the other conditions of Section 175 (3) of the Act have not been fulfilled, namely the contracts have not been expressed to be made by the Governor-General and they have not been executed on his behalf. Thus in any view of the matter, there is no effective reply to the contention that the contracts are unenforceable because they have not been made in conformity with Section 175 (3) of the Act.

37. The second contention of Mr. Das is equally unacceptable. There is nothing to show, that the contracts on behalf of the railway Administration were exempted from the operation, of Section 175 of the Government of India Act. No doubt, the provisions, of Sub-section (3) of Section 175 are subject to the provisions, of the Government of India Act with respect to the Federal Railway Authority, but that part of the Government of India Act which dealt with Federation never came into force. The contention of Mr. Das cannot be accepted without introducing in Sub-section (3) of Section 175 words of exception which do not find mention there.

It applies to all contracts made in the exercise of the executive authority of the Central Government, and this authority embraces the railway, also. In this connection Mr. Das referred to Section 47 of the Indian Railways Act and to the Indian Railway Board Act. Section 47 relates to rule making power. By the Indian Railway Board Act the Central Government was empowered to invest by notification in the official gazette, the Railway Board, either absolutely or subject to conditions, (a) with all or any of the powers of functions of the Central Government under the Indian Railways Act, 1890 with respect to all or any railways and (b) with the power of the officer referred to in Section 47 of the said Act to make general rules for railways administered by the Government.

I fail to understand now these provisions help, the plaintiff at all. The Railway Board was no doubt given certain powers, and the Railway Company and the officers of the State railway have powers to make rules for certain purposes. This does not imply that Section 175 of the Government of India Act did not apply to railways. Apart from this, it is not within the competency of the State Legislature or Parliament to make any law abrogating the Constitutional provisions contained in this section. This contention is entirely without merit and must be overruled.

37a. Lastly, Mr. Das argued that in any casa the non-observance of the provisions of Section 175 (3) rendered the contracts not void but voidable and were therefore capable of ratification. His submission is that even assuming that the Divisional Superintendent had no authority the railway ad-ministration ratified the contracts by accepting the goods tendered by the plaintiffs pursuant to the contracts and paying for them. His conten-tion is that though initially the contracts suffered from certain infirmities, they were valid and enforceable against the railway administration because of subsequent ratification.

In support of his contention he relied upon a Division Bench decision of this Court in State of Bihar v. Karamchand Thaper and Bros. Ltd., Misc. Appeal No. 367 of 1953, D/- 5-10-1956 (M); and certain observations of the Supreme Court in the case of Chatturbhuj Vithaladas Jasani (F), referred to above, and also upon the decision of the Privy Council in the Collector of Masulipatam v. Cavaly Vencata Narrainapah, 8 Moo Ind App 529 (N). In the last case their Lordships of the Privy Council laid down as follows:

“Again the acts of a Government officer bind
the Government only when he is acting in the
discharge of a certain duty within the limits of
his authority or if he exceeds that authority, when
the Government in fact, or in law, directly or by
implication, ratifies the excess.”

This case is an authority for the view that any action of a government officer in excess of authority is capable of ratification by the Government and where the Government ratifies the excess, it is bound by the act of the Government officer, even if unauthorised. Stated generaly there is nothing in law to prevent the Government from ratifying the acts of its officer in excess of his authority, but the ratio decidendi of that case has no application here, because in that ease their Lordship of the Privy Council were not considering the fact of the violation of any Constitutional provision, as in the present case.

The decision in Misc. Appeal No. 367 of 1953, D/- 5-10-1956 (Pat) (M), has also no binding force, as there the contracts were found to be valid. In the case of Chaturbhuj Vithaldas Jas-ani (F), the Supreme Court has laid down that the contracts not executed in the manner provided in Article 299 (1) of the Constitution are not void, but only voidable because, although such contracts were unenforceable against the Government by reasons of that Article, they were binding upon the officers who actually made the contracts under Section 230 (3) of the Contract Act. As to the effect of the non-observance of the provisions of that Article, their Lordships of the Supreme Court observed as follows:

“It may be that Government will not be bound by the contracts in that case, but that is a very different thing from saying that the contracts as such are void and of no effect, It only means that the principal cannot be sued; but we take it there would be nothing to prevent ratification, especially if that was for the benefit of Government.”

The contracts though not in conformity with the provisions of Article 299(1) may no doubt be roti-fied by the Government, but the question is how that ratification is to be brought about. Their Lordships of the Supreme Court were not concerned in that case with the manner and mode of ratification of the contract which was unenforceable by reason of violation of the provisions of Article 299 (I). In the present case, the acceptance by the defendant of the goods tendered by the plaintiff is said to constitute ratification.

In fact, the contracts were made by a person who had no authority to make them, and the goods were also accepted by the same person. Can such an acceptance constitute ratification so as to override the mandatory provisions of Article 299 (1)? I think not, if that were so, then the provisions of that Article which were designed to protect the people from the vagsries of the government servants will be easily abrogated. In considering such cases, the ordinary princinles governing ratification by individuals do not apply. I would refer to the case of H Young and Co.. (H). quoted above. In that case the contract entered into by Mr. Jerram with the plaintiffs was valid and legally perfect in all respects, except one, namely, it was not sealed with the common seal of the corporation.

The contract had been fully performed by both sides, and the defendants, the corporation, had taken possession and accepted and received the benefit of all the works and materials, the sub-ject of that action, and were in enjoyment there-of. In other words, there was prima facie ratification of the contract by the corporation in that they were in enjoyment of the benefits of the con-tract and had also made payment from time to time to the plaintiffs. Still, the contract we held to be unenforceable against the corporation. The House of Lords quoted with approval the observation of Brett L. J. delivering the Judgment of the Court of appeal in that case.

“Further, after having read all the cases with regard to the doctrine of work done for and accepted by a corporation, I am bound to say that I have come to the conclusion that even if this were a municipal corporation not bound by the statute the proper decision in point of law, according to the eases and principle, is that the want of seal prevents, in such a case as this, the plaintiffs succeeding.”

38. In cases of contracts which do not conform to the provisions of Article 299 (1) or for the matter of that, Section 175 (3) of the Government of India Act, acceptance of the benefit by the Government is not sufficient in point of law to constitute ratification so as to validate the contracts. The important question for consideration is whether or not Constitutional provisions with respect to the execution of the contracts have been strictly followed.

If not, the Constitution must be upheld and the contracts must be declsred unenforceable against the Government notwithstanding the ques-tion that the Government had accepted some bene-fit under the contracts. In my opinion, the ratio decidendi of the case Young and Co. (H), applies to the present case and must hold that there was no ratification of the contracts. They were wholly-unenforceable against the Government since the conditions of Section 175 (3) of the Act have not been fulfilled.

39. The last question is what will be the amount of damage which the plaintiff will be entitled to recover in the event of his success; The case of the plaintiff is two fold: first he claimed as damages the actual loss he sustained by reason of the breach of the contracts by the defendant, that is to say, the difference between the contractual rates of prices and the prices fetched on resale of the goods (vide paragraph 18 of the plaint). Alternatively, he claimed by way of damages the difference between the contracted prices and the market prices of the commodities on the dste of the breach, namely 1-10-1943 (vide paragraph 18 (s) of the plaint) As to the first, the learned Subordinate Judge held that the plaintiff had failed to prove by reliable evidence the prices which he got on resale.

The plaintiff alleged that the goods were sold by auction to the highest bidder. None of the bidders was examined in this case. The plaintiff also produced his rober bahis (exhibits 1 series). The learned Subordinate Judge discarded these bahis as untrustworthy. I am not Inclined to place any reliance upon the rokar bahis firstly, because the different entries in them have not been specifically proved, and, secondly, there is no independent corroboration. In my opinion, the learned Subordinate Judge rightly discarded the bahis as unreliable. It must be held in agreement with the learned Subordinate Judge that there is no evidence to prove the prices fetched on the resale of the goods.

40. The learned Subordinate Judge further held that there was no evidence to prove the prices ruling the market on the date of the breach. In absence of such evidence the plaintiff relied upon the prices of the different commodities as fixed by the Sadar Subdivisional Officer, Arrah in exercise of the powers conferred upon him under the Defence of India Rules as evidence by the control price list, exhibit 5 (m). The learned Sub-ordinate Judge based his decision on this exhibit, and, in his opinion, the measure of damage in this case is the difference between the contractual prices and the control prices. I am unable to agree with the conclusion reacned by him.

In this case there was no evidence at all to prove the actual market prices of the commodities. In absence of such evidence, the plaintiff cannof recover any damage. The control price list does not assist the plaintiff. In the first place, as contended by the plaintiff himself, it had no operation beyond the territorial jurisdiction of the Sadar Sub-Division. The goods’ were sold by auction at different places in the district of Shahabad. It appears that in the Court below the case of the plaintiff was that the prices mentioned in exhibit 5 (m) were prevalent in the district of Shahabad.

He, however, for different reasons changed front in this Court, and contended that the prices fixed by the Sadar Subdivisional Officer Arrah, had no force in places outside that Subdivision. Be that as it may, the plaintiff cannot recover and damage on the strength of the control prices, because in point of law he cannot sell the commodities in open market at prices higher than the prices fixed by the Sadar Sub-divisional Officer. Therefore, even if the contractual prices were higher than the control prices, the law debarred him from claiming more than the control prices. The position is, therefore perfectly clear.

He can claim only the difference between the contractual prices and the prices ruling the market on the date of the breach. If there is no evidence as found in this case, the plaintiff must be unsuited, because the basis of assessment of damages is leaking. The control prices even on the assumption that they had application throughout the district of Shahabad, are of no avail be-cause the plaintiff cannot in law, to recover in a suit were more than what was fixed under the Defence of India Rules. It will thus appear that in this case there is no legal evidence to prove the damages which the plaintiff will be entitled to recover from the defendant, and on this, ground alone the plaintiff must be unsuited.

41. I may mention here that the learned Subordinate Judge has allowed the plaintiff interest at 6 per cent, per annum on the amount of damages determined by him from 1-10-1943 (that is. from the date of the breach) to the dyte of the institution of the suit. On the authority of the decision of the Privy Council in Bengal Nagpur Railway Co. Ltd. v. Ruttanji Ramji, AIR 1938 PC 67 (O), the learned Government Advocate contended that in this case the interest prior to the Institution of the suit, was not permissible. Mr. Das candidly conceded that the plaintiff was not entitled to interest for any period prior to the institution of the suit. This part of the decree of the learned Subordinate Judge, must, therefore be set aside.

42. Mr. Das, however, argued that the plaintiff was entitled to interest pendente lite and that the learned Subordinate Judge has not allowed him any interest for the period subsequent to the institution of the suit. The plaintiff has filed a cross appeal claiming interest pendente lite. Since, however, the plaintiff’s case fails in toto, his cross appeal must be dismissed.

43. It follows from, the above that in any view of the matter the plaintiff is not entitled to any relief in this case. In the result, the appeal is allowed with costs, the Judgment and decree of the learned Subordinate judge are set aside and the suit of the plaintiff is dismissed with costs throughout. The cross-appeal of the plain-tiff is also dismissed but without costs.

Ramaswami, C.J.

44. One of the important questions arising in this appeal is whether the contracts, exhibits, 6, 6 (a) and 6 (b) are void and unenforceable against the Union Government because of the contravention of Section 175 (3) of the Government at India Act, 1935. All these three contracts are in the form of letters of acceptance addressed to the plaintiff by the Divisional Superintendent Ex-hibits 6 and 6 (a) are signed by Mr. Ribbins “For Divisional Superintendent” and exhibit 6 (b) if apparently signed by the Divisional Superintendent himself. Exhibit 6 is in the following terms:

“Divisional Superintendent Office, E. I. Railway, Post Khagaul.

Mr. Jaipuria Sd. Illeg. 24/7/Dist. Patna, 20th July, 1943.

To.

Messrs. Mr. Jaipuria.

C/o. Subdivisional Officer, Arrah.

Dear Sir/s. ….

Your offer No. …… dated 19-7-1943.

I accept your offer for supplying the following foodstuffs at the rates quoted against each Inclusive/exclusive of the cost of bags and bagging for any station on the E. I. R., in the province of Bihar. U. P. The Supply should be commenced by you within seven days from the date of receipt of this letter and completed within one calendar month.

Please acknowledge receipt.

Commodity.

Quantity
Rate per maund.

Gram 1st quality.

Ten thousand maunds

Rupees fifteen per maund plus cost of new bags not (?) exceeding Rupees Seventy five per hundred for any E I.R. Station in Bihar,

Note: If bags are supplied by the Administration, necessary cost thereof shall be deducted from your bill at the prevalent market rate.

Purchase approved by the Tender Committee of 20-7-1943,

(Seal of the Court).                                                                                                    Yours faithfully.

Sd. R. C. Ribbin,
For Divisional Superintendent.”

44a. Exhibit 6 (a) is to the following effect:

Divisional Supdt’s Office, E. I. Railway, Post Khagaul, Dist. Patna 24th July, 1943. To,

Messrs. Mr. Rajam Vijakumar Jaipuria, Grain

Supply Agency, Arran.

Dear Sir/s. ……….

Your offer No. ………. dated 24-7-1943.

I accept your offer for supplying the following foodstuffs at the rates quoted against each inclu-sive/exclusiveof the cost of bags and bagging F.O.R. any station on the E. I. R. in province of Bihar U. P. The supply, should be commenced by you within seven days from the date of receipt of this letter and completed within the calendar month.

Please acknoledge receipt.

Commodity.

Quantity
Rate per maund

Rice dhenki medium quality.

one thousand maund

Rupees twenty two annas eight (Plus cost of bags not exceeding Rs. 75/ % per maund f.o. r. any station on the Division.

Wheat white as per sample.

Five thousand maunds.

Rupees twenty annas eight per maund with bags f.o.r. any Station on E.I.R. on Division.

Note: If bags are supplied by the Administration, necessary cost thereof shall be deducted from your bill at the prevalent market rate.

Yours faithfully

Sd. S.C. Ribbin.

For Divisional superintendent.

When payment for a commodity supplied against a purchase Order is required to be made against the Railway Receipt through any Bank before taking delivery of the Consignment the Divisional Superintendent does not agree to make such payment unless the bill of cost for the commodity is received in advance and checked by the Divisional Accounts Officer against the purchase Order and certified as correct. If non-compliance With this by the supplier entails interest charges from the Bank, supplier will have to pay these and also bear all consequences that may accrue from late payment to the Bank.

Payment against Railway Receipt will only be made up to 98 per cent, of the bill. The supplier should, therefore, intimate, 98 per cent. of the total amount for recovery from the Railway the balance 2 per cent, will be paid after delivery and check of the consignment,”

45. Exhibit 6 (b) is dated the 24th August, 1943, and is to the following effect:

“Purchase Order form No. 106,

Divisional Superintendent’s Office, E. I. Railway, Pest

Khagaul, District Patna.

24th August 1943. To,

Messrs, Mr. Rajaram Vijaikumar, Arrah. Dear sir/s, Your offer No. nil, dated 21-8-1943.

I accept your offer for supplying the following foodstuffs at the rates quoted against each. The supply should be commenced by you within (sic) days (?) from the date of receipt of this letter and completed within one calendar month.

Commodity.

Quantity
Rate per maund

Rice medium quality.

fifteen thousand maunds

Rupees twenty four per maund without bags (f. o. r. E. I. -Rly. Station in Bihar.)

When payment for a commodity supplied against a purchase order is required to be made against the Railway Receipt through any Bank before taking delivery of the consignment the Divisional Superintendent does not agree to make such pay-ment unless the bill of cost for the commodity is receive in advance and checked by the Divisional Accounts Officers against the purchase order and certified as correct. If non-compliance with this by, the Supplier entails interest charges from the Bank, supplier will have to pay these and also bear all consequences that, may accrue from late payment to the Bank.

Payment against Railway Receipt will only be made up to 98 per cent. of the total amount for recovery from the Railway the balance 2 per cent. will be paid after delivery and check of the consignment at destination. Please acknowledge receipt, and let the undersigned know where ysu require the bags to be sent.

Yours faithfully.

Sd/. Illeg.

Divisional Superintendent.”

46. The argument of the learned Government Advocate on behalf of the appellant is that the contracts are not in the form contemplated by Section 175 (3) of the Government of India Act. It was submitted by the learned Government Advocate in the first place that the contracts are not expressed to be made by the Governor General and in the second place that tthe contracts are not executed by a person duly authorised by the Governor-General. In this connection it is necessary to quote Section 175 (3) which is in the following terms:

“175 (3) 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 Governor General or by the Governor of the province, as the case may be, and all such contracts and all assurance 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.”

Reference should also be made in this connection to Section 313 (3) of the Government of India Act which states:

“313. (3) Reference in the provisions of this Act for the time being in force to the Governor General and the Federal Government shall, except as respects matters with respect to which the Governor Genera] is required by the said previsions to act in his discretion be construed as references to the Governor General in Council and any reference to the Federation, except where the reference is the establishment of the Federation shall be construed as a reference to British India, the Governor General in Council, or the Governor General, as the circumstances and the context may require x x”

The effect of Section 313 (3) is that the reference in Section 175 (3) to the Governor-General should be construed as reference to the Governal-General in Council and a reference to the Federation should be construed as also reference to the Governor-General in Council. It was argued by Mr. P.R. Das on behalf of the respondent that Section 175 (3) has no application to the present contracts as these contracts were not made in exercise of the executive authority of the Governor General in Council.

It was submitted by learned Counsel that contracts relating to purchase of food-grains for railways are not contracts made in exercise of the executive authority of the Governor General in Council. Reference was made in this connection to Section 47 (g) of the Indian Railways Act. which empowers a railway company to make a general rules consistent with the Railways Act for the working and management of the railway. Section 47(g)(1) states:

”47. (1) Every railway company and in the case of a railway administered by the Government, an officer to be appointed by the Central Gov-ernmeht, in this behalf shall make general rules consistent with this Act for the following purposes, namely, (g) Generally, for regulating the travelling upon, and the use, working and management of, the railway.”

Reference was also made by Mr. P.R. Das to Section 2 (B) of the Indian Railways Board Act (Act IV of 1905), which empowers the Central Government, by notification in the official gazette, to invest the Railway Board, either absolutely or subject to conditions with the power of making general rules for railways administered by the Government. Section 2 (b) of Central Act (IV of 1905) is in the following terms;

“2. The Central Government may, by notification in the Official Gazette invest the Railway Board, either absolutely or subject to conditions,

(b) with the power of the officer referred to In Section 47 of the said Act make general rules for railways administered by the Government.”

47. Mr. P.R. Das also referred in this connection to the evidence of Mr. Ribbins (D.W. 11) at page 58 of the printed paper book. Mr. Ribbins, has stated in the bourse of his evidence’ that the scheme of supplying goods and foodgrains to railway employees was drawn Up in the Head Office and it subsequently got the assent of the Railway Board. Mr. Ribbins further said that “he received instructions sanctioning the forms of purchase order”. In’ my opinion the argument of Mr. P.R. Das is unsound. Reference by learned Counsel to Section 47 (1) (g) of the Railways Act and Section 2 (b) of Central Act IV of 1905 is irrelevant in this connection.

These statutory provisions cannot, in my Opinion, qualify or control the effect of Section 175 (3) of the Government of India Act. I am also of opinion, that the executive authority of the Federation extends to matters relating to purchase of foodgrains for railway employees. Section 8 of the Government of India Act deals with the extent of the executive authority of the Federation. Section 8 (1) (a) states that the executive authority of Federation extends to ail matters with respect to which the Federal Legislature has power to make laws. Section 100, Sub-section (1) deals with the subject-matter of Federal laws and states that the Federal Legislature has power to make laws with respect to any matters enumerated in list I of the Seventh Schedule. Item 20 of lise I of the Seventh Schedule is as follows :

“20. Federal railway the regulation of all railways other than minor railways in respect of safety, maximum and minimum rates and fares, station and service terminal charges, interchange of traffic and the responsibility of railway administration as carriers of goods and passengers the regulations of minor railways in respect of safety and the responsibility of the administration of such railways as carriers of goods and passengers.”

It is manifest, therefore, that the Federal Legislature has power to make laws with respect to sale of foodgrains for railway authorities. The subject-matter lies within the compass of the Jurisdiction of the Federal Legislature. The subject-matter accordingly lies within the compass of the executive authority of the Federation as defined in Section 8 of the Government of India Act I would reject the argument addressed by Mr. P.B. Das on this aspect at the case.

48. In this connection the learned Govern-ment Advocate produced two notifications of the Governor General in Council, issued under Section 176 (3) of the Government of India Act. The first notification is No. F. 215/41 O and G (Judicial dated the 28th February, 1942. The second notification is No. F-215/42 C. & G. (Judicial dated the 16th of July, 1943, and is in the following terms :

“Simla, the 16th July, 1943.

No. R 215/42. C. & G. (Judicial). In exercise of the powers conferred by sub-s (3) of Section 175 of the Government of India Act, 1935 (26 Geo. 5, Ch 2) the Governor General in Council is pleased, in supersession of the Notification of the Government of India in the Legislative Department No. F-215/41 C. & G. (Judicial) dated the 28th February, 1942, to declare that the under-mantioned contracts and assurances of property made in exercise of his executive authority may be executed on his behalf as follows:

In the case of the Railway Department (subject to any limits fixed in Department orders).

1. All instruments relating to purchase or hire, supply and conveyance of materials, stores, machinery plant, telephone lines and connections, coal, etc.; by General Managers, Deputy or As-sistant General Managers, Assistant Deputy General Managers, Secretaries to General Managers, Engineers-in-chief, Chief Engineers, Deputy Chief Engineers, Chief Commercial Managers, Deputy Chief Commericial Managers, Commercial Managers, Divisional Superintendents, Superintendents-of works, Executive Engineers, Divisional Engineers, Colliery Superintendents, Chief Electrical” Engineers, Senior Electrical Engineers, Chief Mechanical Engineers, Bridge Engineers, Signal and Interlocking Engineers, Signal Engineers, Track Supply Officers, Controllers of Stores, Deputy Controllers of Stores, District Controllers of Stores or Assistant Controllers of Stores attached to the Controllers of Stores Office of State Railways, the Director, Railway Clearing Accounts Office, Slee-per Control Officers of the Eastern and the Nor-them Groups, the Chief Mining Engineer with the Railway Board, or the Superintendent, Mechanical workshop Moghalpura.

*****

34. All deeds and instruments relating to Railway matters other than those specified above; by the Secretary to the Railway Board.”

49. It was argued by Mr. P.R. Das that the contracts in the present case fall within X(1) and; the Divisional Superintendent was the proper”: authority to execute the contracts on behalf of the Governor-General. It was contended by learned Counsel that the word “materials” would in-clude the purchase of foodgrains for consumption of employees. I do not accept this argument as correct. The word “materials” must be construed, ejusdem generis, that is, in the context of the language of that clause. It is apparent that the word “materials”, in clause (1) refers to materials in connection with stores, machinery plants etc. and not foodgrains meant for consumption. In my opinion, the contracts fall within the residuary Clause 34, and the proper authority to execute the contracts would, therefore, be the Secretary to the Railway Board and not the Divisional Superintendent. I reject “the argument addressed by Mr. P.R. Das on this point.

50. It was then contended on behalf of the respondent that though there has been a violation of Section 175 (3) of the Government of India Act, the contracts are voidable and not void. I cannot accept this argument as correct: I think that the provisions of Section 175 (3) are mandatory in character and, therefore, a contract in order to be binding and enforceable against the Union Government must be made in strict conformity with the formalities prescribed by Section 175 (3). If these formalities are not complied with, the contracts are void and not enforceable against the Union Government. Section 175 (3) deliberately circumscribes the power of the Governor-General to make contracts which bind the Central Government.

The formalities prescribed by Section 175 (3) cannot, therefore, be waived or dispensed with. The principle embodied in Section 175 (3) is a principle of public policy in the general sense. The requirements of Section 175 (3) are meant for the protection of the general public, otherwise it is possible that public funds may be depleted by clandestine contracts made by any and every public servant acting in the name of the Governor-General. I am, therefore, of the view that the provisions of Section 175 (3) are mandatory, and a breach of that section makes the contract void and unenforceable against the Government.

This opinion is borne out by a decision of the Supreme Court in 1954 SCR 817: (AIR 1954 SC 236) (F), where Bose, J. approved the strict view taken by the Bombay High Coun in Krishnaji Nilkant v. Secretary of State, AIR 1937 Bom 449 (P) & by the Calcutta High Court in Province of Bengal v. S.L. Puri, 51 Cal WN 753 (Q). It was observed by Bose, J. that the reasoning of the Federal Court in J.K. Gas Plant Manufacturing Co. v. Emperor,. 1947 FCR 141: (AIR 1947 PC 38) (R), with regard to Section 40 (1) of the Ninth Schedule of the Government of India Act was not applicable to the interpretation of Article 299 (1) of the Constitution which was couched in different language,

Bose, J. also held that the reasoning of the Supreme Court in Dattatreya Moreshwar v. State of Bombay. 1952 SCR 612: (AIR 1932 SQ 181) (S), with regard to Article 166 (1) of the Constitution was also not applicable to the interpretation of Article 299 (1) of the Constitution. Bose, J. further held that the provisions of Article 299 (1) were not inserted in the Constitution for the sake of mere form, but the provisions were inserted for the purpose of safeguarding Government against unauthorised contracts. It was accordingly held by the Supreme Court that Article 299 was not complied with as the contracts were made by correspondence and, therefore, the Union Government could not have been sued upon them and the contracts were unenforceable and void as against the Union Government. At P. 834 of SCR: (p. 243 of AIR), Bose, J. states :

“In our opinion, this is a type of contract to which Section 230 (3) of the Indian Contract Act would apply. This view obviates the inconvenience and injustice to innocent persons which the Federal Court felt in 1947 FCR 141 0t pp. 156. 157: (AIR 1947 PC 38 at PP. 41, 42) (R) and at the same time protects Government. 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 he safeguarded. On the other hand, an officer entering into a contract en behalf of Government can always safeguard himself by having recourse to the proper form”.

The same view has been expressed by Bose, J. in a subsequent case, CS) AIR 1955 SC 468 at p. 476 (G), where his Lordship states :

“It is well settled that Government can only be bound by contracts that are entered into in a particular way and which are signed by the proper authority. A. reference to the agreement, Ex. A (1), will show that it was accepted on behalf of the Dominion Government by the Additional Chief Engineer and not by an Executive Engineer.”

The same view has been expressed in an English case, (1883) 8 App Cas 517 (H). The question arose in that case whether Section 174 of the Public Health Act, 1875, was mandatory or directory and whether contracts which do not conform with the requirements of the section could be enforced against an urban authority. Sub-section 1 of Section 174 of the Public Health Act, 1875, enacted that “every contract made by an urban authority where of the value or amount exceeds £50 shall be in writing and sealed with the common seal of such authority”.

It was argued in that case on behalf of the plaintiff that the absence of a seal was not fatal to the contract, and that the corporation had adopted the contract and could not plead their own disability for want of a seal when they had taken the benefit of an executed contract. The argument was rejected by the House of Lords and it was held that Section 174 of the Public Health Act was obligatory and not merely directory and that the section applied even to an executed contract of which the urban authority had the full benefit and enjoyment, and which had been effected by a duly appointed agent. The matter has been very well put by Lord Bramwell at page 528 of the report as follows :

“I must add that I do not agree in the regret expressed at having to come to this conclusion. The legislature has made provisions for the protection of rate-payers, share-holders and others, who must act through the agency of a representative body, by requiring the observance of certain solemnities and formalities which involve deliberation and reflection. That is the importance of the seal. It is idle to say that there is no magic in a wafer.

It continually happens that carelessness and indifference on the one side, and the greed of gain on the other, cause a disregard of these safeguards, and improvident engagements are entered into. Whether that has been so in this case I have no notion; but certainly the rate-payers of Leamington may well be astonished at the amount claimed of them. The decision may be hard in this case on the plaintiffs, who may not have known the law. They and other must be taught it, which can only be done by its enforcement.”

51. An argument was then put forward by Mr. P. R. Das on behalf of the respondent that the railway authority had accepted the goods and hence therp was ratification of the contracts by the Union Government. I am unable to accept this argument as correct. For the reasons which I have already stated, the provisions of Section 175 (3) of the Government of India Act are mandatory in character and a breach of these prcvisions makes the contracts void and unenforceable against the Union Government. There is no ques-tion of estoppel or ratification in such a case.

As I have already said, the provisions of Section 175 (3) have not been inserted in the Constitution for the sake of mere form, but have been inserted for safeguarding the Government against unauthorised contracts. The provisions are embodied in Section 175 (3) on the ground of public policy–on the ground of protection of general public, and these formalities cannot be waived or dispensed with.

If that is the correct meaning of Section 175 (3), then the plea of estoppel or ratification cannot be admitted, as contended for by learned Counsel for the respondent. If the plea of the respondent regarding estoppel on ratification is admitted, that would mean in effect the repeal of an important constitutional provision intended for the protection of general public. The plea of estoppel in similar circumstances was rejected by Lord Maugham in Maritime Electric Co. Ltd. v. General Dairies, Ltd., AIR 1937 PC 114 (T) At page 116 Lord Maugham has observed as follows:

“The sections of the Public Utilities Act which are here in question are sections enacted for the benefit of a section of the public, that is, on grounds of public policy in a general sense. In such a case–and their Lordships do not propose to express any opinion as to statutes which are not within this category — whereas here the statute imposes a duty of a positive kind, and not avoidable by the performance of any formality, for the doing of the very act which the plaintiff seeks to do, it is not open to the defendant to set up an estoppel to prevent it.

This conclusion must follow from the circumstance that an estoppel is only a rule of evidence which under certain special circumstances can be invoked by a party to an action; it cannot therefore avail in such a case to release the plaintiff from an obligation to obey such a statute, nor can it enable the defendant to escape from a statutory obligation of such a kind on his part. It is immaterial whether the obligation is onerous or otherwise to the party suing. The duty of each party is to obey the law.

To hold, as the Supreme Court has done, that in such a case estoppel is not precluded, since, if it is admitted, the statute is not evaded, appears to their Lordships with respect to approach the problem from the wrong direction; the Court should first of all determine the nature of the obligation imposed by the statute, and then consider whether the admission of an estoppel would nullify the statutory provision”.

52. At page 117 his Lordship further proceeded to state :

“A contract to do a thing which cannot be done without a violation of the law is clearly void. It may be asked with force why, if a voluntary release will not put an end to the obligation of the respondents, an inadvertent mistake by the appellants acted upon by the respondents can have the result of absolving the appellants from their duty of collecting and receiving payment in accordance with the law. To collect the money due will, in one sense, cause loss or injury to the respondents, to the extent of $ 1,931,82.

Their Lordshins do not know, because the admission (No. 9 above) does not cover the point, whether to allow the estoppel will not leave the respondents with an advantage consisting of the difference between the sum of $1.931.82 and the total amount by which the respondents were led to increase their payments of cream to farmers and others. It is, however, clear that to disallow the estoppel will leave the respondents out of pocket to the extent of the increased amounts just referred to. It is an unfortunate result; but the obligation to obey a positive law is more compelling than a duty not to cause injury to another by inadvertence. In the present case it may be observed that the injury is not a cause of action. Their Lordships are unable to see how the Court can admit an estoppel which would have the effect pro tanto and in the particular case of repealing the statute.”

53. I think the legal position is analogous to that of a corporation which cannot be estopped from contending that a particular act is ultra vires. In Ashbury Railway Carriage and Iron Co. v. Riche, (1875) 7 HL 653 (U), the Memorandum of Association gave the company power to make and sell carriages. The direclors bought a railway concession in Belgium. Later on the company passed a special resolution to ratify the purchase. The Articles gave express power to the company to extend its business beyond the Memorandum by special resolution. Even so), it was held by the House of Lords that the purchase of the railway concession in Belgium was ultra vires and bad. Lord Cairns observed in the course of his judgment :

“If every share-holder had been in the room, and if every share-holder has said, that is a contract which we authorise the directors to make, it would be void. The share-holders would thereby by unanimous consent have been attempting to do the very thing which by the Act of Parliament they were prohibited from doing.”

54. in Reg v. Blenkinsop, (1892) 1 QB 43 (V), a Municipal body had under a mistake of law sent demands to the railway company for only one-third of the sums legally due. The error continued for four successive years. In the fifth year the Municipal overseers took steps to recover the amounts unpaid. The company set up a plea of estoppel and contended that it had acted on the statements sent to it and had paid out the money in dividends. But the Plea of estoppel was disallowed.

In the case of Anctili v. Manufacturer’s Life Insurance Co., (1899) App Cas 604 (W), the question at issue arose with reference to a condition in a policy of life assurance which provided for the policy becoming incontestable, on any ground if the same should have been in force for a year, the premiums having been promptly paid. The policy was impeached on the ground of a lack of insur-able interest within the meaning of the Civil Code of Lower Canada. The condition of incontestability of the life assurance policy was relied upon and estoppel was also pleaded. The plea of estoppel was disallowed by the Privy Council. Lord Watson in delivering the judgment of the Privy Council observed on this point as follows :

“The rule of the Code appears to them (i. e. their Lordships) to be one which rests upon general principles of public policy or expediency, and which cannot be defeated by the private convention of the parties.”

55. In support of his argument on the question of ratification learned Counsel on behalf of the respondent referred to 1954 SCR 817 at p. 836: (AIR 1954 SC 236 at p. 243) (P), where Bose, J. states that if there is violation of Article 299 (1), there is nothing to prevent ratification if that course is for the benefit of the Government. Bose, J. also added that “there was authority for the view that when a Government officer acts in excess of authority Government was bound if it ratified the excess”. In my opinion, these observations of Bose, J. are in the nature of obiter and are not part of the ratio decidendi of the case. The question at issue was whether the contract fell, within the meaning of Section 7 (d) of the Representation of the People Act, which is in the following terms :

“A person shall be disqualified for being cho-sen as, and for being; a member etc.

*****

(d) if….by himself… he has any share or interest in a contract for the supply of goods to.. … the appropriate Government.”

The object of the Legislature in enacting Section 7 (d) was to maintain the purity of the Legislatures and to avoid a conflict between duty and interest on the part of the legislatures. The question which arose for decision in that case was whether the contract which failed to comply with Article 299 (1) could nevertheless be said to be a contract falling within the ambit of Section 7 (d) of the Representation of the People Act. It was observed by the Supreme Court in this connection that the contract could be enforced against the officer himself under Section 230 (3) of the Indian Contract Act and, therefore, the contract was not void in its absolute sense snd was only void and unenforceable as against, the Union Government.

It was further observed by the Supreme Courb that Section 7 (d) did not require that the contract should be enforceable against the Government; all that it required was that the contract was for the supply of goods to the Government. The contracts in question in that case were, therefore, hit by Section 7 (d) and the Supreme Court held that the Election Tribunal was right in disqualifying Chattur-bhuj Jasani.

56. In the course of argument Mr. P.R. Das appearing for the respondent also referred to a decision of a Division Bench of this High Court, Misc. Appeal No. 367 of 1953, D/- 5-10-1956 (M). I do not think this decision is of much assistance to the case of the respondent. It was held by the learned Judges in that case that Mr. Lall was authorised by the Governor under Section 175 (3) of the Government of India Act and so there was a validly executed contract. It is true that at p. 50 of the judgment the learned Judges proceeded to say that there has been ratification of the contract even if there is a violation of Section 175 (3).

I say this with respect, but it appears to me that this part of the reasoning of that case is in the nature of obiter and not part of the ratio decidendi of that case. I have already given reasons in support of the view that the provisions of Section 175 (3) of the Government of India Act, which corresponds to Article 299 (1) of the Constitution, are mandatory in nature, and a contract in order to be binding upon the Government must be made in strict conformity with the formalities prescribed by the section. If the formalities are not complied with, the contract is void and the plea of ratification” or estoppel cannot be admitted in such a case. The effect of admitting such a plea of estoppel or ratification would be tantamount to the repeal of a constitutional provision, and that is why the plea of estoppel or ratification cannot be permitted.

57. The legal position is almost similar with regard to Government contracts in American Constitutional law. In Federal Cron Insurance Corporation v. A.A Merrill. (1947) 332 US 380 (X), the question arose whether the Federal Crop Insurance Corporation was bound by an assurance given to a farmer by its local agents that his crop was insurable though a valid regulation published in the Federal Register but not in fact known to the farmer or to the local agents precluded coverage of the insurance. It was held by the majority of the Supreme Court that the Crop Insurance Corporation was not estopped from denying its liability. At page 385 Frankfurter, J. states:

“Accordingly, the Wheat Crop Insurance Regulations were binding on all who sought to come within the Federal Crop Insurance Act, regardless of actual knowledge of what is in the Regulations or of the hardship resulting from innocent ignorance The oft-quoted observation in Rock Island, A. & L. R. Co. v. United States, (1920) 254 US 141 (Y). ‘that ‘Men must turn square corners when they deal with the Government,’ does not reflect a callous outlook. It merely expresses the duty of all courts to observe the conditions defined by Congress for charging the public treasury.

The terms and conditions’ defined by the Corporation, under authority of Congress, for erecting liability on the part, of the Government preclude recovery for the loss of the reseeded wheat no matter with what good reason the respondents thought they had obtained insurance from the Government. Indeed, not only do the wheat Regulations limit the liability of the Government as if they had been enacted by Congress directly, but they were in fact incorporated by reference in the application, as specifically re-quired by the Regulations.”

58. For these reasons, as also for the reasons given by my learned Brother Kanhaiya Singh. J., I agree that the suit brought by the plaintiff should be dismissed with costs and that this appeal should be allowed with costs throughout. I also agree that thp cross-objection filed by the plaintiff, should be dismissed.