Ram Padarath Mahto vs Mishri Singh and Anr

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

Court: Supreme Court of India

Case Number: Civil Appeal No. 388 of 1960

Decision Date: 17 November 1960

Coram: P.B. Gajendragadkar, A.K. Sarkar, K.N. Wanchoo

In the case titled Ram Padarath Mahto versus Mishri Singh and another, the judgment was handed down on the seventeenth day of November, 1960. The decision was rendered by a bench composed of Justice P. B. Gajendragadkar, Justice A. K. Sarkar and Justice K. N. Wanchoo. The matter was reported in the 1961 All India Reporter at page 480 and also in the second volume of the 1961 Supreme Court Reports at page 470. The dispute concerned an application of section 7(d) of the Representation of the People Act, 1951, which deals with disqualification of persons who have an interest in a contract for the performance of services undertaken by the Government. The appellant, Ram Padarath Mahto, belonged to a joint Hindu family that operated as a government stockist of grain under a contract with the Government of Bihar. His nomination for election to the Bihar Legislative Assembly was rejected on the ground that, as a participant in that contract, he was disqualified under the said statutory provision. The appellant argued that the government’s activity under the Grain Supply Scheme involved the sale of foodgrains, whereas the contract in question related only to the storage of those grains and therefore did not fall within the ambit of section 7(d). The Court examined the nature of the contract and concluded that it was a bailment arrangement obligating the bailee to stock and store the grain, not a contract for the sale of grain, which was the service the Government had undertaken. Accordingly, the Court held that the contract did not constitute a service undertaken by the Government and that the appellant was not disqualified under section 7(d). Earlier decisions such as N. Satyanathan v. K. Subramanyam and V. V. Ramaswamy v. Election Tribunal, Tirunelveli, were distinguished in reaching this conclusion.

The appeal was filed as Civil Appeal No. 388 of 1960, taken by special leave from the judgment and order dated the third day of February, 1959, of the Patna High Court in Election Appeal No. 10 of 1958. Counsel for the appellant was Mr. S. P. Varma, while the respondents were represented by Messrs. L. K. Jha and D. Govardhan for the first respondent and by Messrs. L. K. Jha and K. K. Sinha for the second respondent. The judgment was delivered on the seventeenth of November, 1960, by Justice Gajendragadkar. The principal question before the Court was whether the appellant, Ram Padarath Mahto, was disqualified from membership of the Bihar Legislature under section 7(d) of the Representation of the People Act, 1951. The appellant had contested the Dalsinghsarai constituency situated in the Darbhanga district of Bihar. This constituency was designated as a double‑member constituency, meaning that it elected two members: one for the general category and another for a seat reserved for scheduled castes in the Bihar Legislative Assembly. The Court noted these factual circumstances as the backdrop for its examination of the statutory issue concerning disqualification.

The constituency had announced that voters were to elect members on 19 January 1957, and it fixed 29 January 1957 as the final date for filing nomination papers. The appellant submitted his nomination on 28 January 1957, and on the following day seven additional candidates filed their nominations. On 1 February 1957 the returning officer rejected the appellant’s nomination on two separate grounds. First, the returning officer concluded that the appellant, who was an Inspector of Co‑operative Societies, was a Government servant at the material time and therefore disqualified from contesting the election under the relevant statutory provision. Second, the returning officer found that the appellant was a member of a joint and undivided Hindu family that was engaged in a business arrangement with the Government; specifically, the family acted as a stockist of grain under a contract between the Government of Bihar and a firm of the joint family identified as Nebi Mahton Bishundayal Mahto. After the rejection, the election proceeded, and Mr Mishri Singh and Mr Baleshwar Ram, identified as respondents 1 and 2, were declared duly elected to the general and reserved seats respectively. The appellant challenged the validity of that election by filing Election Petition No. 428 of 1957, in which he impleaded the two elected candidates together with five other individuals who had contested the election. Before the Election Tribunal, the appellant asserted that he was not in the employ of the Government of Bihar at the material time. He explained that he had resigned from his post on 13 January 1957, and that his resignation had been accepted on 25 January 1957, thereby relieving him of his duties from that later date. He further contended that a partition had occurred in his family and that he possessed no share or interest in the contract in question. Alternatively, he argued that even if he retained an interest in the contract, such interest did not fall within the mischief contemplated by section 7(d) of the Representation of the People Act. Respondents 1 and 2 opposed these pleas. The Election Tribunal held that the petitioner was not a Government servant on the day he filed his nomination, and consequently concluded that the returning officer had erred in rejecting the nomination on that ground. The Tribunal also rejected the appellant’s claim of a family partition and determined that, at the relevant time, the appellant remained a member of the undivided Hindu family that had entered into the contract with the Government. Nevertheless, after examining the nature of the contract, the Tribunal found it could not be said to disqualify the appellant under section 7(d), and therefore held that the returning officer was also wrong in rejecting the nomination on that basis. Accordingly, the Tribunal allowed the election petition, declared that the nomination had been improperly rejected, and set aside the election of the two respondents as void.

The Tribunal had held that the nomination paper had been improperly rejected and that the elections of both respondents were void. In reaction to that order, the two respondents filed separate election appeals—numbers nine and ten of 1958—in the Patna High Court. The High Court affirmed the Tribunal’s determination that the appellant was not a government servant at the relevant time, and it also accepted the Tribunal’s conclusion that, at that time, the appellant remained a member of the undivided Hindu family. However, the High Court disagreed with the Tribunal on the interpretation of the contract involved. It concluded that the contract rendered the appellant disqualified under section 7(d) of the Act, and therefore the rejection of his nomination paper was proper. Because the High Court had reached that conclusion, it deemed it unnecessary to revisit the Tribunal’s declaration that the election of respondent 1, and also of respondent 2, was void.

The appellant subsequently obtained special leave to approach this Court, challenging only the High Court’s finding of disqualification under section 7(d). The resolution of that issue depends primarily on the construction and legal effect of the contract in question. Section 7 of the Act prescribes disqualification criteria for membership of Parliament or State Legislatures. Section 7(d), as it existed at the relevant time, provides, inter alia, that a person shall be disqualified from being chosen as, and from serving as, a member of a State Legislative Assembly if, whether by himself or by any person or body of persons holding trust for him, he has any share or interest in a contract for the supply of goods, the execution of works, or the performance of services undertaken by the appropriate Government. Both the High Court and the Tribunal concur that the appellant possessed an interest in the contract, thereby satisfying the first limb of section 7(d). The High Court further held that the contract engaged the last limb of section 7(d) because, according to the High Court, the Government of Bihar had undertaken to discharge the service of supplying grain to Bihar’s residents, and the appellant’s family firm had entered into a contract to perform that service. The last limb requires that the appropriate Government have undertaken specific services, and that the citizen’s contract be for the performance of those services. In other words, if a citizen enters into a contract with the appropriate Government for the performance of services that the Government itself has undertaken, the provisions of section 7(d) become applicable.

In the matter before the Court, it was observed that when a citizen entered into a contract with the appropriate Government for the performance of services that the Government itself had undertaken, the provisions of section 7(d) became applicable. The Court identified that the application of this provision raised two essential questions: first, what specific services had the appropriate Government undertaken; and second, whether the contract had been concluded for the purpose of performing those services. To answer these questions, the Court examined the material terms of the contract that formed the factual foundation of the dispute.

The contract in question had been executed on 8 February 1956 between two parties. The first party was the Governor of Bihar, that is, the Government represented by the Governor, and the second party was the firm of the appellant, which was identified as the other contracting entity. The preamble of the contract disclosed that the Government’s objective was to stock and store food grains in Darbhanga District for sale under the Grain Supply Scheme of the Government. To achieve this objective, the Government required a suitable custodian and bailee who would be paid a reward for performing the duties. The preamble further recorded that the appellant’s firm had applied to become such custodian and bailee for the stock of food grains that the Government would deliver to the firm either in a single shipment or in installments, according to the terms expressly specified in the contract or as may be necessarily implied.

Clause 1 of the contract stipulated that, at the direction of the Government, the second party must take over food grains from railway wagons or from any location that the Government specified. After receipt, the second party was required to store the grains in its own godown located at Dalsinghsarai and later to redeliver the grains to the Government after weighing them either at the second party’s godown, which had to be approved by the Government, or at any other place directed by the Government. The movement of the grain was to be carried out either by the second party itself or by a transport contractor appointed by the Government.

Clause 2 imposed upon the second party the duty to maintain a register and to keep accounts in the manner prescribed by the contract. Under clause 3, the second party agreed to establish and maintain such stocks and related establishments at its own expense. Clause 4 required the second party to protect the stock of food grains and to compensate for any loss, except as provided for in later provisions. Clauses 5 through 8 were noted by the Court as not material to the issue under consideration and were therefore not discussed in detail.

Clause 9 required the second party to deposit the sum of Rs 5,000 in a Savings Bank account that was pledged to the District Magistrate of Darbhanga, and to comply with the other conditions specified in that clause. Clause 10 dealt with the remuneration payable to the second party. It provided that the Government was liable to pay the second party a remuneration calculated at the rate of one rupee per cent on the value of the stocks moved or taken over from its custody, according to the orders or directions of the Government or its agent, and that the rate would be fixed by the Government from time to time for wholesale sales of grain. The Court noted these terms as critical to determining whether the contract amounted to a bailment arrangement intended to facilitate the Government’s service of stocking and storing food grains, which, if established, would bring the contract within the ambit of section 7(d).

In the agreement, the clause concerning remuneration specifies that no payment shall be made to the second party if the first party assumes ownership of the entire remaining stock held by the second party because the agreement has been terminated. Apart from this provision, the remaining clauses are not reiterated. From the terms it is evident that the arrangement constitutes a bailment, whereby the State Government intended to delegate the responsibilities of stocking and storing foodgrains to a custodian or bailee. The appellant’s firm submitted an application for this role and was subsequently appointed as the bailee. Consequently, the firm expressly undertook the task of stocking and storing foodgrains that belonged to the State Government, and if it can be reasonably held that the service performed by the State Government in the present matter was limited to stocking the foodgrains, then the contract would clearly fall within the ambit of section 7(d). Mr. Varma, however, argues that the service undertaken by the State Government was the sale of foodgrains under its Grain Supply Scheme, and contends that unless the contract expressly indicates that it was intended for the sale of the goods, section 7(d) cannot be invoked. The scheme adopted by the State Government for grain supply has not been placed before the Election Tribunal; therefore, the precise nature and scope of the services undertaken by the State Government must be ascertained solely by reference to the contract itself. While it is true that the contract pertains to the stocking and storing of foodgrains which the State Government intended to sell to the inhabitants of Bihar, the question arises whether stocking and storing constitute an integral or essential component of the sale such that a contract for stocking and storing must necessarily be treated as a contract for sale. In the Court’s view, it is difficult to accept the proposition that stocking and storing of foodgrains are so essential and integral to the State Government’s supply scheme. Theoretically, stocking and storing cannot be deemed indispensable for the execution of a grain‑sale scheme because the State Government could, in principle, devise a method of supply that does not require it to store the grains itself; consequently, the activity of stocking and storing may, in some instances, be merely incidental rather than an essential element of the scheme. It is also noteworthy that the sale of the goods under the contract was never to occur at the firm’s godown; sales were required to take place at other designated selling centres or shops, creating a temporal gap between the act of storing the grains and their eventual sale. Thus, the sole duty imposed on the firm by this agreement was to act as a custodian or bailee of the goods, maintain them in good order, and deliver them after weighment as directed by the first party.

In this case the contract required the bailee to act as custodian of the goods, to keep them in good order and to deliver them after they had been weighed, in accordance with the directions of the first party. The remuneration payable to the bailee was fixed at one percent of the value of the stocks that were moved or taken into his custody. This rate merely indicated the method the parties had chosen for calculating the bailee’s fee and the rent for the godowns; it did not, by itself, demonstrate any link between the bailee contract and the sale of the goods. The Court considered whether the contracts that the State Government entered into for purchasing foodgrains from farmers or for transporting those grains to the godowns could be characterised as contracts for the sale or supply of goods. While purchase and transport are undoubtedly preparatory steps in a scheme that ultimately aims to sell or supply the grain, the Court held that it would be difficult to describe those procurement and conveyance agreements as contracts for the sale of goods. After a careful examination of the material terms of the contract, the Court found itself unable to accept the High Court’s conclusion that a bailment contract, which imposed on the bailee the duty to stock and store the grain in his godown, could be described as a contract for the service of selling grain undertaken by the State Government within the meaning of section 7(d). The appellant had not disputed that the State Government’s service consisted of supplying grain to the people of Bihar, and the High Court had inferred that this admission meant the firm shared an interest in the government’s service contract. The Court observed that such an inference was not inevitable; merely because the government’s service was the supply of grain did not automatically make a storage contract a contract for the supply of grain. Even if the point appears technical, when interpreting a statutory provision that disqualifies a citizen, it would be unreasonable to adopt an overly broad view that overlooks essential distinctions. The narrow question therefore was whether a contract for storing grain, when the government’s overall work was the supply of grain, could itself be regarded as a contract for supply. The Court answered this question negatively and concluded that the High Court had not correctly appreciated the effect of the contract in relation to section 7(d).

The High Court had held that the contract under consideration brought the appellant’s case within the scope of section 7(d). In reaching that conclusion the High Court relied on a decision of this Court in N. Satyanathan v. K. Subramanyan (1) (1) [1955] 2 S.C.R. 83. In the Satyanathan case the appellant, who was a contractor, entered into an agreement with the Central Government whereby he offered to contract with the Governor‑General to provide a motor‑vehicle service for the transit and conveyance of all postal articles for the period specified in the contract, and the Governor‑General accepted the offer. The Government agreed to pay the contractor Rs 200 per month during the subsistence of the agreement as remuneration for the service to be rendered. Two questions were framed before the Court. First, it was argued that the Central Government had not undertaken any service within the meaning of section 7(d) when it made arrangements for the carriage of mail‑bags and postal articles through the contractor. That contention was rejected on the ground that, although the Government was not bound as a sovereign State to provide postal service, it had undertaken to do so under the Indian Post Offices Act for the convenience of the public. “It cannot be gainsaid,” observed Sinha, J., “that the postal department is rendering a very useful service, and that the appellant has by his contract with the Government undertaken to render that kind of service on a specified route.” He further added that the present case was “a straightforward illustration of the kind of contract contemplated under section 7(d) of the Act.” The Court explained that the illustration clearly identified the class and type of contracts that fall within section 7(d): the Government must undertake to render a specified service or services, and the contract must be for the rendering of that service or services. That description matched precisely the contract in N. Satyanathan. Consequently, it was difficult to accept that the Satyanathan decision supported the High Court’s view that a contract for stocking and storing goods could be treated as a contract for the service of supplying and selling those goods to residents. In this connection the respondent’s counsel referred the Court to a decision of the Madras High Court in V. V. Ramaswamy v. Election Tribunal, Tirunelveli (1) [1955] 2 S.C.R. 83. In that case the Court examined four contracts whereby the contracting party agreed “to hold the reserve grain stock belonging to the Government of Madras, safely store it, and dispose of it according to the directions of the Government.” The Court observed that the contracts were not merely for storage but also included disposal, indicating that they were contracts for a service that the State Government had undertaken to perform.

In describing the nature of the contract, the Court observed that the agreement required the contractor to act “according to the directions of the Government.” The Court explained that the contract therefore covered not only the stocking and storing of foodgrains but also the disposal of those grains. Because the disposal function was included, the contract was characterised as a service contract that the State Government had undertaken to execute. The Court noted that the decision cited by the respondents could not be used to support their position in the present appeal. Consequently, the Court held that the High Court had not been justified in overturning the Tribunal’s finding that the contract did not fall within the ambit of section 7(d) of the Act. On that basis, the Court allowed the appeal and set aside the order passed by the High Court. However, the Court stated that it could not finally dispose of the entire matter because another question required consideration. That question concerned whether the finding that the appellant’s nomination paper had been improperly rejected should lead to the conclusion that the elections of both respondent 1 and respondent 2 ought to be declared void. The Election Tribunal had declared the whole election void, and both respondents had challenged that finding in their appeals before the High Court. The High Court had, in its view, deemed it unnecessary to address the latter point because it considered the rejection of the appellant’s nomination paper to be proper. The Court now directed that the High Court must consider that remaining issue and dispose of the appeals promptly in accordance with law. Accordingly, the Court set aside the High Court’s order and remanded the proceedings for further consideration of the outstanding question. The Court further directed that each party bear its own costs in the Supreme Court, and that the costs incurred in the High Court become the costs of the appeal before that Court. The appeal was therefore allowed. (1) (1953) 8 E.L.R. 233.