N. Satyanathan vs K. Subramanyan And Others

Rewritten Version Notice: This is a rewritten version of the original judgment.

Court: Supreme Court of India

Case Number: Civil Appeal No. 252 of 1954

Decision Date: 29 March 1955

Coram: Bhuvneshwar P. Sinha, Vivian Bose, B. Jagannadhadas

The case is titled N. Satyanathan versus K. Subramanyan and Others and was decided on 29 March 1955 by the Supreme Court of India. The judgment was authored by Justice Bhuvneshwar P. Sinha and the bench also comprised Justices Vivian Bose and B. Jagannadhadas. The petitioner in the appeal was N. Satyanathan and the respondents were K. Subramanyan and others. The citation for this decision is 1955 AIR 459 and 1955 SCR (2) 83. The matter arose under the Representation of the People Act, 1951, specifically section 7(4), which concerned whether the appellant, who had entered into an agreement with the Central Government for the conveyance of postal articles and mail bags by motor vehicle service for a specified remuneration, was disqualified from election to the House of the People under section 7(d) of the same Act.

The central issue for determination was whether the appellant fell within the disqualification provision of section 7(d) of the Representation of the People Act, 1951. Section 7(d) provides: “A person shall be disqualified for being chosen as and for being, a member of either House of Parliament … (b) if, whether by himself or by any person or body of persons in trust for him or for his benefit or on his account, he has any share or interest in a contract for … the performance of any service undertaken by the appropriate Government.” The appellant, who was a contractor, had entered into a contract with the Central Government. The relevant clause of that contract stated: “The contractor has offered to contract with the Governor-General for the provision of a Motor Vehicle Service for the transit conveyance of all postal articles and mail bags from 15 December 1949 to 14 December 1952 and the Governor-General has accepted the offer. The Government agrees to pay to the contractor Rs. 200 per month during the subsistence of the agreement as his remuneration for service to be rendered by him.”

The Court held that, on its face, the agreement was made between two competent parties who gave their free consent, and that there was a lawful monetary consideration for the services. It further observed that the appellant entered into the agreement fully aware of his rights and liabilities under it. The Court described the case as a straightforward illustration of the type of contract contemplated by section 7(d). At all material times, the appellant was directly involved, for his own benefit, in the contract for carrying mail bags and postal articles that he had entered into with the Government’s Postal Department. The Court noted that the purpose of section 7 of the Act is to prevent a conflict between public duties and private interests.

The appeal was filed under civil appellate jurisdiction as Civil Appeal No. 252 of 1954. It was an appeal by special leave from the judgment and order dated 22 January 1953 of the Election Tribunal at Vellore in Election Petition No. 35 of 1952. Counsel for the appellant presented the case on behalf of the appellant.

Narayan appeared for respondent No. 1. The judgment was delivered on 29 March 1955 by Justice Sinha. The sole issue for determination in this appeal by special leave was whether the appellant was disqualified under section 7(d) of the Representation of the People Act, 1951 – hereinafter “the Act” – for election to the House of the People, as had been held by the Election Tribunal of North Arcot, Vellore, by its orders dated 20 January 1953 in Election Petition No. 35 of 1952. The factual matrix of the case was not contested and was confined to a very limited set of circumstances. The appellant, together with respondents 1, 2 and 3, had contested the most recent general elections from the Dharmapuri Parliamentary Constituency, which lay in the district of Salem in the State of Madras. Subsequently, respondents 4 through 10 were added by an order of the Tribunal; they too were candidates for the election, their nominations having been upheld as valid, although they ultimately withdrew their candidatures before polling took place. After the poll, the appellant was declared to have been elected to the House of the People. On 5 March 1952 the first respondent filed an election petition before the Election Commission, challenging the appellant’s election on the ground that the appellant was disqualified under section 7(d) of the Act because, from the date of his nomination until the date of the election and thereafter, the appellant had a contract with the Government of India, acting through the Postal Department, for the transport of postal mail – a service that the Act characterises as one undertaken by the Government of India. It was necessary to note at this stage that it was admitted that the appellant was the holder of a stage-carriage service permit (Exhibit B-2) dated 26 April 1949, which had been issued by the Regional Transport Authority of Salem, Madras. One of the conditions attached to that permit required the holder, if called upon, to enter into an agreement with the Government of India for the conveyance of postal articles and mail bags. In compliance with that condition, the appellant entered into a registered agreement with the Government of India on 16 November 1949 (Exhibit A-3), the terms of which were to be examined in detail later. After the appellant had filed his nomination paper, the first respondent, by a petition dated 28 November 1951, raised an objection asserting that the nomination should be rejected on the basis that the appellant had entered into a contract with the Government of India for his own benefit to transport mail between Salem and Yercaud. The Returning Officer for the Dharmapuri Parliamentary Constituency, Salem, by his orders (Exhibit A-2) issued on the same date, overruled that objection. He held that the service rendered by the appellant, namely the carrying of mail, was not performed under a contract but under an imperative order of the Government, pursuant to Rule 160-B of the Madras Motor Vehicles Rules. It appeared that the registered agreement (Exhibit A-3) had not been produced before the Returning Officer. The election petition filed by the first respondent therefore proceeded on the basis of the foregoing submissions.

The appellant submitted his written statement on 28 May 1952 in which he denied that he was disqualified from being elected as a member of Parliament under the provisions of section 7(d) of the Representation of the People Act, 1951. He argued that the exclusive privilege of conveying all postal articles from one place to another belongs solely to the Government of India and that this function is a normal statutory duty reserved for the Government itself. Accordingly, the appellant asserted that the carrying of mail could not be characterised as the performance of any service undertaken by the Government. He further maintained that he did not have any interest in a contract for the performance of a service that falls within the mischief of section 7(d) of the Act, because his activities were undertaken only in accordance with Rule 160-B of the Motor Vehicles Rules, which imposed obligations upon him. In addition, the appellant contended that, under article 103 of the Constitution of India, the question of a member’s disqualification must be decided by the President and that the President’s decision is final. Based on these pleadings, the Election Tribunal framed two principal issues: first, whether the nomination of the first respondent was invalid due to the prohibition contained in section 7(d) of the 1951 Act or for any of the reasons set out in paragraphs nine to eleven of the petition; and second, whether the Tribunal possessed jurisdiction to decide the disqualification question in view of article 103 of the Constitution. The Tribunal noted that it was unnecessary to consider a further issue concerning limitation arising from an interlocutory application for impleading certain candidates whose nominations had been accepted but who later withdrew. Both of the framed issues were ultimately decided against the appellant.

After a thorough discussion of the matters presented before it, the Tribunal held that the postal service, including the transport of mail, constitutes a service undertaken by the Central Government within the meaning of section 7(d). It found that at the time of the appellant’s nomination, he was a contractor for the Central Government, and that the agreement between the Government and the appellant involved mutual obligations that could not be described merely as the performance of a statutory duty. The Tribunal concluded that the agreement was the result of a free offer and acceptance, supported by valid consideration, and therefore created a contractual relationship. Moreover, the Tribunal determined that article 103 of the Constitution did not preclude its jurisdiction to decide the dispute. Consequently, the Tribunal allowed the election petition, declared the appellant’s election void under section 100(1)(c) of the Act, and awarded costs to the respondent. This decision was subsequently appealed, and the appellant’s contentions before the Tribunal, except for the objection to jurisdiction under article 103, were again presented before the higher court.

The issue raised before the Court by counsel for the appellant concerned the jurisdiction of the Tribunal, but the decisive question in this case was the proper construction and legal effect of the agreement identified as Exhibit A-3, which the appellant had admittedly entered into with the Central Government. Consequently, the Court found it necessary to set out in detail the essential provisions of that agreement. The contract identified the appellant, referred to as “the contractor,” on one side and the Governor-General of India on the other. The preamble of the agreement stated that the contractor, Sri N Satyanathan, had offered to provide a motor vehicle service for the transit, conveyance and delivery of all postal articles and mail bags as defined in the Indian Post Office Act of 1898, as amended from time to time, commencing on the fifteenth day of December 1949 and continuing until the fourteenth day of December 1952, and that the Governor-General had accepted this offer on the terms and conditions that followed. The indenture then affirmed that, in pursuance of the said agreement and for the consideration of the premises and the payments to be made, the parties mutually agreed and declared the following clauses. Clause 1 required the contractor, for the duration of the contract-period from 15 December 1949 to 14 December 1952 or until terminated by notice as provided, to safely convey, by means of motor vehicles of good and reliable manufacture, all postal articles and mail bags. Clause 4 permitted the contractor to carry passengers and their luggage by bus, provided that there was available accommodation and that the mail service was not prejudiced in any way. Clauses 5 and 6 imposed on the contractor the obligation to maintain in good order and repair a number of motor buses and their spare parts at his own expense and to bear all municipal and other taxes payable in respect of the motor vehicles. Clause 7 set out a schedule of penalties applicable where any journey was not completed or was delayed contrary to the prescribed timetable. Clause 8 made the contractor absolutely liable for the safe custody and delivery of postal articles and mail bags in good order and condition. Clause 10 declared that non-gazetted postal and telegraph officers traveling on duty on the route assigned to the appellant were entitled to travel free of all charges and that such official passengers would have precedence over ordinary passengers. Finally, clause 13 stipulated that the contract could not be transferred by the contractor to any other person or company without the prior written consent of the Director-General of Posts & Telegraphs.

Clause fifteen stated that the Government agreed to pay the contractor a sum of two hundred rupees per month for the duration of the agreement, describing this amount as remuneration for the services to be rendered under the contract. The clause further provided that the monthly amount of two hundred rupees could be increased or decreased in proportion to any increase or decrease in the mileage that the contractor was required to cover. Clause eighteen was drafted in the following terms: if the contractor failed to obtain a renewal of the permit for the line, the contract would automatically terminate on the date up to which the existing permit remained valid, and in such a circumstance no compensation would be payable by either party for the termination. The same clause also allowed either contracting party to bring the contract to an end by giving the other party written notice of four calendar months indicating the intention to terminate. Clause twenty-one contained the standard arbitration provision, providing that all disputes or differences arising out of or relating in any manner to the agreement would be referred to the sole arbitration of the Director-General of Posts and Telegraphs or a nominee appointed by him, and it further stipulated that the arbitrator’s award would be final and binding on both parties. The Court observed that the document described above was a formally prepared agreement that satisfied all the essential requirements of a contract. The appellant did not contend that the contract had been vitiated by undue influence, fraud, or any similar defect. Rather, the appellant argued that the agreement was a necessary consequence of the stage-carriage permit granted by the Transport Authority under the Motor Vehicles Act, read together with the applicable rules. In support of this contention, reference was made to rule 160-B of the Madras Motor Vehicles Rules, which provides that it shall be a condition of every stage-carriage permit that the permit holder, if required by the Transport Authority that issued the permit, shall carry mail at rates and on terms fixed by the authority after consultation with the permit holder and the postal authorities concerned. The rule was said to have been made under the authority of section 48(d) of the Motor Vehicles Act. It was undisputed that the agreement between the appellant and the Central Government was executed in pursuance of rule 160-B. However, the appellant maintained that, although the agreement appeared to have the form of a contract, it lacked the essential ingredients of a free consensus of offer and acceptance. The appellant further contended that the performance of mail-carrying on his buses was a statutory obligation and therefore could not fall within the scope of section 7(d) of the Representation of the People Act, 1951, the material portion of which reads: “A person shall be disqualified for being chosen as”.

The Court observed that Section 7(b) of the Representation of the People Act disqualifies a person from being elected to either House of Parliament if, either personally or through a trustee or body of persons acting for his benefit, he holds any share or interest in a contract for the performance of services undertaken by the appropriate Government. The appellant raised several alternative arguments against the application of this provision. First, he contended that the agreement he entered into with the Central Government, although resembling a contract, was deficient in the essential elements of free consent of offer and acceptance because it arose from a statutory duty to carry mail, a duty that he could not argue fell within the mischief of Section 7(d). Second, he argued that even if the agreement possessed contractual force, it lacked consideration, since the monetary remuneration specified in the agreement was merely the subsidy previously fixed by the Regional Transport Officer in an order dated 23 July 1949. He further maintained that the agreement, being with a third party – the Governor-General – to render a service that was already owed to another party, the Transport Authority, for the same consideration, could not constitute a valid contract supported by consideration. Finally, the appellant asserted that the transport of mail did not qualify as a “service undertaken by the Central Government.” The Court rejected each of these contentions as unfounded. It noted that the appellant had indeed entered into a contract with the Central Government concerning the carriage of postal articles and mail bags on 16 November 1949, after having already been engaged in operating buses on a route allotted to him by the Regional Transport Authority. The Court emphasized that the appellant entered into this agreement with full awareness of his rights and liabilities; no individual is compelled to engage in the stage-carriage business or to transport postal articles and mail bags. Under the terms of the transport permit, the Government retains the authority to require a permit holder to assume the additional burden of carrying postal articles and mail bags, with the attendant remuneration to be fixed by the Transport Authority after consultation with the postal authorities and the carrier. This requirement does not apply to every stage-carriage permit holder. At the time the appellant executed the contract, he could not have foreseen his future candidacy for election to the House of the People. The Court pointed out that, had he wished to avoid the difficulty created by Section 7, he could have given the Government notice pursuant to clause 18 of the contract; upon expiration of the notice period, he would have been free to stand for election to a State or Central Legislature. Section 7, the Court explained, is expressly intended to prevent a conflict between public duty and private interest. In reaching its conclusion, the Tribunal examined a range of authorities from English and American contract law and determined that the agreement between the appellant and the Government of India’s Postal Department contained all the essential ingredients of a valid contract.

The Tribunal observed that the arrangement between the appellant and the Government of India in the Postal Department possessed every essential element of a valid contract. It noted that the Tribunal had not needed to examine foreign authorities, because the provisions of the Indian Contract Act alone were sufficient to resolve all of the appellant’s contentions. On the face of the transaction, the agreement was concluded between two competent parties who had given their free consent, and there was no dispute that lawful consideration existed. The consideration consisted of the stage-carriage permit issued by the authority under the Motor Vehicles Act, together with a cash payment made by the Postal Department for the transport of postal articles and mail bags. The appellant argued that the agreement was merely the execution of a pre-existing duty imposed by the rule framed under the Motor Vehicles Act. The Tribunal clarified that although the permit contained a condition stating that the holder might be called upon to transport mail bags and postal articles, that clause was only a notice to prospective applicants that they could be required to provide such additional service for additional remuneration if the Postal Department so required. Any person unwilling to assume that extra responsibility was free to refrain from applying for the permit; this fact did not convert the subsequent agreement with the Postal Department into anything other than an independent contract governed by its own specific terms. Moreover, clause 18 of the contract expressly reserved to either party the right to terminate the agreement by giving four months’ notice. The Tribunal presumed that the appellant was aware that the contract would impede his eligibility to contest elections to either the Central or a State Legislature, but also held that nothing barred him from issuing the requisite notice, terminating the contract, and thereby freeing himself to stand as a candidate. Section 7 of the Act, according to the Tribunal, was designed to prevent any clash between public duty and private interest. Consequently, the appellant possessed a clear and voluntary choice: if he wished to serve the community as a member of the Central Legislature, he would have to relinquish the private compensation he received for carrying postal articles and mail bags. Termination of the contract might also require surrendering the stage-carriage permit, although this was not mandatory. Where several bus services operated on the same route, the Postal Department could select any of them for the mail-carriage agreement; even if only one service existed, surrendering the permit would simply allow another party to assume that service and the associated postal duties.

In this case, the Court observed that even if the appellant were the sole operator of a bus service on a particular route for which he held a stage-carriage permit, relinquishing that permit would simply allow another party to step into the vacated position and continue the bus service as well as the carriage of postal articles and mail bags. The appellant had argued that he did not participate in determining the remuneration that the Postal Department would pay for carrying its mail. However, the Court referred to the rule governing the arrangement and noted that the rule expressly required the Department to fix the amount of remuneration only after consulting the carrier. The carrier, that is, the appellant, retained the right to object to any terms proposed by the Department, and if the Department refused to accept the carrier’s counter-terms, the carrier was not compelled to enter into the agreement. The Court further pointed out that the appellant’s agreement to carry postal articles and mail bags could be viewed as an extra qualification that strengthened his position when applying for a renewal of his stage-carriage permit. This qualification, the Court held, gave the appellant a competitive advantage over other applicants rather than imposing a burden or handicap. Consequently, the agreement between the appellant and the Postal Department was based on reciprocal promises: the appellant promised to transport the mail bags and related items, and the Department promised to pay him a suitable remuneration for providing those services.

The Court also examined the appellant’s contention that the Central Government could not be said to have “undertaken” any “service” within the meaning of section 7(d) of the Act when it arranged for the carriage of mail bags and postal articles through the appellant. The Court rejected this contention, stating that it could not be argued that the Government, in discharging its sovereign duties, was obligated to provide postal mail service to every individual and every location. The provisions of the Indian Post Office Act, 1898, were characterised as enabling provisions that merely authorised the State agency to enjoy an exclusive privilege to convey letters and similar items for public convenience and for the benefit of the Government. These provisions did not make it compulsory for the State to furnish postal facilities universally. Although the postal facilities might be gradually extended and brought closer to every household, the Court observed that such extension reflected the State’s desire, as a welfare state, to improve public communications, not a statutory duty. Accordingly, the Government’s activity in the Postal Department was described as a service rendered to the community, but not an essential function of a sovereign State. Nonetheless, the Court acknowledged that the Postal Department’s service was undeniably useful and served a valuable purpose for the public.

In this case the appellant, by virtue of a contract entered into with the Government, had agreed to provide a postal conveyance service on a particular route that had been specified in that agreement. The factual matrix presented before the Court demonstrates that the present dispute is a clear and uncomplicated example of the type of contract that is described in section 7(d) of the Indian Post Office Act, 1898. Throughout the period that is material to the proceedings, the appellant was personally and directly engaged, for his own commercial benefit, in the performance of the contract that required him to carry mail bags and other postal articles. That contract had been executed between the appellant and the Government through its Postal Department, and the appellant’s obligations under the contract were limited to the transportation of those items along the route identified in the agreement. Having considered the submissions and the evidence, the Court found that the reasons set out earlier in the judgment fully support the findings made by the Tribunal. Accordingly, the Court expressed no hesitation in concluding that the Tribunal’s determinations were correct in every respect. For that reason, the appeal was dismissed. The order also directed that the costs of the proceedings be awarded against the appellant. The dismissal of the appeal therefore stands as the final order in this matter.