Seth Bikhraj Jaipuria vs Union Of India

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

Court: Supreme Court of India

Case Number: Civil Appeal No. 86 of 1959

Decision Date: 24 July, 1961

Coram: J.C. Shah, J.L. Kapur, M. Hidayatullah, Raghubar Dayal

In the matter titled Seth Bikhraj Jaipuria versus Union of India, the judgment was delivered on the 24th of July, 1961 by the Supreme Court of India. The opinion was authored by Justice J. C. Shah, who was joined by Justices J. L. Kapur, M. Hidayatullah, and Raghubar Dayal. The case is reported in the 1962 volume of the All India Reporter at page 113, in the 1962 Supreme Court Reporter (Second Series) at page 880, and it is cited in numerous subsequent reports, including but not limited to 1962 SC 779, 1963 SC 1417, 1963 RF 1685, 1964 SC 1714, 1966 SC 580, 1967 SC 203, 1968 SC 1218, 1969 SC 903, 1972 SC 915, 1977 SC 536, 1977 SC 2149, 1980 SC 1285, 1988 SC 2149, and 1989 SC 1160. The dispute centred on a contract entered into under the provisions of the Government of India Act, 1935, specifically section 175(3), involving the purchase of foodgrains by the East Indian Railway.

The factual background disclosed that in the year 1943 the Divisional Superintendent of the East Indian Railway placed a series of purchase orders with the appellant, Seth Bikhraj Jaipuria, for the supply of foodgrains intended for the railway’s employees. These orders were not expressed as being made in the name of the Governor‑General, nor were they executed on behalf of the Governor‑General as mandated by section 175(3) of the 1935 Act. The orders bore the signature of the Divisional Superintendent either in his own handwriting or that of his personal assistant. Initial deliveries of the foodgrains were made under these orders, accepted by the Railway Administration, and the corresponding payments were rendered. Subsequently, the Railway Administration refused to accept any further deliveries of foodgrains. In response, the appellant sold the remaining balance of the foodgrains that were covered by the purchase orders and instituted a suit to recover the difference between the price realized from the sale and the contract price stipulated in the orders. The respondent, representing the Union of India, defended the suit on several grounds, chief among them being that the contracts were not binding upon the Government because they failed to satisfy the statutory requirements of section 175(3). The Court examined the statutory language and held that, as it stood at the relevant time, a contract under that provision had to satisfy three essential conditions: (a) the contract must be expressed to be made by the Governor‑General; (b) it must be executed on behalf of the Governor‑General; and (c) it must be executed by officers duly appointed for that purpose and in the manner authorized by the Governor‑General. While the Court acknowledged that authority to execute contracts could be conferred not only by explicit rules or formal notifications but also by a special grant of authority, the evidence established that a special authority had indeed been conferred upon the Divisional Superintendent. Nevertheless, because the purchase orders were neither expressed to be made by the Governor‑General nor executed on his behalf, they failed to meet the mandatory statutory requisites. Consequently, the Court concluded that the contracts were not binding on the Government and that the Union of India could not be held liable for damages resulting from the alleged breach of those contracts.

The Court observed that the provisions of section 175(3) of the Government of India Act, 1935, were mandatory in nature. Their purpose, the Court explained, was to protect the State from liability arising out of contracts that had not been properly authorised. Consequently, the statute required that any contract which bound the State must, on its face, display that it was made by the Governor‑General and that it was executed on his behalf according to the mode prescribed for an authorised officer. In support of this principle, the Court referred to the decision in State of Bihar v. M/s. Karam Chand Thapar and Bros., Ltd., reported in 1962 1 S.C.R. 827, and followed its reasoning. The Court also cited several other authorities that were considered relevant, namely 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. K. 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.I.R. (1960) All. 420; and Devi Prasad Sri Krishna Prasad Ltd. v. Secretary of State, I.L.R. (1941) All. 741. The Court distinguished the judgments in S. K. Sen v. Provincial P. W. D., State of Bihar, A.I.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, indicating that those authorities did not apply to the present factual matrix.

The judgment concerned Civil Appeal No. 86 of 1959, filed by special leave against the order dated 27 March 1957 of the Patna High Court in appeal from Original Decree No. 359 of 1948. The appellant, Bikhraj Jaipuria, was described as the sole proprietor of a grocery business carried on under the name “Rajaram Vijai Kumar” in the town of Arrah, Bihar. In July and August of 1943, the Divisional Superintendent of the East Indian Railway issued three purchase orders under which the railway agreed to buy, and the appellant agreed to sell, specified quantities of food grains for the railway’s employees. The Court set out the terms of those purchase orders in a table showing the purchase date, the commodity, the quantity, the rate per maund, and the method of supply. The first order, numbered 69 and dated 20 July 1943, concerned one thousand maunds of a certain quality of grain at a rate of fifteen rupees per maund, together with a permissible charge for new bags not exceeding seventy‑five rupees per hundred bags, to be delivered FOB to any East Indian Railway station. The second order, numbered 76 and dated 4 July 1943, dealt with one thousand maunds of rice of a specified quality at a rate of twenty‑two rupees and eight annas per maund, also allowing a bag charge not exceeding seventy‑five rupees per hundred bags, FOB any station in the division. The third order, numbered 106 and dated 24 August 1943, involved fifteen thousand maunds of medium‑quality rice at twenty‑four rupees per maund, FOB any East Indian Railway station in Bihar, without a bag charge. Purchase orders 69 and 76 had been signed by S. C. Ribbins, Personal Assistant to the Divisional Superintendent, while order 106 bore the signature of the Divisional Superintendent himself. The contracts required that delivery of the grains commence within seven days of acceptance and be completed within one month. The appellant delivered varying quantities of grain over time but was unable to fulfil the contracts fully within the stipulated period. Specifically, between 20 July 1943 and 4 August 1943, the appellant supplied three thousand four hundred sixty‑five maunds of rice, and between 1 September 1943 and 19 September 1943, further deliveries were made, though the record indicated that complete performance was not achieved within the contractual time‑frame.

In Bihar, purchase order number 76 dated 4‑7‑1943 required the supply of one thousand maunds of rice at a price of twenty‑two rupees eight annas per maund, to be delivered in Dhenki quality, with the additional cost of medium bags not exceeding seventy‑five rupees for each hundred bags. The same order also called for five thousand maunds of wheat at a price of twenty rupees eight annas per maund of white wheat, to be supplied in standard bags, free on railway station (F.O.R.) to any station within the East Indian Railway division. A further order, number 106 dated 24‑8‑1943, stipulated the delivery of fifteen thousand maunds of rice at twenty‑four rupees per maund of medium quality, without any bagging cost, also free on railway station in Bihar. Purchase orders 69 and 76 bore the signature of S. C. Ribbins, Personal Assistant to the Divisional Superintendent, while order 106 was signed by the Divisional Superintendent himself. The terms of the orders required that delivery of the grains begin within seven days of acceptance and be completed within one month.

The appellant, Bikhraj Jaipuria, delivered varying quantities of foodgrains over time but was unable to fulfil the contracts fully within the stipulated period. Between 20 July 1943 and 4 August 1943 he supplied three thousand four hundred sixty‑five maunds of rice, and between 1 September 1943 and 19 September 1943 he supplied one thousand one hundred fifty‑two maunds and thirty‑five seers of wheat. Subsequently, under the authority of clause (b) of sub‑rule (2) of rule 81 of the Defence of India Rules, the Government of Bihar issued notification No. 12691‑P.C. dated 16 September 1943. That notification directed that, from 20 September 1943 until further notice, the commodities listed in column I of the attached schedule could not be sold at any primary source or by any proprietor, manager or employee of a mill in Bihar at prices exceeding those specified in column II. The controlled prices fixed were eighteen rupees per standard maund for medium rice, seventeen rupees for red wheat, eighteen rupees for white wheat and twelve rupees eight annas for gram. On 21 September 1943 the Sub‑Divisional Magistrate of Arrah issued a price‑list of controlled articles that mirrored the prices set by the government notification. Clause 2 of the notification warned that any dealer who sold the controlled articles above the prescribed rates or who withheld stock from sale would be liable to prosecution under rule 81(1) of the Defence of India Rules.

By a telegraphic communication dated 28 September 1943, the Divisional Superintendent informed the appellant that, according to the purchase orders, any foodgrains tendered for delivery after 1 October 1943 would not be accepted unless dispatched before that date. Apart from a consignment of six hundred thirty‑seven maunds and twenty seers that was accepted on 7 October 1943, the Railway Administration refused to accept any further deliveries offered by the appellant after 1 October 1943. In response, the appellant served a notice on the Divisional Superintendent alleging breach of contract and, between 1 February 1944 and 23 February 1944, sold the remaining balance of foodgrains covered by the purchase orders that were stored either at various railway stations or in his own godowns.

In this case, the appellant demanded payment of the shortfall between the contract price and the price obtained from the sale. After failing to obtain satisfaction, the appellant instituted suit number 359/48A before the First Additional Subordinate Judge at Patna, seeking a decree of Rs. 2,89,995-15-3 against the Dominion of India. The amount claimed comprised Rs. 2,32,665-12-0 as the difference between the agreed contract price and the actual sale price, and Rs. 42,709-10-3 as interest. In addition, the appellant claimed Rs. 14,620-9-0 to cover freight, wharfage, cartage, packing material, labour charges and the costs incurred in holding the sale. The appellant submitted that the purchase orders required supply to begin within seven days of receipt of the order and to be completed within one month. However, the appellant argued that the time clause was not intended to be essential to the contract. Alternatively, the appellant claimed that the Railway Administration had expressly waived the time stipulation in its performance of the contracts. This waiver, the appellant contended, entitled him to recover as compensation the difference between the contract price and the price at which the grains were sold. The Dominion of India opposed the suit on several grounds, contending that the appellant had no cause of action. It further argued that the contracts between the appellant and the Divisional Superintendent of Dinapur were not valid or binding on the Government of India, and that the contracts were avoidable by the Government. The Dominion also submitted that time was of the essence of the contracts and that no waiver of the time stipulation had occurred. Finally, it asserted that even if a breach had been proven, the appellant had not suffered any loss as a result of such breach. In its written statement, the Dominion admitted that the East Indian Railway, through the Divisional Superintendent of Dinapur, had issued three orders as set out in the plaint. Those orders showed that the railway agreed to purchase and the appellant agreed to sell the specified commodities. However, the Dominion denied that the Divisional Superintendent possessed full 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 were, any breach of the time stipulation had been waived by the Railway Administration. The court further observed that the plea that the contracts were void for non‑compliance with section 175 (3) of the Government of India Act, 1935, could not be entertained. This was because the written statement did not raise such a plea. Concluding that the Divisional Superintendent was duly authorised to execute the purchase contracts and that he had committed a breach, the trial judge awarded the appellant Rs. 1,29,460-7-0. Interest was to be calculated at six per cent per annum from October 1, 1943, to the date of institution of the suit. Further interest at the same rate was to accrue on the decree.

In this case the Union of India filed an appeal against the decree that awarded the appellant a sum of Rs 1,29,460‑7‑0 with interest of six per cent per annum from 1 October 1943 to the date of filing the suit and a further six per cent on judgment. The appellant also raised cross‑objections to the decree that was being appealed. The Patna High Court examined the matter and held that the contracts required timely performance, but because the Railway Administration had accepted the goods after the prescribed period had elapsed, the time stipulation was deemed waived. The Court further observed that, although the notification issued under Rule 81 of the Defence of India Rules did not make the performance of the contracts illegal, the Divisional Superintendent lacked authority to enter into contracts for the purchase of food grains on behalf of the Railway Administration. Moreover, the Court found that the contracts were unenforceable because they were not expressed to be made by the Governor‑General nor were they executed by an officer duly appointed for that purpose as required by section 175(3) of the Government of India Act, 1935. The High Court also concluded that the appellant was not entitled to a decree for compensation because he had failed to prove the prevailing market rate for the commodities on the date of breach, namely 1 October 1943. In addition, the Court noted that the trial court erred in granting interest for the period before the suit was instituted and relied upon the Privy Council decision in Bengal Nagpur Railway Co. Ltd. v. Ruttanji Ramji and others, L.R. (1938) 65 J.A. 66, to support that view. The appeal raised two substantive questions for determination: first, whether the appellant could sue the Dominion of India for compensation for breach of contract by relying on purchase orders signed by the Divisional Superintendent that were not made and executed in the manner prescribed by section 175(3) of the Government of India Act, 1935; and second, whether the appellant had established the ruling market rate for the commodities on 1 October 1943. The finding that the Railway Administration had waived the time stipulation, despite the contract’s provision that time was of the essence, was not contested by the Union of India. Assuming that finding to be correct, the Court noted that the Divisional Superintendent, by telegraph dated 28 September 1943, had indicated that food grains not dispatched before 1 October 1943 would not be accepted, thereby committing a breach of the contract. Section 175(3) of the Government of India Act, as applicable at the relevant time, provided that all contracts made in the exercise of the executive authority of the Federation or a Province must be expressed to be made by the Governor‑General or the Governor of the Province, and must be executed on behalf of that authority by persons duly appointed and in the manner authorized by the Governor‑General.

In the judgment, it was noted that the provision of the Government of India Act required contracts made in the exercise of the executive authority of the Federation to be expressed as being made by the Governor‑General, to be executed on behalf of the Governor‑General, and to be executed by officers duly appointed for that purpose and in the manner directed or authorized by the Governor‑General. The Federal Railway Authority, however, had never been constituted in 1943 and therefore did not exist at the relevant time. The agreements for the supply of foodgrains were unquestionably made under the executive authority of the Federation, and consequently, under section 175(3) they were required to satisfy the three conditions just mentioned. No formal contracts were drawn up by the appellant for the supply of the grains. Instead, the appellant sent letters of offer addressed to the Divisional Superintendent, and the Superintendent responded by issuing documents described as “purchase orders” which accepted those offers. Those purchase orders were not worded as being made in the name of the Governor‑General and were not executed on his behalf. They bore the signature of the Divisional Superintendent, either in his own hand or that of his personal assistant. The Court first examined whether the Divisional Superintendent possessed authority to contract on behalf of the Railway Administration for the purchase of the foodgrains required by the Administration. At the material time, the standing instruction labelled Ex‑M‑2 permitted the Divisional Superintendent to execute a wide range of instruments relating to the purchase or hire, supply and conveyance of materials, stores, machinery, plant, telephone lines, coal and similar items. However, that instrument expressly excluded contracts concerning the purchase of foodgrains. Item 34 of the same instruction was a residuary clause that authorised the Secretary of the Railway Board to execute any deeds and instruments concerning railway matters that were not specified in items 1 to 33. It was agreed by the parties that no other clause specifically authorised the making and execution of contracts for the purchase of foodgrains; consequently, such deeds and instruments fell within the ambit of item 34. The Secretary to the Railway Board had not signed the purchase orders in question. Nonetheless, the trial Court concluded that the Divisional Superintendent was authorised to enter into contracts with the appellant for the supply of foodgrains. That conclusion was based on the testimony of the Grain Supply Officer, identified as Ribbins, and the personal assistant to the Divisional Superintendent at Dinapur. The High Court rejected the trial Court’s view. It observed that the authority of any officer acting on behalf of the Governor‑General must be derived from the express words of the Governor‑General, either through rules framed under section 175(3) or by a specific notification issued under that section. The High Court found that no such notification or rule had been produced to show that the Divisional Superintendent had been authorised by the Governor‑General to execute the purchase orders, nor any rule that conferred on him the power to make such contracts.

After examining paragraph 10 of the notification, Exhibit M‑2, items 1 to 34, the High Court concluded that the notification demonstrated that the Divisional Superintendent lacked authority to execute contracts for the purchase of food grains. The Court stated that the notification “therefore … shows that the Divisional Superintendent had no authority to execute the contracts for the purchase of food grains.” The Supreme Court, however, disagreed with the High Court’s interpretation of section 175(3) of the Government of India Act, 1935. The Court held that it was erroneous to assert that authority to execute a contract under that provision could be conferred only by the Governor‑General through rules expressly framed for that purpose or by a formal notification. The Court referred to a recent decision which recognised that special authority may be validly granted for a particular contract or contracts by the Governor to an officer who is not the one specified in the rules made under section 175(3). In The State of Bihar v. M/s Karam Chand Thapar and Brothers Ltd., Justice Venkatarama Aiyar observed that although a government notification of a formal character ordinarily governs who may execute instruments, section 175(3) does not prescribe a single mode for conferring such authority. The judgment explained that while the usual method is a notification in the Official Gazette, the section itself does not exclude ad‑hoc authorisation of any person, and when such authorisation is established, the statutory requirements are satisfied. The cited case involved an agreement to refer a matter to arbitration on behalf of the Government of Bihar, which was executed by an Executive Engineer even though the notification under section 175(3) required the Secretary or Joint Secretary to sign instruments. The Court, after reviewing the correspondence, agreed with the High Court that the Executive Engineer had been specially authorised by the Governor, acting through his Secretary, to execute the arbitration agreement. Consequently, the Court held that section 175(3) does not limit the Governor‑General’s or Governor’s direction or authority to be given solely by rules or formal notifications, and therefore the High Court’s assumption was erroneous.

The plaintiff’s plaint, in paragraph 5, alleged that in July and August 1943, the Eastern India Railway, through its then Divisional Superintendent at Dinapur, issued three distinct orders under the authority described in paragraph 3, agreeing to purchase certain commodities from the plaintiff at the rates specified. Paragraph 3 of the written statement indicated that the Dominion of India accepted the allegations made in paragraph 5 of the plaint. The statement affirmed that the authority described in paragraph 3 was indeed exercised in the manner claimed. The Court noted these factual submissions and recognised that they formed the basis of the plaintiff’s claim that the Divisional Superintendent had acted within the authority conferred, contrary to the High Court’s conclusion that such authority was absent.

In paragraph 1 of the written statement, the claim was made that the Divisional Superintendent did not possess the authority to contract with trading firms for the supply of foodgrains, and it was further asserted that the Superintendent was not “invested with complete authority to enter into contracts for the purchase of food supplies and to do all that was necessary in that connection.” Although the averments in paragraphs 1 and 3 of the written statement show some inconsistency, the parties did not dispute that the purchase orders were issued by the Divisional Superintendent on behalf of the East Indian Railway Administration. Pursuant to those purchase orders, the appellant tendered a large quantity of foodgrains which the Railway Administration accepted and for which it subsequently made payment to the appellant. Employees of the Railway Administration wrote letters to the appellant requesting that he specify the railway stations where the grains would be delivered and indicating the date when the supply would commence. The Railway Administration also arranged inspection programmes for the goods, kept wagons ready to receive the deliveries, and convened meetings on multiple occasions to finalise the supply schedule. When grains did not conform to the contractual specifications, the Railway rejected them, and it corresponded with the appellant regarding the return of empty bags, the acceptance of bills and railway receipts, and the settlement of payments. The Administration returned certain bills concerning grains tendered after the contract period had expired and performed numerous other acts that could only be consistent with contracts that had been entered into under the authority granted to the Divisional Superintendent. In addition, the testimony of Ribbins clearly supports the view that the agreements to purchase foodgrains by the Divisional Superintendent formed part of a scheme devised by the Railway Administration during the severe Bengal famine of 1943. During cross‑examination, Ribbins explained that when the famine struck in April‑May 1943, a need arose to arrange the supply of foodgrains to East Indian Railway employees. A written scheme was prepared, and orders were received from the Head Office in Calcutta. The Deputy General Manager, Grains, Calcutta issued the necessary orders, and the agent or General Manager, acting under those orders, appropriated the functionary. The scheme subsequently obtained the assent of the Railway Board, and from time to time additional orders were issued by the Head Office, with all directions kept in the office of the Divisional Superintendent at Dinapur. To implement the scheme, new posts were created, including an Assistant Grain Supply Officer, later followed by two additional positions—one on a senior scale and another as an Assistant—in Dinapur, and staff were appointed exclusively to manage the grain shops.

The Railway arranged, at certain locations, both accommodation and additional storage facilities for grain supplies, and grain shops were established at those sites when extra storage was provided. Ribbins, who had served for a time as a Grain Supply Officer with the East Indian Railway, testified that purchase orders similar to those under dispute were prepared on cyclostyled forms following directives from the Head Office. He further stated that the Head Office instructions were kept in the office file, although the Railway Administration did not produce any of these documents as evidence. The overall evidence demonstrates that, to implement the Railway Board’s scheme of providing foodgrains to employees at concessional rates, the Railway made arrangements for procuring the grains. This scheme received the Railway Board’s approval, and railway officers were empowered to purchase, transport and distribute the foodgrains. When the scheme was carried out, the Railway Administration received the grains, provided special wagons, conveyed the goods to various locations, and made payments after testing the supplies. Consequently, it is inevitable to infer that the Divisional Superintendent who issued the purchase orders acted under special authority that had been expressly granted to him. Ribbins’s testimony, supported by plentiful documentary evidence, establishes beyond doubt that although the Divisional Superintendent was not expressly authorized by Notification Ex. M‑2, he was specially authorised to enter into contracts for purchasing foodgrains. The remaining issue is whether purchase orders issued by the Divisional Superintendent, which were not expressed to be made by the Governor‑General nor executed on his behalf, bind the Government of India. Section 175(3) plainly requires that contracts on behalf of the Government of India be executed in the form prescribed, but the provision does not specify the consequences of non‑compliance. When a statute mandates a particular manner or form without stating the result of deviation, the court must determine whether the requirement is mandatory or merely directory by examining the legislature’s intention as shown by the statute’s object, purpose and scope. If the provision is mandatory, any act not performed in the prescribed manner has no legal effect; if it is directory, non‑compliance may attract a penalty but the act remains valid. As noted 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.”

The Court examined the object of the enactment and observed that it is often correct to say that nullification is the natural and usual consequence of disobedience. However, the Court emphasized that the true question is governed primarily by considerations of convenience and justice. If nullification would cause general inconvenience or injustice to innocent persons, or would advantage those who are guilty of neglect, and if it would not further the real aim and object of the enactment, such an intention cannot be attributed to the legislature. Accordingly, the whole scope and purpose of the statute under consideration must be regarded.

Lord Campbell, speaking in Liverpool Borough Bank v. Turner (1861) 30 L. J. Ch. 379, observed that no universal rule can be laid down as to whether mandatory enactments should be treated as merely directory or as obligatory with an implied nullification for disobedience. He added that it is the duty of the court of justice to ascertain the real intention of the legislature by carefully attending to the entire scope of the statute to be construed.

Applying this principle, the Court found that Parliament, in enacting the provision contained in section 175(3), intended that the State should not be saddled with liability for unauthorised contracts. To achieve that objective, the legislation requires that any contract purporting to bind the State must, on its face, show that it is made on behalf of the State, that is, by the Head of the State and executed on his behalf in the manner prescribed by the authorised person. The provision appears to have been enacted in the public interest and to invest public servants with the authority to bind the State by contractual obligations incurred for governmental purposes.

The Court noted that it is in the public interest that the question of whether a binding contract exists between the State and a private individual should not remain open to dispute and litigation. For that reason, the legislature appears to have required that such a contract be in writing and that it clearly demonstrate, on its face, that it is executed for and on behalf of the head of the State and in the prescribed manner. The Court explained that the entire aim and object of the legislature in conferring powers upon the head of the State would be defeated if, in cases where a contract is ambiguous in form, disputes were allowed to arise as to whether the contract was intended to be made for and on behalf of the State or merely on behalf of the individual making the contract. This consideration, the Court held, is sufficient to imply a prohibition against a contract being effectively made in any manner other than that prescribed.

The Court also recognised that in some cases hardship may befall a person who is not conversant with the law and who enters into a contract in a form different from that prescribed by law. It further observed that governmental contracts are sometimes concluded in disregard of the prescribed forms. Nevertheless, the Court stated that such occurrences do not, in its judgment, constitute a ground for holding that a departure from a provision which is mandatory may be permitted.

The Court explained that the requirement that a contract be executed in the form prescribed by law is mandatory, and at the same time, a salutary deviation may be permitted. It observed that a large body of judicial opinion in the High Courts of India has examined whether contracts that are not in the form prescribed by the Constitution Acts can be binding on the State. The consistent view expressed by these courts is that the provisions contained in the successive Constitution Acts relating to the form of contracts between the Government and private individuals are mandatory and not merely directory. In the decision of Municipal Corporation of Bombay v. Secretary of State¹, the true effect of sections 1 of 22 and 23 of the Viceregal Acts of 1841 had to be determined. The judgment explained that the Governor‑General of India in Council, the Governors in Council and the officers then entrusted with governmental functions were, subject to the restrictions prescribed by the Secretary of State in Council, empowered to sell and dispose of both real and personal estate vested in Her Majesty, to raise money on such estate, and also to enter into contracts within the limits specified for the purposes of the Act. The statute further provided that the Secretary of State in Council could be named as a party to any deed, contract or instrument, and that such instrument 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 the Governor in Council. Nevertheless, the instrument could be executed in other respects in the same manner as other instruments executed by or on behalf of those officials in their official capacity, and it could be enforced by or against the Secretary of State in Council who was then in office. In a suit between the Government of Bombay and the Municipal Corporation of Bombay, the corporation claimed that it was entitled to remain in occupation of an extensive piece of land on payment of a nominal rent because a resolution of the Government of Bombay had sanctioned such use. Jenkins C.J., delivering the judgment of the Court, observed that “a disposition in 1865 of Crown 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” (I.L.R. (1905) 29 Bom. 580). In Kessoram Poddar and Co. v. Secretary of State for India¹, the Court held that for a contract to 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; a contract not so made would not be valid as against that officer. The same principle was reaffirmed in S. C. Mitra and Co. v. Governor‑General of India in Council², in Secretary of State v. Yadavgir Dharamgir³, in Secretary of State and another v. G.T. Sarin, in Company U.P. Government v. Lala Nanhoo Mal, and in Gupta Devi Prasad Sri Krishna Prasad Ltd. v. (subsequent authorities omitted for brevity).

The learned counsel for the appellant, identified as Mr Viswanatha Sastri, referred to earlier authorities such as Secretary of State (6) and S K Sen v. Provincial P. Way D. State of Bihar (7). He argued that the present Court had previously decided in Chatturbhuj Vithaldas Jasanth v. Moreshwar Parashram (8) that a contract for the supply of goods to the Government, even when it was not executed in the form prescribed by article 299(1) of the Constitution – a form that corresponds substantially to section 175(3) of the Government of India Act, 1935 – could not be said to be void and unenforceable. The matter before the Court related to the challenge to the election of Chatturbhuj Jasani to Parliament on the ground that he possessed a share or interest in a contract for supplying goods to the Union Government. It was established that Jasani was a partner in a firm which had entered into such supply contracts with the Union Government. Those contracts were in force on 15 November 1951, and the relevant electoral dates were 14 February 1952, which was the last day for filing nominations and also the date of declaration of election results. The Court held that, pursuant to section 7(b) of the Representation of the People Act, 1951, Jasani was disqualified from being elected. The contracts in question were openly admitted not to have been executed in the form prescribed by article 299(1) of the Constitution, and on that basis it was contended that the contracts were void and possessed no legal existence.

In addressing that contention, Justice Bose, speaking for the Court, observed that article 299(1) must be given a reasonable interpretation and is not a mere technical requirement. He stated that the provisions were intended to protect the Government against unauthorized contracts, and that where a contract exceeds authority, it is appropriate for the Government to be safeguarded. However, he emphasized that a Government officer who enters into a contract on behalf of the Government can always protect himself by using the proper form. Between these extremes, there exists a large class of contracts – arguably the greatest in number – that are authorized yet not executed in the prescribed form. Justice Bose asserted that an innocent contracting party should not suffer because of this defect, and that absent any other flaw, the Government should accept responsibility, thereby safeguarding its interests as intended by the Constitution. He further warned that it would be disastrous to hold that the numerous Government officers who daily enter into a variety of contracts, often petty or made in emergencies, must always use a ponderous legal document in the specific form, thereby imposing an unreasonable burden on ordinary administrative transactions.

The Court observed that requiring an officer to enter into a contract only in an emergency by oral agreement or by correspondence, and insisting that every minor contract be executed through a cumbersome legal document in a prescribed form, would be unreasonable. The Court explained that the reasoning adopted in its earlier judgment did not support the view that a contract entered into on behalf of the State, which failed to follow the prescribed form, could be enforced against the State. Justice Bose had expressly stated that although the Government might not be bound by such a contract, this was not the same as declaring the contract void or of no effect. He clarified that the statement meant only that the principal, namely the Government, could not be sued on the contract, but that nothing would prevent the Government from ratifying the contract if it was to its benefit.

The facts proved in the earlier case demonstrated that, despite the contract not being in the prescribed form, the Government had accepted performance of the contract from the firm in which Jasani was a partner. Consequently, a relationship existed between the Government and the firm under which goods were supplied and accepted by the Government. Although, in the event of a dispute, the agreement could not be enforced at law, the parties continued to perform the contract according to its terms. The Court held that, for the purposes of section 7(d) of the Representation of the People Act, the existence of such an agreement, which was being carried out and in which Jasani had an interest, disqualified him. Justice Bose reiterated that section 7(d) did not require the contracts to be enforceable against the Government; it required only that the contracts be for the supply of goods to the Government. He therefore concluded that the contracts in question satisfied the condition of the statute and were therefore covered by it.

The appellant’s counsel also relied on cases decided under section 40 of the Government of India Act, 1915, a provision that continued to operate even after the 1915 Act was repealed by the ninth schedule to the Government of India 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 must be expressed to be made by the Governor‑General in Council, must be signed by a Secretary to the Government of India or otherwise as directed by the Governor‑General in Council, and could not be called into question in any legal proceeding on the ground that they were not duly made by the Governor‑General in Council. The Court cited the decision in J.K. Gas Plant Manufacturing Co. (Rampur) Ltd. v. King‑Emperor, wherein certain persons were accused of offences committed in contravention of clauses (5) and (8) of the Iron and Steel (Control of Distribution) Order, 1941, an order that had not been expressed to be made by the Governor‑General in Council as required by the provisions of section 40.

Section 40(1) of the Ninth Schedule to the Constitution Act was examined by the Federal Court, which held that the purpose and scope of the Act did not require the words in that section to be read as mandatory. The Court explained that the provision, which required all orders of the Governor‑General in Council to be expressed as having been made by the Governor‑General in Council, dealt only with the manner of expression and not with the procedure for actually making an order. In other words, the act of creating the order occurred before, and was distinct from, the way the order was stated in writing. The Court further observed that the provision was not limited to orders alone; it also covered proceedings. In the case of proceedings, the provision prescribed a method of recording actions that had already taken place, rather than dictating a particular form that the proceedings must assume in order to be valid. Finally, the Court noted that the requirement for a signature by a Secretary to the Government of India or another authorised person related to the manner in which a previously made order should be presented in a publishable form. The Court stated that when the directions concerning the expression of the order, the recording of proceedings, and the signature were complied with, the order and the proceedings could not be called into question in a court of law on the sole ground of non‑compliance with Section 40(1). The rule in Section 40(1), therefore, served as evidence that dispensed with the need to prove the authority of the Governor‑General for orders or proceedings that satisfied the prescribed requirements; the making of the order was independent of the form used to express it.

The Court clarified, however, that this principle could not be extended to contracts. It held that a contract’s validity is not independent of the form in which it is executed, because the document embodying the contract contains all its terms and it is by executing the contract that the parties acquire liability ex contractu. Consequently, the principle applied in J.K. Gas Plant Manufacturing Co. v. King Emperor was not applicable to the interpretation of Section 175(3) of the Government of India Act, 1935. The Court also relied on the decisions in Dattatreya Moreshwar Pangarkar v. The State of Bombay (1) and The State of Bombay v. Purshottam Jog Naik (2). In both of those cases, orders issued by the Government of Bombay under the Preventive Detention Act were challenged on the basis that they failed to satisfy the requirements of Article 166 of the Constitution. Article 166, the Court observed, laid down essentially the same rules for authenticating the orders of a State Governor as Section 40 of the Ninth Schedule of the Government of India Act, 1935 did for authenticating the orders of the Governor‑General and the Governors.

In the earlier case, the Court observed that the Preventive Detention Act required an executive decision to confirm a detention order under section eleven, paragraph one, and that failure to make and authenticate that decision in the manner prescribed by Article one hundred sixty‑six would not render the decision itself illegal because the provisions of that article are merely directory and not mandatory; this observation was supported by the authorities reported in the 1952 Supreme Court Reports at pages 612 and 674. In a later case, the Court noted that an order presented as having been made by the Government of Bombay rather than by the Governor of Bombay, as mandated by Article one hundred sixty‑six, was not considered defective, and it was further observed that the State Government retained the right to demonstrate that such an order had been validly issued; consequently the Court held that the provisions of Article one hundred sixty‑six are directory rather than compulsory. The Court further explained that these decisions rest on substantially the same principles as those applied in the judgment of J K Gas Plant and Manufacturing Company, and therefore they do not influence the interpretation of section one hundred seventy‑five, clause three, of the Government of India Act, 1935. The judgment also relied on the decision in State of U P v. Manbodhan Lal Srivastava, reported in 1958 at page 533 of the Supreme Court Reports, where the Court held that the provisions of Article three hundred twenty, clause three, sub‑clause (e), concerning consultation with the Public Service Commission before appointing a public servant, are merely directory. The Court stressed that the fact some constitutional provisions are characterised as directory does not permit a conclusion that the provisions governing the form of contracts with the Government are non‑mandatory. While it may be argued that treating the contractual‑form provisions as mandatory could cause hardship to the unwary, the Court held that any person seeking to contract with the Government is presumed to be fully aware of the statutory requirements prescribing the proper form of such contracts, as affirmed in the cited authority. Moreover, the Court stated that the inadvertent act of a State officer who executes a contract in contravention of the explicit statutory form, together with the other party’s acquiescence born of ignorance or negligence, cannot excuse the Court from giving effect to the legislature’s intention, which was enacted in the public interest. Accordingly, the Court concluded that because the contract in question was not executed in the form mandated by the Government of India Act, 1935, it could not be enforced by the appellant, and consequently the Dominion of India could not be sued by the appellant for compensation arising from an alleged breach of contract. The Court also agreed with the High Court’s finding that the appellant had failed to establish his entitlement to any compensation, even assuming the existence of a valid and enforceable contract. The appellant had claimed that he was entitled to the difference

In this case the appellant claimed that he was entitled to the difference between the price stipulated in the contract and the price actually obtained when he offered foodgrains for sale after 1 October 1943, although those grains were not accepted by the Railway Administration. The High Court observed that, even if the appellant were to recover any amount, it could only be compensation for the loss caused by the State’s wrongful breach of contract, and such compensation should be measured by the difference between the contract price and the prevailing market rate on 1 October 1943. The Court further noted that the appellant had failed to produce any evidence establishing the market rate that applied on that date. The trial judge had previously held that the document labeled “control price‑list xxx” was a reliable source for determining the measure of damages. That document was a notification setting out the controlled rates applicable in the district of Arrah, and it declared that any sale of foodgrains at prices above those prescribed constituted an offence. The appellant evidently had the option of delivering the foodgrains to a railway station for onward shipment from the Province of Bihar, and there was no record of any similar control orders being issued by the authorities in other districts of Bihar. Consequently, if the grains were supplied within the district of Arrah, the appellant could not claim recovery of a price higher than the rates fixed by the control notification, because the contracts were deemed to be subject to the condition that grains be sold only at the specified rates. Conversely, if the grains had been supplied outside Arrah, the appellant’s case suffered from a complete lack of evidence regarding the market rates applicable on 1 October 1943. For these reasons the High Court was correct in refusing to award any damages. Accordingly, the present appeal was dismissed and the appellant was ordered to pay costs.