PETITIONER: SETH BIKHRAJ JAIPURIA Vs. RESPONDENT: UNION OF INDIA DATE OF JUDGMENT: 24/07/1961 BENCH: SHAH, J.C. BENCH: SHAH, J.C. KAPUR, J.L. SUBBARAO, K. HIDAYATULLAH, M. DAYAL, RAGHUBAR CITATION: 1962 AIR 113 1962 SCR (2) 880 CITATOR INFO : R 1962 SC 779 (6,7) R 1963 SC1417 (19) RF 1963 SC1685 (9) R 1964 SC1714 (10) RF 1966 SC 580 (21) R 1967 SC 203 (7) R 1968 SC1218 (6) D 1969 SC 903 (23) F 1972 SC 915 (9) R 1977 SC 536 (17) F 1977 SC2149 (8) RF 1980 SC1285 (9) R 1988 SC2149 (13) F 1989 SC1160 (26) ACT: Contract-Divisional Superintendent of Railway placing orders-Contract not expressed to be in name of Governor- Genera and not executed on behalf of Governor-General- Whether binding on Government-Government of India Act, 1935 (26 Geo. 6 Ch. 2) s. 175 (3). HEADNOTE: In the year 1943 the Divisional Superintendent, East Indian Railway placed certain purchase orders with the appellant for the supply of foodgrains for the employees of the East Indian Railway. The orders were not expressed to be made in the name of the Governor-General and were not "executed on behalf of the Governor-General as required by S. 175 (3) of the Government of India Act, 1935. They were signed by the Divisional Superintendent either in his own hand or in the hand of his Personal Assistant. Some deliveries of foodgrain s were made under these orders and were accepted and paid for by the Railway Administration. But the Railway Administration declined to accept further deliveries of foodgrains. The appellant sold the balance of foodgrains under the purchase orders and filed a suit to recover the difference between the price realised by sale and the contract price. The respondent resisted the suit inter alia on the ground that the contracts were not binding on it. Held, that the contracts were not binding on the respondent and it was not liable for damages for breach of the contracts. Under s 175 (3) of the Government of India Act, 1935, as it stood at the relevant time, the contracts had: (a) to be expressed to be made by the Governor-General, (b) to be executed on behalf of the Governor-General and (F) to be executed by officers duly appointed in that behalf and in such mariner as the Governor-General directed or authorised. The 881 authority to a person to execute contracts may be conferred not only by rules expressly trained and by formal notifications issued in this behalf but may also be specially conferred. The evidence in the case showed that such authority was specially conferred upon the Divisional Superintendent. But the contracts were not expressed to be made by the Governor-General and were not executed on his behalf The provisions of s. 175(3) were mandatory. The object of enacting these provisions was that the State should not be saddled with liability for unauthorised contracts and hence it was provided that the contracts trust show on their face that they were made by the Governor- General and executed on his behalf in the manner prescribed by the person authorised. State of Bihar v. M/s. Karam Chand Thapar and Bros., Ltd. (1962) 1 S. C. R. 827, followed. Liverpool Borough Bank v. Turner, (1861) 30 L. J. Ch. 379, Municipal Corporation of Bombay v. Secretary of State, I. L. R. (1903) 29 Bom. 580, Kessoram Poddar and Co., v. Secretary of State for India, I. L. R. (1927) 54 Cal. 969 S. C. Mitra and Co., v. Governor-General of India in Council, I.L.R. (1950) 2 Cal. 431, Secretary of State v. Yadavgir Dharamgir, I. L. R. (1936) 60 Bom. 42, Secretary of State v. G.T. Sarin and Co., 1. L. R. (1930) 11 Lah. 375, U. I'. Government v. Lal Nanhoo Mal Gupta, A. 1. R. (1960) All. 420, and Devi Prasad Sri Krishna Prasad Ltd. v. Secretary of State, I. L. R. (1941) All. 741, referred to. S. K. Sen v. Provincial P. W. D., State of Bihar, A. 1. R. (1960) Pat., Chatturbhui Vithaldas Jasani v. Moreshwar Prashram, (1954) S. C. R. 817,J. K. Gas Plant Mfg., Co. (Rampur) Ltd. v. King Emperor, (1947) F. C. R. 141, Moreshwar Pangarkar v. State of Bombay, (1952) S. C. R. 612, State of Bombay v. Purshottam Jog Naik, (1952) S. C. R. 674 and State of U.P. v. Manbodhan Lal Srivastava, (1958) S. C. R. 533, distinguished. JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 86 of 1959.
Appeal by special leave from the judgment and order dated
March 27, 1957, of the Patna High Court in Appeal from
Original Decree No. 359 of 1948.
A. V. Viswanatha Sastri and S. P. Varma, for the
appellant.
882
H. N. Sanyal, Additional Solicitor-General of India, R.
Ganapathy Iyer and T. M. Sen, for the respondent.
1961. July, 24. The Judgment of the Court was delivered by
SHAH, J. Bikhraj Jaipuria-hereinafter called the appellant-
is the sole proprietor of a grocery business conducted in
the name and style of “Rajaram Vijai Kumar” in the town of
Arrah in the State of Bihar. In the months of July and
August, 1943, the, Divisional Superintendent, East Indian
Railway under three “-‘purchase orders’ agreed to buy and
the appellant agreed to sell certain quantities of food
grains for the employees of the East Indian Railway.
The ‘following table sets out the purchase prices, the
commodities, the dates of purchase orders, the quantities
and the rates and the method of supply.
Purchase Date of Kinds Quantity Rates.
Order purchase of of
No. orders. commo- commo-
dity. dities.
(1) (2) (3) (4) (5)
69. 20-7-1943. Gram 1st 1000 mds. @ Rs. 15/
quality. per md. (plus
cost of new
bags not
exceeding
Rs. 75/- per
100 bags)
F.O.R. any
E.I.Rly. sta-
tion in Bihar.
76. :4-7-1943. Rice 1000 mds. @ Rs. 22-8-0
Dhenki (plus cost of
Medium bags not ex-
quality. ceeding Rs.75
883
(1) (2) (3) (4) (5)
per cent) per
md. F.O.R. any
station on the
division.
ii. Wheat 5000 mds. @ Rs. 20-8-0
white per md. with
as per bags F.O.R.
sample. any station
on E.I.R. on
the Division.
106. 24-8-1943. Rice 15000 mds. @ Rs. 24/-
medium per md. with-
quality. out bags
F.O.R. E.I.
Rly. station
in Bihar.
Purchase orders Nos. 69 and 76 were signed by S.C. Ribbins,
Personal Assistant to the Division at Superintendent and
purchase order No. 106 was signed by the Divisional
Superintendent. Under the purchase orders delivery of
grains was to commence within seven days’ of acceptance and
was to’ be completed within one month. The appellant
delivered diverse quantities of foodgrains from time to time
but was unable fully to perform the contracts within, the
period stipulated. Between July.), 20, 1943 and August of
4, 1943, he supplied 3465 maunds of rice and between
September 1, 1943 and September 19, 1943 he supplied 1152
maunds 35 seers of wheat. In exercise of the powers
conferred by cl.(b) of Sub-r. (2) of r.81 of the Defence of
India Rules, the Government of Bihar by notification No.
12691-P.C. dated September 16, 1943 directed that
commodities named in column I of the schedule shall not,
from and including September 20, 1943 and until further
notice, be sold at any primary source of supply or by the
proprietor, manager or employee of any mill in the Province
of Bihar at prices exceeding those
884
specified in the second column of the schedule. The
controlled rat-. of rice (medium) was Rs. 18/- per standard
maund, of wheat (red) Rs. 17/-, of wheat (white) Rs. 18/-
and of gram Rs. 12-8-0. The Sub-Divisional Magistrate,
District Arrah issued on September 21, 1943, a price-list of
controlled articles fixing the same prices as were fixed for
wheat, rice and gram by the notification issued by the
Government of Bihar. By cl. (2) of the notification, a
warning was issued that in the event of the dealers selling
controlled articles at rates exceeding those fixed or with-
holding stocks of such articles from sale, “they will be
liable to prosecution under r.81 (1) of the Defence of India
Rules.”
By a telegraphic communication dated Sep. tember 28, 1943,
the Divisional Superintendent informed the appellant that
under the purchase orders, foodgrains tendered for delivery
will not, unless despatched before October 1, 1943, be
accepted, and barring a consignment of 637 maunds 20 seers
accepted on October 7, 1943, the Railway Administration
declined to accept,delivery of food grains offered to be
supplied by the appellant after October 1, 1943. The
appellant served a notice upon the Divisional Superintendent
coraplaining of breach of contract and sold between February
la and February 23, 1944 the balance of foodgrains under the
purchase orders which were lying either at the various
railway stations or in his own godowns. The appellant then
called upon the Railway Administration to pay the difference
between the price realised by sale and the contract price
and failing to obtain satisfaction, commenced an action
(Suit No. 359/48A) in the court of the First Additional
Subordinate Judge, Patna for a decree for Rs. 2,89,995-15-3
against the Dominion of India. The appellant claimed Rs.
2,32,665-12-0 being the difference between the contract
price and the price realised, Rs.42,709-10-3 as interest and
Rs. 14,620-9-0 as freight, wharf.
885
age, cartage, price of packing material, labour charges and-
costs incurred in holding the sale. The appellant submitted
that under the terms of the purchase orders, supply was to
commence within seven days of the date of receipt of the
orders and was to be completed within one month, but it was
not intended that time should be of the essence of the
contract, and in the alternative that the Railway
Administration had waived the stipulation as to time in the
performance of the contracts and therefore he was entitled,
the Railway Administration having committed breach of ,the
contracts, to recover as compensation the difference between
the contract price and the price for which the grains were
sold. The suit was resisted by the Dominion of India
contending inter alia that the appellant had no cause of
action for the claim in the suit, that the contracts between
the appellant and the Divisional Superintendent Dinapur were
not valid and binding upon the Government of India and that
the contracts were liable to be avoided by the Government,
that time was of the essence of the contracts, that
stipulations as to time were not waived, and that no breach
of contract was committed by the East Indian Railway
Administration and in any event, the appellant had not
suffered any loss as a result of such breach. By the
written statement, it wag admitted that the East Indian
Railway through the Divisional Superintendent, Dinapur had
by three orders set out in the plaint agreed to buy and the
appellant had agreed to sell the commodities specified
therein, but it was denied that the Divisional
Superintendent had been “”given complete authority to enter
into contracts for the supply of foodgrains.”
The trial court held that time was not of the essence of
the contracts and even if it was, breach of the stipulation
in that behalf was waived. It further_held that the plea
that the contracts were void because they were not in
accordance with the
886
provisions of s. 175 (3) of the Government of India Act,
1935, could not be.permitted to be urged, no such plea
having been raised by the written statement. Holding that
the Divisional Superintendent was authorised to enter into
the contracts for purchase of foodgrains, and that he had
committed breach of contracts the trial Judge awarded to the
appellant Rs. 1,29,460-7-0 with interest thereon at the rate
of 6% per annum from October 1, 1943, to the date of the
institution of the suit and further interest at 6% on
judgment. Against that decree, an appeal was preferred by
the Union of India to the High Court of Judicature at Patna
and the appellant filed cross-objections to the decree
appealed from. The High Court held that time was of the
essence of the contracts, but the Railway Administration
having a accepted the goods tendered after the expiration of
the period prescribed thereby, the stipulation as to time
was waived. The High Court further held that by the
notification under r. 81 of the Defence of India Rules,
performance of the contracts had not been rendered illegal
but the Divisional Superintendent had no authority to enter
into contracts to purchase food grains on behalf of the
Railway Administration and that in any event, the contracts
not having been expressed to be made by the Governor-General
and not having been executed on behalf of the Governor-
General by an officer daily appointed in that behalf and in
manner prescribed, the contracts were unenforceable. The
High Court also held that the appellant was not entitled to
a decree for compensation because he had failed to prove the
ruling market rate on the date of breach viz, October 1,
1943. The High Court also observed that the trial court
erred in awarding interest prior to the date of the suit and
in so holding, relied upon the judgment of the Privy-
Council in Bengal Nagpur Railway Co., Ltd. v. Ruttanji Ramji
and others (1).
(1) L. R. (1938) 65 J. A. 66.
887
In this appeal by the appellant, two questions fall to be
determined, (1) whether relying upon the purchase orders
signed by the Divisional Superintendent which were not made
and executed in the manner prescribed by s.175 (3) of the,
Government of India Act 1935, the appellant could sue the
Dominion of India for compensation for breach of contract,
and (2) whether the appellant has proved the ruling market
rate on October 1, 1943 for the commodities in question. ,
The finding that the Railway Administration had waived the
stipulation as to the performance of the contracts within
the time prescribed though time was under the agreement of
the essence, is not challenged before us on behalf of the
Union of India. If the finding as to waiver is correct,
manifestly by his telegraphic intimation dated September 28,
1943, that the foodgrains not despatched before October 1,
1943, will not be accepted the Divisional Superintendent
committed a breach of the contract.
Section 175 (3) of the Government of India Act as in force
at the material time provided :
“Subject to the provisions of this Act, with respect to the
Federal Railway Authority, all contracts made in the
exercise of the executive authority of the Federation or of
a Province shall be expressed to be made by the Governor-
General, or by the Governor of the Province, as the case may
be, and all such contracts and all assurances of property
made in the exercise of that authority shall be executed on
behalf of the Governor-General or Governor by such persons
and in such manner as he may direct or authorise.”
The Federal Railway Authority had not come. into being in
the year 1943: it was in fact never set up. The contracts
for the supply of foodgrains were undoubtedly_ made in the
exercise of executive
888
authority of the Federation. The contracts had therefore
under s. 175(3), (a) to be expressed to be made by the
Governor-General, (b) to be executed on behalf of the
Governor-General, and (e) to be execrated by officers duly
appointed in that behalf and in such manner as the Governor-
General may direct or authorise. But no formal contracts
were executed for the supply of foodgrains by the appellant
: he had merely offered to supply foodgrains by letters
addressed to the Divisional Superintendent and that officer
had by what are called “purchase orders” accepted those
offers. These purchase orders were not expressed to be made
in the name of the Governor-General and were not executed on
behalf of the Governor-General. The purchase orders were
signed by the Divisional Superintendent either in his own
hand or in the hand of his Personal Assistant. In the first
instance it has to be considered whether the Divisional
Superintendent had authority to contract on behalf of the
Railway Administration for buying foodgrains required by the
Railway Administration. By Ex.M-2 which was in operation at
the material time, all instruments relating to purchase or
hire, supply and conveyance of materials, stores, machinery,
plant, telephone lines and connections, coal etc. could be
executed amongst others by the Divisional Superintendent;
but contracts relating to purchase of foodgrains are not
covered by that authority. Under item 34 which is the
residuary item, all deeds and instruments relating to
railway matters other than those specified in items 1 to 33
may be executed by the Secretary of the Railway Board. It
is common ground that there is no other item which
specifically authorises the making and execution of
contracts relating to purchase of foodgrains; deeds and
instruments relating to purchase of food grains therefore
fall within item 34. The Secretary to the Railway Board had
not executed these purchase orders : but the trial Court
held
889
that the Divisional Superintendent was authorised to enter
into contracts with the appellant for the supply of
foodgrains. In so holding, the trial judge relied upon the
evidence of Ribbins, Grain Supply Officer and Personal
Assistant to the Divisional Superintendent, Dinapur. The
High Court disagreed with that view. The High Court
observed that the authority of the officer acting on behalf
of the Governor-General “must be deduced from the express
words of the Governor-General himself expressed by rules
framed or by notification issued, under s. 175(3). No
notification has been produced in this case showing that the
Divisional Superintendent had been authorised by the
Governor General to execute such contracts on his behalf,
nor has any rule been produced which conferred authority
upon the Divisional Superintendent to make such contracts.”
After referring to paragraph 10 of the notification, Ex. M-
2 items 1 to 34, the High Court observed:
“Therefore this notification rather shows that the
Divisional Superintendent had no authority to execute the
contracts for the purchase of food grains.”
In our view, the High Court was in error in holding that the
authority under s. 175(3) of the Government of India Act,
1935 to execute the contract could only be granted by the
Governor General by rules expressly promulgated in that
behalf or by formal notifications. This court has recently
held that special authority may validly be given in respect
of a particular contract or contracts by the Governor to an
officer other than the officer notified under the rules made
under s. 175(3). In The State of Bihar v. M/s. Karam Chand
Thapar and Brothers Ltd.(,), Venkatarama Aiyar J. speaking
for the court observed :
(1) (1962) 1 S.C.R. 827.
890
It was further argued for the appellant that there being a
Government notification of a formal character we should not
travel outside it and find authority in a person who is not
authorised thereunder. But s. 175 (3) does not prescribe
any particular mode id which authority must be conferred.
Normally, no doubt, such conferment will be by notification
in the Official Gazette, but there is nothing in the section
itself to preclude authorisation being conferred ad hoc on
any person, and when that is established, the requirements
of the section must be held to be satisfied.”
In that case, an agreement to refer to arbitration on behalf
of the Government of Bihar was executed by the Executive
Engineer whereas by the notification issued by the
Government of Bihar under s.175 (3) all instruments in that
behalf had to be executed by the Secretary or the Joint
Secretary to the Government. This Court on a consideration
of the correspondence produced in the case agreed with the
High Court that the Executive Engineer had been specially
authorised by the Governor acting through his Secretary to
execute the agreement for reference to arbitration. Section
175 (3) in terms does not provide that the direction or
authority given by the Governor-General or the Governor to a
person to execute contracts shall be given only by rules or
by notifications, and the High Court was in our judgment in
error in assuming that such authority can be given only by
rules expressly framed or by formal notifications issued in
that behalf.
In para 5 of the plaint, the appellant pleaded:
“‘That for the purposes and under the authority conferred as
noted in the para 3 above in July and August, 1943 the said
E. 1. Rly. through its then Divisional Superintendent,
Dinapur, by three diverse orders agreed to buy and the
plaintiff agreed to sell the following commodities at the
rates mentioned against them,
891
By para 3 of the written statement, the Dominion of India
accepted the allegations made in para 5 of the plaint. It
is true that by paragraph 1, the authority of the Divisional
Superintendent to enter into contract with, trading firms
dealing in foodgrains for the supply of foodgrains was
denied and it was further denied that the Divisional
Superintendent “was invested with complete authority to
enter into contracts for the purchase of food supplies and
to do all that was necessary in that connection.” There was
some inconsistency between the averments made in paragraphs
1 and 3 of the written statement, but there is no dispute
that the purchase orders were issued by the Divisional
Superintendent for and on behalf of the East Indian Railway
Administration. Pursuant to these purchase orders, a large
quantity of foodgrains was tendered by the appellant: these
were accepted by the Railway Administration and, payments
were made to the appellant for the grains supplied.
Employees of the Railway Administration wrote letters to the
appellant calling upon him to intimate the names of the
railway stations where grains will be delivered and about
the date when the supply. will commence. They fixed
programmes for inspection of the goods, kept ‘wagons ready
for accepting delivery, held meetings on diverse occasions
for settling programmes for the supply of grains, rejected
grains which were not according to the contract, entered
into correspondence with the appellant about the return of
empty bags accepted bills and railway receipts and made pay-
ments, returned certain bills in respect of the grains
tendered beyond the period of contract and did diverse other
acts in respect of the goods which could only be consistent
with the contracts having been made with the authority of
the Railway Administration granted to the Divisional
Superintendent. There is also the evidence of Ribbins which
clearly supports the vie* that the agreements to purchase
foodgrains by the Divisional
892
Superintendent were part of a. scheme devised by the Railway
Administration at the time of the, serious famine in 1943 in
Bengal. In cross-examination, Ribbins stated:
“When the Bengal famine arose in April-May 1943, the
(necessity for a scheme of) arrangement of supplying
foodgrains to E. I. Railway employees arose … A scheme was
drawn up for carrying out this work in writing. In other
words orders were received from Head Office Calcutta about
it. The Deputy General Manager, Grains, Calcutta issued the
necessary orders … The agent or General Manager as he is
called appropriated the above functionary. He must have
done so presumably under orders … The entire scheme did
subsequently get the assent of the Railway Board. From time
to time order came with instruction from Head Office. All
such directions should be in the office of D. Supdt.,
Dinapur. Some posts had to be created for carrying out this
scheme. Originally one post of Asstt. Grain Supply Officer
was created. Subsequently, two posts were created one on a
senior scale and the other as Asstt. in Dinapur Dv. staff
had to be appointed to be in charge of the grain shops.
They were exclusively appointed to work the grain shop
Organisation. The Railway made some arrangement in some
places for accommodation and additional storage…Grain
shops were located At these places when accommodation was
made for additional storage.”
Ribbins was for some time a Grain Supply Officer under the
East Indian Railway and he admitted that orders similar.to
the purchase orders in question in this litigation were
drawn up in cyclostyled forms “as per orders from the Head
Office.” The witness stated that the instructions of the
Head Office were “in the office file”. None of these
documents were, however, produced or tendered in evidence by
the Railway Administration.
893
The evidence on the whole establishes that with a view to
effectuate the scheme devised by the Railway Board for
distributing foodgrains to their employees at concessional
rates, arrangements were made for procuring foodgrains.
This scheme received the approval of the Railway Board and
Railway Officers were authorised to purchase, transport and
distribute foodgrains. If, in the implementation of the
scheme, the foodgrains were received by the Railway
Administration, special wagons were provided and goods were
carried to different places and distributed and payments
were made for the foodgrains received by the Railway
Administration after testing the supplies, the inference is
inevitable that the Divisional Superintendent who issued the
purchase orders acted with authority specially granted to
him. The evidence of Ribbins supported by abundant docu-
mentary evidence establishes beyond doubt that the
Divisional Superintendent though not expressly authorised by
the notification Ex. M-2 to contract for the purchase of
foodgrains, was specially authorised to enter into these
contracts for the purchase of foodgrains.
The question still remains whether the purchase orders
executed by the Divisional Superintendent but which were not
expressed to be made by the Governor-General and were not
executed on behalf of the Governor-General, were binding on
the Government of India. Section 175(3) plainly requires
that contracts on behalf of the Government of India shall be
executed in the form prescribed thereby ; the section
however does not set out the consequences of non-compliance.
Where a statute requires that a thing shall be done in the
prescribed manner or form but does not set out the
consequences of non-compliance, the question whether the
provision was mandatory or directory has to be adjudged in
the light of the intention of the legislature as disclosed
by the
894
object, put-pose and scope of the statute. If the statute
is mandatory, the thing done not in the manner or form
prescribed can have no effect or validity : if it is
directory, penalty may be incurred for non-compliance, but
the act or thing done is regarded as good. As observed in
Maxwell on Interpretation of Statutes 10th Edition p. 376 :
“It has been said that no, rule can be laid down for
determining whether the command is to be considered as a
mere direction or instruction involving no invalidating
consequences in its disregard, or as imperative, with an
implied nullification for disobedience, beyond the
fundamental one that it depends on the scope. and object of
the enactment. It may perhaps be found generally correct to
say that nullification is the natural and usual consequence
of disobedience, but the question is, in the main governed
by considerations of convenience and justice, and when that
result would involve general inconvenience or injustice to
innocent persons, or advantage to those guilty of the
neglect, without promoting the real aim and object of the
enactment such an intention is not to be attributed to the
legislature. The whole scope and purpose of the statute
under consideration must be regarded.”
Lord Campbell in Liverpool Borough Bank v. Turner(1)
observed
“No universal rule ‘can be laid down as to whether mandatory
enactments shall be considered directory only or obligatory
with an implied nullification for disobedience. It is the
duty of Court of justice to try to get at the real intention
of the Legislature by carefully attending to the whole scope
of the statute to be construed.”
It is clear that the Parliament intended in enacting the
provision contained in s. 175(3) that
(1) (1861) 30 L. J. Ch. 379
895
the State should not be saddled with liability for
unauthorised contracts and with that object provided that
the contracts must show on their face that they are made on
behalf of the State, i. e., by the Head of the State and
executed on his behalf and in the manner prescribed by the
person authorised. The provision, it appears, is enacted in
the public interest, and invests public servants with
authority to bind the State by contractual obligations
incurred for the purposes of the State.
It is in the interest of the public that the question
whether a binding contract has been made between the State
and a private individual should not be left open to dispute
and litigation ; and that is why the legislature appears to
have made a provision that the contract must be in writing
and must on its face show that it is executed for and on
behalf of the head of the State and in the manner
prescribed. The whole aim and object of the legislature in
conferring powers upon the head of the State would be
defeated if in the case of t contract which is in form
ambiguous, disputes are permitted to be raised whether the
contract was intended to be made for and on behalf of the
State or on behalf of the person making the contract. This
consideration by itself would be sufficient to imply a
prohibition against a contract being effectively made
otherwise than in the manner prescribed. Itm is true that
in some cases, hardship may result to a person not
conversant with the law who enters into a contract in a form
other than the one prescribed by law. It also happens that
the Government contracts ,ire sometimes made in disregard of
the forms prescribed ; but that would not in our judgment be
a ground for holding that departure from a provision which
is mandatory and at the same time, salutary may be
permitted.
There is a large body of judicial opinion in the High Courts
in India on the question whether
896
contracts not ill form prescribed by the Constitution Acts
are binding upon the State. The view has been consistently
expressed that the provisions, under the successive
Constitution Acts relating to the form of contract between
the Government and the private individual are mandatory and
not merely directory.
In Municipal Corporation of Bombay v. Secretary of State
(1), the true effect of s. 1 of Si. 22 and 23 Vic. c. 41
fell to be determined. The Governor-General of India in
Council and the Governors in Council and officers for the
time being entrusted with the Government were, subject to
restrictions prescribed by the Secretary of State in
Council, empowered to sell and dispose of real and personal
estate vested in Her Majesty and to raise money on such
estate and also to enter into contracts within. the
respective limits for the purposes of the Act. it was
provided that the Secretary of State in Council. may be
named as a party to such deed, contract, or instrument and
the same must be expressed to be made on behalf of the
Secretary of State in Council by or by the order. of the
Governor-General in Council or Governor in Council, but may
be executed in other respects in like manner as other,
instruments executed by or on behalf of him or them
respectively in his or their official capacity, and may be
enforced by or against the Secretary of State in Council for
the time being. In a suit between the Government of Bombay
and the Municipal Corporation of Bombay, the latter claimed
that it was entitled to remain in occupation on payment of a
nominal rent, of an extensive piece of land because of a
resolution passed by the Government of Bombay sanctioning
such user. Jenkins C. J. in delivering the judgement of the
Court observed.
“I think that a disposition in 1865 of Crown’
(1) I. L. R. (1905) 29 Bom. 580.
897
lands by the Governor in Council was dependent for its
validity on an adherence to the forms prescribed, and that
therefore the Resolution was not a valid disposition of the
property for the interest claimed.”
In Kessoram Poddar and Co. v. Secretary of State for India
(1), it was held that in order that a contract may be
binding on the Secretary of State in Council., it must be
made in strict conformity with the provisions laid down in
the statute governing the matter and if it is not so made,
it is not valid as against him.
The same view was expressed in S. C. Mitra and Co. v.
Governor-General of India in Council (2), Secretary of State
v. Yadavgir Dharamgir(3), Secretary. of State and another v.
G. T. Sarin and, Company U. P. Government v. Lala Nanhoo Mal
Gupta Devi Prasad Sri Krishna Prasad Ltd. v. Secretary of
State (6), and in S. K. Sen v. Provincial P. Way D. State of
Bihar(7).
But Mr. Viswanatha Sastri on behalf of the appellant
contended that this court in Chatturbhuj Vithaldas Jasanth
v. Moreshwar Parashram (8) has held that a contract for the
supply of goods to the Government which is not in the form
prescribed by Art. 299 (1) of the Constitution which is
substantially the same form as s. 175 (3) of the Government
of India Act, 1935) is not void and unenforceable. In that
case, the election of Chatturbhuj Jasani to the Parliament
was challenged on the ground that he had a share or interest
in a contract for the supply of goods to the Union
Government. It was found that Jasani was partner of a firm,
which had entered into contracts with the Union Government
for the supply of goods and these contracts subsisted on
November 15, 1951 and
(1) I.L.R. (1927) 54 Cal. 969.(2) I.L.R. (1950) 2 Cal. 431.,
(3) I.L.R. (1936) 60 Bom. 42.(4) I.L.R. (1930) 11 Lah.375.
(5) A.I.R. (1960) All. 420. (6) I.L.R. (1941) All. 741 (7)
(7) A.I.R. (1960) Pat. 159. (8) (1954) S. C.R. 817.
898
February 14, 1952 respectively the last date for filing
nominations and the date of declaration of the results of
the election. This court held that Jasani was disqualified
from being elected by virtue of the disqualification set out
in s. 7 (b) of the Representation of the People Act 43 of
1951. The contracts in that case were admittedly not in the
form Prescribed by Art. 299 (1) of the Constitution, and
relying upon that circumstance, it was urged that the
contracts were void and had in law no existence. In dealing
with this plea, Bose J. speaking for the court observed :
“We feel that some reasonable meaning must be attached to
article 299(1). We do not think the provisions were
inserted for the sake of mere form. We feel they are there
to safeguard Government against unauthorised contracts. If
in fact a contract is unauthorised or in excess of authority
it is right that Government should be safeguarded. On the
other hand, an officer entering into a contract on behalf of
the Government can always safeguard himself by having
recourse to the proper form. In between is a large class of
contracts, probably by far the greatest in numbers, which
though authorised, are for one reason or other not in proper
form. It is only right that an innocent contracting party
should not suffer because of this and if there is no other
defect or objection we have no doubt Government will always
accept the responsibility. If not, its interests are
safeguarded as we think the Constitution intended that they
should be.”
The learned Judge also observed:
“It would, in our opinion, be disastrous to hold that the
hundreds of Government officers who have daily to enter into
a variety of contracts, often of a petty nature, and
sometimes in an emergency, cannot contract orally or through
correspondence and that every petty contract must be effect-
ed by a ponderous legal document couched in a particular
form.”
899
The rationale of the case in our judgment does not support
the contention that a contract on behalf of a State not in
the form prescribed is enforceable against ‘the State. Bose
J. expressly stated that the “Government may not be bound by
the contract, but that is a very different thing from saying
that the contract “,as void and of no effect, and that it
only meant the principal (Government) could not be sued; but
there will be nothing to prevent ratification if it was for
the benefit of the Government.”
The facts proved in that case clearly establish that even
though the contract was not in the form prescribed, the
Government had accepted performance of the contract by the
firm of which Jasani was a partner, and that in fact there
subsisted a relation between the Government and the firm
under which the goods were being supplied and accepted by
the Government. The agreement between the parties could not
in the case of dispute have been.enforced at law, but it was
still being carried out according to its terms : and the
Court held that for the purpose of the Representation of the
People Act, the existence of such an agreement which was
being carried out in which Jasani was interested
disqualified him. It was clearly so stated when Bose J.
observed:
“Now section 7 (d) of the Representation of the People Act
does not require that the contracts at ‘which it strikes
should be enforceable against the Government ; all it
requires is that the contracts should be for the supply of
goods to the Government. The contracts in question are just
that and so are hit by the section”.
Reliance was also placed by counsel for the appellant upon
cases decided under s.40 of the Government of India Act,
1915, which was continued in operation. even after the
repeal of the Act, 1915, by the 9th schedule to the
Government of India
900
Act; 1985. Section 40 prescribed the manner in which the
business of the Governor-General in Council was to be
conducted. It provided that all orders and other
proceedings of the Governor-General in Council shall be
expressed to be made by the Governor-General in Council and
shall be signed by a Secretary to the Government of India or
otherwise as the Governor-General in Council may direct and
shall not be called in question in any legal proceeding on
the ground that they were not duly made by the Governor-
General in Council.
In J.K. Gas Plant Manufacturing Co., (Rampur) Ltd., v. King
Emperor (1), certain persons were accused of offences
committed by them in contravention of cls. (5) and (8) of
the Iron and Steel (Control of Distribution) Order, 1941,
which order was not expressed to be made by the Governor-
General in Council as required by s. 40(1) of the 9th
schedule to the Constitution Act. The Federal Court held
that the scope and purpose of the Act did not demand a
construction giving a mandatory rather than a directory
effect to the words in s. 40: for, in the first instance,
the provision that all orders of the Governor-General in
Council shall be expressed to be made by the Governor-
General in Council did not define how orders were to be made
but only how they are to be expressed; it implied that the
process of making an order preceded and was something
different from the expression of it. Secondly, it was
observed, the provision, was not confined to orders only and
included proceedings and in the case of proceedings, it was
still clearly a method of recording proceedings which had
already taken place in the manner prescribed rather than any
form in which the proceedings, must take place if they are
valid. Thirdly, it was observed, that the provision
relating to the signature by a Secretary to the Government
of India or other person indicated that it was a provision
as
(1) (1947) F.C.R. 141.
901
to the manner in which a previously made order should be
embodied in publishable form, and it indicated that if the
previous directions as to the expression of the order and
proceedings and as to the signature were complied with, the
order and proceedings shall not be called in question in a
court of law on one ground only.
The rule contained in s. 40 (1) was in the view of the court
one of evidence which dispensed with proof of the authority
granted by the GovernorGeneral in respect of orders or
proceedings which complied with the requirements prescribed
: the making of the order or the proceedings was independent
of the form of the order or proceedings expressing it. But
it cannot be s aid that the making of the contract is
independent of the form in which it is executed. The
document evidencing the contract is the sole repository of
its terms and it is by the execution of the contract that
the liability ex contracti of either party arises.
The principle of J. K. Gas Plant Manufacturing Co.’s case
has therefore no application in the interpretation of s. 175
(3) of the Government of India Act, 1935.
Reliance was also placed upon Dattatreya Moreshwar Pangarkar
v. The State of Bombay (1) and The State of Bombay v.
Purshottam Jog Naik(2). In both these cases, orders made by
the Government of Bombay under the Preventive Detention Act
were challenged on the ground that the orders did not comply
with the requirements of Art. 166 of the Constitution.
Article. 166 substantially prescribes the same rules for
authentication of the orders of the Governor of a State as
s. 40 to the 9th schedule of the Government of India Act,
1935 prescribed for the authentication of the orders of the
Governor-General and the Governors. In the former case,
this court observed that
(1) (1952) S.C.R. 612.
(2) (1952), S.C.R. 674.
902
the Preventive Detention Act contemplates and requires the
taking of an executive decision for confirming a detention
order under s. 11 (1) and omission to make and authenticate
that decision in the form set out in Art. 166 will not make
the decision itself illegal,for the provisions in that arti-
cle are merely directory and not mandatory. In the latter
case, an order which purported to have been made in the name
of the Government of Bombay instead of the Governor of
Bombay as required by Art. 166 was not regarded as defective
and it was observed that in any event, it was open to the
State Government to prove that such an order was validly
made. The court in those cases therefore held that the
provisions of Art. 166 are directory and not mandatory. ,
These cases proceed on substantially the same grounds on
which the decision in J. k. Gas Plant and Manufacturing
Co.’s case , proceeded, and have no bearing on the
interpretation of s. 175 (3) of the Government of India
Act, 1935.
Reliance was also placed upon the State of U.P. v. Manbodhan
Lal Srivastava(1) in which case this court held that the
provisions of Art. 320 el. (3) (e) of the Constitution
relating to the consultation with the Public Service
Commission before discharging at public servant are merely
directory.
The fact that certain other provisions in the Constitution
are regarded as merely directory and not mandatory, is no
ground for holding that the provisions relating to the form
of contracts are not mandatory. It maybe said that the view
that the provisions in the Constitution relating to the form
of contracts on behalf of the Government are mandatory may
involve hardship to the unwary. But a person who seeks to
contract with the Government must be deemed to be fully
aware of
(1) (1958) S.C.R. 533.
903
statutory requirements as to the form in which the contract
is to be made. In any event, inadvertence of an officer of
the State executing A contract in manner violative of the
express statutory provision, the other contracting party
acquiescing in such violation out of ignorance or negligence
will not justify the court in not giving effect to the
intention of the legislature, the provision having been made
in the interest of the public. It must therefore be held
that as the contract was not in the form required by the
Government of India Act, 1935, it could not be enforced at
the instance of the appellant and therefore the Dominion of
India could not be sued by the appellant for compensation
for breach of contracts.
We are also of the view that the High Court was right in
holding that the appellant failed to prove that he was
entitled to compensation assuming that there was a valid and
enforceable contract. The appellant claimed that he was
entitled to the difference between the contract price and
the price realised by sale of the foodgrains offered after
October 1,1943 but not accepted by the Railway
Administration. The High Court rightly pointed out that the
appellant was, if at all, entitled only to compensation for
loss suffered by him by reason of the wrongful breach of
contract committed by the State, such compensation being the
difference between the contract price and the ruling market
rate on October 1,1943, and that the appellant had failed to
lead evidence about the ruling market rate on October
1,1943. The trial judge held that the “control price-list
xxx was reliable for ascertaining the measure of damages in
the case”. This document was a notification relating to the
controlled rates in operation in the district of Arrah, by
which the sale of foodgrains at prices exceeding the rates
prescribed was made an offence. The appellant had obviously
the option of delivering foodgrains at an railway station F.
O. R. in the Province of
904
Bihar, and there is no evidence on the record whether orders
similar to Ex.M-2 were issued by the authorities in other
districts of the Bihar State. But if the grains were
supplied in the district of Arrah, the appellant could
evidently not seek to recover price for the goods supplied
and accepted on and after October 1, 1943, at rates
exceeding those fixed by the notification; for, by the issue
of the control orders, on the contracts must be deemed to be
superimposed the condition that foodgrains shall be sold
only at rates specified therein. If the grains were to be
supplied outside the district of Arrah, the case of the
appellant suffers from complete lack of evidence as to the
ruling rates of the foodgrains in dispute on October 1,
1943. The High Court was therefore right in declining to
award damages.
On the view taken by us, this appeal must stand dismissed
with costs.
Appeal dismissed.
