Seth Bikhraj Jaipuria vs Union Of India (Uoi) on 24 July, 1961

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

Court: Supreme Court of India

Case Number: Not extracted

Decision Date: 24 July, 1961

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

In the matter titled Seth Bikhraj Jaipuria versus Union of India, decided on 24 July 1961, the Supreme Court of India heard a bench comprising Justices J.C. Shah, J.L. Kapur, K. Subba Rao, M. Hidayatullah and Raghubar Dayal. The appellant, Bikhraj Jaipuria, was identified as the sole proprietor of a grocery business operating under the name “Rajaram Vijai Kumar” in the town of Arrah, Bihar. During July and August 1943, the Divisional Superintendent of the East Indian Railway entered into three purchase orders with the appellant, whereby the Railway agreed to buy and the appellant agreed to sell specified quantities of food grains for the use of Railway employees. The judgment set out the details of these purchase orders in a tabular form, indicating the order numbers, dates, types of commodities, quantities, rates and the method of supply. Purchase order 69, dated 20 July 1943, concerned gram of the first quality, for which the price was fifteen rupees per maund, with an additional allowance for new bags not to exceed seventy‑five rupees per hundred bags, and the supply was to be made to any East Indian Railway station in Bihar. Purchase order 76, dated 4 July 1943, covered rice of medium quality at a rate of twenty‑two rupees and eight annas per maund, again with a similar bag cost restriction, and also wheat of white quality at twenty rupees and eight annas per maund, both to be supplied to any station in the division. Purchase order 106, dated 24 August 1943, required rice of medium quality at twenty‑four rupees per maund, without any provision for bags, for delivery to any East Indian Railway station in Bihar. Orders 69 and 76 were signed by S.C. Ribbins, the Personal Assistant to the Divisional Superintendent, while order 106 bore the signature of the Divisional Superintendent himself. The contracts stipulated that delivery of the grains should commence within seven days of acceptance and be completed within one month. The appellant delivered various quantities of grains at different times but was unable to fulfil the contracts fully within the stipulated period. Specifically, between 20 July 1943 and 24 August 1943 he supplied three thousand four hundred and sixty‑five maunds of rice, and between 1 September 1943 and 19 September 1943 he supplied one thousand one hundred and fifty‑two maunds and thirty‑five seers of wheat. Subsequently, invoking the powers granted by clause (b) of Sub‑rule (2) of Rule 81 of the Defence of India Rules, the Government of Bihar issued Notification No. 12691‑PC on 16 September 1943. That notification directed that the commodities listed in the first column of the accompanying schedule were not to be sold, from 20 September 1943 onward and until further notice, at any primary source of supply or by any proprietor, manager or employee of any mill in Bihar at prices exceeding those specified in the second column. The controlled price fixed for medium‑quality rice was eighteen rupees per standard maund, for red wheat seventeen rupees, for white wheat eighteen rupees, and for gram twelve rupees and eight annas. Following this, the Sub‑Divisional Magistrate of District Arrah issued, on September, a price‑list of the controlled articles that fixed the same prices as those stipulated in the Bihar government’s notification.

On 21 September 1943 a price‑list of controlled articles was issued, which fixed the same rates for wheat, rice and gram that had been established by the earlier notification of the Government of Bihar. The price‑list reiterated the warning contained in clause (2) of that notification, stating that any dealer who sold the controlled articles at prices higher than those fixed, or who withheld stocks of such articles from sale, would be liable to prosecution under rule 81(1) of the Defence of India Rules.

Subsequently, by a telegraphic message dated 28 September 1943, the Divisional Superintendent informed the appellant that, according to the purchase orders, any foodgrains tendered for delivery would be rejected unless they were dispatched before 1 October 1943. Apart from a consignment of 637 maunds and 20 seers that was accepted on 7 October 1943, the Railway Administration refused to accept any further delivery of foodgrains that the appellant offered after 1 October 1943.

In response to this refusal, the appellant served a notice on the Divisional Superintendent alleging breach of contract. He then sold the remaining foodgrains covered by the purchase orders between 18 February and 23 February 1944. These grains had been stored either at various railway stations or in the appellant’s own godowns. After selling the grains, the appellant demanded that the Railway Administration pay him the difference between the price he obtained on sale and the price fixed in the contract. When this demand was not satisfied, the appellant instituted legal proceedings, identified as Suit No. 359/48A, before the First Additional Subordinate Judge in Patna, seeking a decree against the Dominion of India for the amount of Rs 2,89,995‑15‑3.

The appellant’s claim was broken down as follows: he sought Rs 2,32,665‑12‑0 as the difference between the contract price and the price realised on sale, Rs 42,709‑10‑3 as interest, and Rs 14,620‑9‑0 as reimbursement for freight, wharfage, cartage, the cost of packing material, labour charges and other expenses incurred in holding the sale.

In supporting his claim, the appellant argued that the purchase orders required supply to begin within seven days of receipt of the orders and to be completed within one month. He maintained, however, that the parties had not intended that time be a condition of the essence of the contract. Alternatively, he contended that the Railway Administration had, by its subsequent conduct, waived any time stipulation, and therefore, because the Railway Administration had breached the contracts, the appellant was entitled to compensation equal to the difference between the contract price and the price at which the grains were sold.

The Dominion of India defended the suit on several grounds. It asserted that the appellant had no cause of action for the relief sought. It further argued that the contracts entered into between the appellant and the Divisional Superintendent in Dinapur were not valid or binding on the Government of India, and that they could be avoided by the Government. The defence maintained that time was indeed of the essence of the contracts, that no waiver of the time stipulation had occurred, and that the East Indian Railway Administration had not committed any breach of contract. Moreover, the Dominion of India claimed that the appellant had not suffered any loss as a result of any alleged breach.

In its written statement, the Dominion of India admitted that the East Indian Railway, through the Divisional Superintendent at Dinapur, had issued three orders in the plaint indicating its agreement to purchase the specified commodities and that the appellant had agreed to sell those commodities. The written statement, however, denied that the Divisional Superintendent had been given complete authority to enter into contracts for the supply of foodgrains.

In the case, it was shown that the East Indian Railway, through the Divisional Superintendent at Dinapur, issued three orders described in the plaint, agreeing to buy certain foodgrains, and that the appellant agreed to sell the commodities named in those orders. The Railway denied that the Divisional Superintendent had been given complete authority to enter into contracts for the supply of foodgrains. The trial court held that time was not of the essence of the contracts and, even if it had been, the breach of that time stipulation was waived by the parties. The trial court also ruled that the contention that the contracts were void because they did not comply with section 175(3) of the Government of India Act, 1935 could not be allowed, as no such plea had been raised in the written statement. Finding that the Divisional Superintendent was authorised to make the purchase contracts and that he had subsequently breached them, the trial judge awarded the appellant a sum of Rs 1,29,460‑7‑0 with interest at six per cent per annum from 1 October 1943 to the date the suit was instituted, and further interest at six per cent on the judgment. The Union of India appealed the decree to the Patna High Court, and the appellant filed cross‑objections to the decree under appeal. The High Court held that time was indeed of the essence of the contracts, but because the Railway Administration accepted the goods after the prescribed period, the time stipulation was waived. The High Court further decided that, although a notification under rule 81 of the Defence of India Rules did not make performance of the contracts illegal, the Divisional Superintendent lacked authority to contract for foodgrains on behalf of the Railway Administration, and, since the contracts were not expressed to be made by the Governor‑General nor executed by an officer duly appointed for that purpose, they were unenforceable. The Court also concluded that the appellant was not entitled to a decree for compensation because he had failed to prove the prevailing market rate on the date of breach, namely 1 October 1943. Additionally, the High Court observed that the trial court erred in awarding interest for the period prior to the filing of the suit and, in reaching that conclusion, relied upon the Privy Council judgment in Bengal Nagpur Railway Co., Ltd. v Ruttanji Ramji and others [L.R. (1938) 65 I.A. 66]. In the present appeal by the appellant, two questions were posed for determination: first, whether, relying upon 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, the appellant could sue the Dominion of India for compensation for breach of contract; and second, whether

The Court observed that the appellant had successfully demonstrated the prevailing market price for the relevant commodities as of 1 October 1943. It further noted that the finding of the lower tribunal—that the Railway Administration had waived the contractual requirement to perform within the time specified, despite time being an essential term—was not contested by the Union of India. Consequently, if that finding regarding waiver was accepted, the telegraphic notice dated 28 September 1943, in which the Divisional Superintendent declared that any foodgrains not dispatched before 1 October 1943 would not be accepted, constituted a clear breach of the contract by the Superintendent. The Court then turned to the statutory framework governing such agreements. Section 175(3) of the Government of India Act, 1935, then in force, provided that all contracts made in the exercise of executive authority of the Federation or a Province must be expressed to be made by the Governor‑General or the Governor of the Province, as appropriate, and must be executed on behalf of that authority by persons duly appointed and in the manner directed or authorized by the Governor‑General. At the material time, the Federal Railway Authority had not been established; in fact, it never came into existence. Accordingly, the contracts for the supply of foodgrains were unquestionably made under the executive authority of the Federation and therefore, under Section 175(3), were required to (a) be expressed as being made by the Governor‑General, (b) be executed on the Governor‑General’s behalf, and (c) be signed by officers properly appointed for that purpose and in the manner prescribed by the Governor‑General. The appellant, however, had not executed any formal contract in that manner. He had merely submitted offers to supply foodgrains by correspondence addressed to the Divisional Superintendent, and the Superintendent had accepted those offers through documents described as “purchase orders.” Those purchase orders were not worded as being made in the name of the Governor‑General, nor were they executed on his behalf; they bore the signature of the Divisional Superintendent either personally or through his Personal Assistant. The Court therefore examined whether the Divisional Superintendent possessed the authority to bind the Railway Administration by entering into contracts for the purchase of foodgrains. At the relevant time, Exhibit M‑2 governed the execution of instruments relating to the purchase, hire, supply, and conveyance of materials, stores, machinery, plant, telephone lines, coal, and similar items, permitting the Divisional Superintendent to execute such instruments. However, contracts concerning the purchase of foodgrains were expressly excluded from that list. Under item 34 of the same exhibit—the residuary provision—any deeds or instruments concerning railway matters not specified in items 1 to 33 could be executed by the Secretary of the Railway Board. Since no specific item authorized the Divisional Superintendent to execute foodgrain purchase contracts, such orders fell within the residuary category and thus required the Secretary of the Railway Board’s execution, not that of the Divisional Superintendent.

The Court noted that the Secretary of the Railway Board was the person authorized under item 34 of the schedule, and that there was no other item that specifically authorised the making or execution of contracts for the purchase of foodgrains. Consequently, deeds and instruments relating to the purchase of foodgrains were deemed to fall within the residuary authority of item 34, which rests with the Secretary of the Railway Board. Although the Secretary had not signed the purchase orders in question, the trial court had held that the Divisional Superintendent possessed the authority to enter into contracts with the appellant for the supply of foodgrains. In reaching that conclusion, the trial judge relied on the testimony of the Grain Supply Officer, identified as Ribbins, and on the evidence of the Personal Assistant to the Divisional Superintendent at Dinapur.

The High Court rejected the trial court’s view. It observed that the authority of an officer acting on behalf of the Governor‑General must be derived from the explicit words of the Governor‑General, expressed either through rules framed under section 175(3) of the Government of India Act, 1935 or by a specific notification issued under that provision. The High Court found that no notification or rule had been produced to show that the Divisional Superintendent had been empowered by the Governor‑General to execute such contracts, nor was there any rule conferring that authority. Referring to paragraph 10 of the relevant notification and to items 1 to 34 of Exhibit M‑2, the High Court concluded that the notification demonstrated the absence of any authority for the Divisional Superintendent to execute contracts for the purchase of foodgrains.

The present Court disagreed with that conclusion. It held that the High Court was in error in interpreting section 175(3) as allowing authority to be granted only by rules expressly promulgated or by formal notifications issued by the Governor‑General. Recent authority, particularly the decision in The State of Bihar v. M/S Karam Chand Thapar and Brothers Ltd., was cited. In that case, Justice Venkatarama Aiyar explained that while a formal government notification is the usual mode of conferring authority, section 175(3) does not prescribe any particular method, and therefore ad hoc authorisation may be validly given to any officer, provided the requirements of the section are satisfied. The Court quoted the passage stating that the statute does not preclude authorisation being conferred on a person outside the formal notification, and that when such ad hoc authority is established, the statutory requirements are deemed fulfilled.

The Court then referred to the facts of the Bihar case, where an agreement to refer a dispute to arbitration on behalf of the Government of Bihar was executed by an Executive Engineer, even though the notification issued under section 175(3) required that all instruments in that matter be executed by the Secretary or the Joint Secretary to the Government. The Court indicated that, upon consideration of the correspondence produced, it agreed with the view that the Executive Engineer had been specially authorised by the Governor, acting through his Secretary, to execute the arbitration agreement, thereby illustrating that special authority may be validly conferred outside the formal rules or notifications stipulated in the statute.

The evidence presented in the form of correspondence confirmed the finding of the High Court that the Executive Engineer had received a special authorization from the Governor, acting through his Secretary, to execute the agreement providing for reference to arbitration. The Court observed that Section 175(3) does not stipulate that any direction or authority conferred by the Governor‑General or the Governor on a person to execute contracts must be issued solely by rules or by formal notifications. Accordingly, the Court held that the High Court was mistaken in its assumption that such authority could be created only by expressly framed rules or by formal notifications issued for that purpose.

In paragraph 5 of the plaint the appellant asserted that, for the purposes and under the authority described in paragraph 3 above, during July and August 1943 the Eastern Indian Railway, through its then Divisional Superintendent at Dinapur, issued three separate orders in which it agreed to purchase and the plaintiff agreed to sell certain commodities at the rates specified. Paragraph 3 of the written statement recorded that the Dominion of India accepted the allegations contained in paragraph 5 of the plaint. The written statement also contended that, according to paragraph 1, the Divisional Superintendent did not possess authority to contract with trading firms dealing in foodgrains for the supply of such grains, and further denied that the Divisional Superintendent “was invested with complete authority to enter into contracts for the purchase of food supplies and to do all that was necessary in that connection.” Although there was an apparent inconsistency between the statements made in paragraphs 1 and 3 of the written statement, the Court noted that there was no dispute that the purchase orders had been issued by the Divisional Superintendent on behalf of the East Indian Railway Administration. Following those purchase orders, the appellant tendered a large quantity of foodgrains, which the Railway Administration accepted and for which it made payments to the appellant. Subsequently, employees of the Railway Administration sent letters to the appellant requesting that he specify the railway stations to which the grains would be delivered and the dates on which delivery would commence. The Railway Administration also arranged inspection programmes, prepared wagons to receive the deliveries, convened meetings on several occasions to finalize supply programmes, rejected grains that did not meet contractual specifications, corresponded with the appellant regarding the return of empty bags, accepted bills and railway receipts, made further payments, returned certain bills for grain supplied after the contract period, and performed numerous other acts that could only be consistent with contracts entered into under the authority granted to the Divisional Superintendent. In addition, the testimony of Ribbins was presented, which clearly supported the view that the agreements to purchase foodgrains by the Divisional Superintendent formed part of a scheme devised by the Railway Administration during the serious famine of 1943.

When the Bengal famine broke out in April‑May 1943, the need arose to arrange for the supply of foodgrains to employees of the East Indian Railway, according to the witness Ribbins. In his cross‑examination he explained that a written scheme was prepared for this work and that orders were received from the Head Office in Calcutta. He stated that the Deputy General Manager, Grains, in Calcutta issued the necessary orders and that the agent or General Manager, as he was called, appropriated the relevant functionary, presumably under those orders. Ribbins further recounted that the entire scheme subsequently obtained the assent of the Railway Board and that, from time to time, further instructions were issued from the Head Office. All such directions were to be placed in the office of the Divisional Superintendent at Dinapur. He added that new posts were created to implement the scheme: initially one Assistant Grain Supply Officer, and later two posts, one on a senior scale and another as Assistant, both within the Dinapur Divisional staff, to be in charge of the grain shops. These officers were appointed exclusively to run the grain‑shop organization. Ribbins also mentioned that the Railway arranged for accommodation and additional storage at certain locations, and that grain shops were situated at those places when such accommodation was provided.

Ribbins later disclosed that he had served for a period as a Grain Supply Officer under the East Indian Railway and admitted that purchase orders similar to those in dispute were drawn up in cyclostyled forms “as per orders from the Head Office.” He said that the instructions of the Head Office were kept “in the office file.” However, none of these documents were produced or tendered as evidence by the Railway Administration. The Court observed that, taken as a whole, the evidence demonstrated that the Railway Board had devised a scheme to distribute foodgrains to its employees at concessional rates and had authorized the procurement, transport and distribution of those grains. When the scheme was implemented, the Railway Administration received the foodgrains, provided special wagons, conveyed the goods to various locations, distributed them, and made payments after testing the supplies. From these facts the Court inferred that the Divisional Superintendent who issued the purchase orders acted under a special authority that had been granted to him. The testimony of Ribbins, together with abundant documentary evidence, established beyond doubt that, although the Divisional Superintendent was not expressly authorized by the notification Ex. M‑2 to contract for the purchase of foodgrains, he was specially authorized to enter into such contracts. The remaining issue, the Court noted, was whether purchase orders executed by the Divisional Superintendent, which were not expressed as being made by the Governor‑General and were not executed on his behalf, were binding on the Government of India, a question governed by Section 175(3) which requires contracts on behalf of the Government to be executed in the prescribed form.

In this case, the Court explained that Section 175(3) states that contracts on behalf of the Government of India must be executed in the form prescribed by that section; however, the provision does not specify what happens if the prescribed form is not complied with. When a statute mandates that an act be performed in a particular manner or form but is silent about the consequences of failure to do so, the Court must determine whether the requirement is mandatory or merely directory. This determination is made by examining the legislature’s intention as revealed by the object, purpose and scope of the statute. If the requirement is mandatory, any act performed in a manner not prescribed is without legal effect or validity. If the requirement is directory, non‑compliance may attract a penalty, but the act itself is still regarded as valid. The Court then quoted the authoritative commentary in Maxwell on the Interpretation of Statutes, tenth edition, page 376, which observes that no single rule can be laid down to decide whether a command is a mere direction without invalidating consequences or an imperative that implies nullification for disobedience, and that the answer depends on the scope and object of the enactment. The commentary further states that while nullification is generally the natural consequence of disobedience, the question is mainly governed by considerations of convenience and justice, and that imposing nullification would be inappropriate where it would cause widespread inconvenience or injustice to innocent persons or benefit those who neglect the law, unless such result furthers the true aim of the enactment. The whole purpose of the statute must therefore be considered. The Court also referred to the observation of Lord Campbell in Liverpool Borough Bank v. Turner, (1861) 30 L.J. Ch. 379, wherein he said that there is no universal rule to decide whether mandatory enactments are to be treated as directory or obligatory with implied nullification, and that it is the duty of the court to discern the true intention of the Legislature by carefully examining the entire scope of the statute. Applying these principles, the Court concluded that Parliament, by enacting section 175(3), intended that the State should not be exposed to liability for contracts that are unauthorised. Accordingly, the provision requires that a contract must, on its face, show that it is made on behalf of the State, that is, by the Head of the State, executed on his behalf and in the manner prescribed by the authorised person. The provision appears to be framed in the public interest and to empower public servants to bind the State by contractual obligations incurred for governmental purposes. Finally, the Court noted that it is in the public interest that the existence of a binding contract between the State and a private individual should not remain uncertain and subject to litigation, which explains why the legislature chose to make

The Court explained that the statute required every contract entered into by the State to be in writing and to display on its face that it was executed for and on behalf of the head of the State in the manner prescribed by law. The purpose of giving the head of the State such power was to ensure that the State could not be bound by agreements that were ambiguous or uncertain in form. The Court held that if a contract were written in an unclear manner, allowing disputes to arise as to whether the contract was intended to bind the State or only the individual who signed it would defeat the legislative intention. Consequently, the requirement that the contract be executed in the prescribed manner operated as an implicit prohibition against any contract that was not fashioned according to the statutory form. The Court recognised that, on occasion, a person unfamiliar with legal requirements might suffer hardship by entering into a contract that does not meet the prescribed form. It also observed that government agencies sometimes ignore the prescribed forms when they execute contracts. Nevertheless, the Court stated that such practical difficulties did not justify deviating from a provision that was both mandatory and beneficial to the public interest, and therefore a departure from the mandatory form could not be permitted.

The Court noted that a substantial body of decisions of the High Courts in India had consistently held that contracts which do not comply with the form prescribed by the Constitution Acts are not binding on the State. Those decisions characterise the statutory requirements relating to the form of contracts between the Government and private individuals as mandatory rather than merely directory. The Court then referred to the decision in Municipal Corporation of Bombay v. Secretary of State, where the effect of sections 1 of statutes 22 and 23 of the 41st Victoria chapter had to be clarified. Under those statutes, the Governor‑General of India in Council, the Governors in Council and other officers entrusted with governmental functions were, subject to restrictions laid down by the Secretary of State in Council, authorised to sell and dispose of real and personal property belonging to Her Majesty, to raise money on such property, and 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 order of the Governor‑General in Council or Governor in Council. Although the instrument could be executed in the same manner as other instruments executed by or on behalf of the officers in their official capacity, it could be enforced by or against the Secretary of State in Council at the time. In the subsequent suit between the Government of Bombay and the Municipal Corporation of Bombay, the corporation asserted its right to remain in occupation of a large parcel of land on payment of a nominal rent, invoking a resolution passed by the Government of Bombay that purported to sanction such use.

In this case, the Municipal Corporation of Bombay asserted a right to continue occupying a large parcel of land on payment of a nominal rent, basing its claim on a resolution passed by the Government of Bombay that sanctioned such use. The Court noted that the Crown land disposition of 1865 by the Governor in Council required strict compliance with the prescribed forms for the disposition to be valid, and therefore the resolution could not constitute a lawful conveyance of the property for the interest asserted. The Court further referred to earlier authorities, observing that in Kessoram Poddar and Co. v. Secretary of State for India [I.L.R. (1927) 54 Cal. 969] a contract would bind the Secretary of State in Council only if it was executed in exact accordance with the statutory provisions governing the matter; any deviation rendered the contract invalid against the Secretary. The same principle was reiterated in S.C. Mitra and Co. v. Governor‑General of India in Council [I.L.R. (1950) 2 Cal. 431], Secretary of State v. Yadavgir Dharamgir [I.L.R. (1936) 60 Bom. 42], Secretary of State and another v. G.T. Sarin and Company [I.L.R. (1930) 11 Lah. 375], U.P. Government v. Lala Nanhoo Mal Gupta, Devi Prasad Sri Krishna Prasad Ltd. v. Secretary of State [I.L.R. (1941) All. 741], and S.K. Sen v. Provincial P.W.D. State of Bihar, all of which held that a contract not made in strict conformity with the governing statute could not be enforced against the governmental party. Counsel for the appellant, Mr. Viswanatha Sastri, argued that a different decision, Chatturbhuj Vithaldas Jasani v. Moreshwar Parashram [(1954) S.C.R. 817], held that a contract for supplying goods to the Government that failed to follow the form prescribed by Article 299(1) of the Constitution—substantially the same as section 175(3) of the Government of India Act, 1935—was not void and unenforceable. In that case the election of Chatturbhuj Jasani to Parliament had been challenged because he possessed an interest in a firm that had entered into Government supply contracts that were in force on 15 November 1951, the last date for filing nominations, and on 14 February 1952, the date on which election results were declared. The Court had concluded that Jasani was disqualified under section 7(b) of the Representation of the People Act, 1951. Although those contracts were admittedly not in the form prescribed by Article 299(1), the Court, through Bose J., observed that a reasonable interpretation must be given to Article 299(1). The Court emphasized that the provision was not intended merely as a formal requirement but to protect the Government from unauthorised contracts, and that an officer who entered into a contract on the Government’s behalf could protect himself by using the proper form. The judgment further warned that it would be disastrous to hold that the numerous Government officers who routinely enter into a variety of contracts—often minor or urgent—could not rely on oral agreements or simple correspondence, and that imposing a heavy legal form on every petty contract would be unreasonable.

The Court explained that when a contract is unauthorized or exceeds the authority granted, it is proper that the Government be safeguarded. Conversely, an officer who enters into a contract on behalf of the Government can protect himself by following the prescribed form. Between these extremes lies a large class of contracts, probably the greatest in number, which, although authorized, are for one reason or another not in the proper form. The Court said it would be unfair for an innocent contracting party to suffer because of this deficiency, and if there is no other defect the Government would accept responsibility, thereby safeguarding its interests as intended by the Constitution. The learned Judge further observed that it would be disastrous to hold that the hundreds of Government officers who daily enter into a variety of contracts, often petty or made in emergencies, could not contract orally or through correspondence, and that every minor contract must be effected by a ponderous legal document couched in a particular form. The rationale of the case does not support the contention that a contract on behalf of a State not in the prescribed form is enforceable against the State. Bose J. expressly stated that the Government may not be bound by such a contract, but that is a very different thing from saying the contract is void and of no effect; it only means that the principal could not be sued, while nothing would prevent ratification if the contract benefited the Government. The facts proved show that although the contract was not in the form prescribed, the Government had accepted performance of the contract by the firm of which Jasani was a partner, and a relationship existed under which goods were supplied and accepted by the Government. The agreement could not, in a dispute, be enforced at law, yet it was being carried out according to its terms. For the purpose of the Representation of the People Act, the existence of such an agreement, in which Jasani had an interest, disqualified him. Bose J. observed that section 7(d) of the Representation of the People Act does not require that the contracts it strikes at be enforceable against the Government; it only requires that the contracts be for the supply of goods to the Government. The contracts in question satisfied that requirement and were therefore caught by the section. Counsel for the appellant also relied upon cases decided under section 40 of the Government of India Act, 1915.

Section 40, which remained in force even after the repeal of the 1915 Act by the ninth schedule of the Government of India Act 1935, laid down the procedure for conducting the business of the Governor‑General in Council. The provision stipulated that every order and any other proceeding of the Governor‑General in Council must be expressed as having been made by that body, must be signed by a Secretary to the Government of India or by any other person directed by the Governor‑General in Council, and that such orders could not be challenged in any legal proceeding on the ground that they were not properly made by the Governor‑General in Council.

In the case of J.K. Gas Plant Manufacturing Co. (Rampur) Ltd. v. King Emperor [(1947) F.C.R. 141], certain individuals were charged with offences allegedly committed in violation of clauses (5) and (8) of the Iron and Steel (Control of Distribution) Order 1941. That order had not been expressed as having been made by the Governor‑General in Council, which was a requirement under section 40(1) of the ninth schedule of the Constitution Act. The Federal Court examined the purpose and scope of the Act and concluded that the language of section 40 should not be given a compulsory, mandatory effect. First, the Court observed that the requirement that all orders be expressed as made by the Governor‑General in Council dealt only with the manner of expression, not with the actual process of making the order; the act of making an order was understood to precede its formal expression. Second, the Court noted that the provision covered not only orders but also proceedings, and that, with respect to proceedings, the provision described a method of recording proceedings that had already occurred in the prescribed manner, rather than prescribing a particular form that the proceedings themselves must take in order to be valid. Third, the Court pointed out that the clause concerning the signature by a Secretary to the Government of India or another authorized person was intended to regulate how a previously made order should be presented in a publishable form. Consequently, if the directions regarding the expression of the order or proceeding and the required signature were complied with, the order or proceeding could not be attacked in court on the sole ground of non‑compliance with those formalities.

The Court further held that the rule in section 40(1) functioned as a piece of evidence that eliminated the need to prove the Governor‑General’s authority for orders or proceedings that satisfied the prescribed requirements. In other words, the creation of an order or proceeding was independent of the form used to express that order or proceeding. However, the Court cautioned that this principle could not be extended to contracts, because the making of a contract is not independent of the form in which it is executed. The document that evidences a contract is the sole repository of its terms, and it is by executing the contract that the contractual liability of each party arises.

The Court observed that a contract itself contains the entirety of its terms, and that it is only by signing the contract that each party incurs liability arising from the contract. Consequently, the Court held that the principle laid down in the J.K. Gas Plant Manufacturing Co. case could not be applied to the construction of section 175(3) of the Government of India Act, 1935. The Court then considered the authorities cited by the parties, namely Dattatreya Moreshwar Pangarkar v. The State of Bombay [(1952) S.C.R. 612] and The State of Bombay v. Purshottam Jog Naik [(1952) S.C.R. 674]. In both of those decisions, orders issued by the Government of Bombay under the Preventive Detention Act were challenged on the ground that the orders failed to comply with the requirements of Article 166 of the Constitution. Article 166 prescribes, in substance, the same rules for the authentication of a Governor’s orders as those contained in section 40 of the Ninth Schedule of the Government of India Act, 1935 for the authentication of orders of the Governor‑General and the Governors. The Court noted that, in the first case, it was held that the Preventive Detention Act requires an executive decision to confirm a detention order under section 11(1), and that the failure to make and authenticate that decision in the form specified in Article 166 does not render the decision itself illegal because the provisions of that article are merely directory and not mandatory. In the second case, the Court observed that an order purportedly made in the name of the Government of Bombay, rather than in the name of the Governor of Bombay as mandated by Article 166, was not deemed defective, and that the State Government retained the ability to demonstrate that such an order had been validly made. Accordingly, the Court concluded that the provisions of Article 166 are of a directory character.

The Court further held that the two decisions cited above were based on the same factual foundations as the J.K. Gas Plant Manufacturing Co. case and therefore did not influence the interpretation of section 175(3) of the Government of India Act, 1935. The Court also examined the reliance placed on State of U.P. v. Manbodhan Lal Srivastava [(1958) S.C.R. 533], in which it was held that the provisions of Article 320 clause (3)(c) of the Constitution, which require consultation with the Public Service Commission before the dismissal of a public servant, are merely directory. The Court stressed that the fact that certain constitutional provisions are regarded as directory does not provide a basis for concluding that the provisions governing the form of contracts with the Government are non‑mandatory. While acknowledging that treating the contractual formalities prescribed by the Constitution as mandatory may impose hardship on the unwary, the Court emphasized that any person seeking to contract with the Government must be deemed fully aware of the statutory requirements concerning the form of such contracts. The Court further noted that even an inadvertent breach of a statutory form requirement by a Government officer, coupled with the other contracting party’s ignorance or negligence, cannot excuse the Court from giving effect to the legislature’s intent, since the provision serves the public interest. Hence, the Court affirmed that because the contract in question did not comply with the form mandated by the Government of India Act, 1935, it could not be enforced, and the appellant could not sue the Dominion of India for compensation for breach of contract.

It was held that when an officer of the State executed a contract in a manner that violated an express statutory provision, the ignorance or negligence of the other contracting party could not excuse the Court from giving effect to the intention of the legislature, because the provision had been made in the public interest. Consequently, because the contract was not executed in the form required by the Government of India Act, 1935, the contract could not be enforced at the instance of the appellant, and the Dominion of India could not be sued by the appellant for compensation on account of a breach of that contract.

The Court also agreed with the High Court that the appellant had failed to demonstrate that he was entitled to any compensation even if a valid and enforceable contract had existed. The appellant had claimed that he was entitled to the difference between the contract price and the price actually realised by the sale of the foodgrains offered after 1 October 1943, which had not been accepted by the Railway Administration. The High Court correctly observed that the appellant, if at all, could claim only compensation for the loss suffered due to the wrongful breach of contract by the State, and that such compensation would be measured by the difference between the contract price and the market rate prevailing on 1 October 1943. The appellant, however, failed to produce evidence of the market rate applicable on that date. The trial judge had held that the “control price‑list xxx” was a reliable source for ascertaining the measure of damages. That document was a notification of the controlled rates applicable in the district of Arrah, under which the sale of foodgrains at prices exceeding the prescribed rates was an offence. The appellant could have delivered the foodgrains at any railway station within the Province of Bihar, and there was no evidence on record that similar orders to Ex. M‑2 had been issued by the authorities in other districts of Bihar. If the grains had been supplied in the district of Arrah, the appellant could not recover a price for the goods supplied and accepted on or after 1 October 1943 at rates exceeding those fixed by the notification, because the control orders imposed a condition that the foodgrains be sold only at the specified rates. If the grains had been supplied outside the district of Arrah, the appellant’s case suffered from a complete lack of evidence regarding the ruling rates of the disputed foodgrains on 1 October 1943. Accordingly, the High Court was right in refusing to award damages.

On the basis of these considerations, the Court concluded that the appeal must be dismissed with costs, and the appeal was dismissed.