Karamshi Jethabhai Somayya vs The State Of Bombay

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

Court: supreme-court

Case Number: Civil Appeal No. 552 of 1962

Decision Date: 3 March 1964

Coram: K.C. Das Gupta, Raghubar Dayal, Subba Rao

In this case, the Supreme Court of India considered an appeal arising from a suit filed by Karamshi Jethabhai Somayya against the State of Bombay. The judgment was delivered on 3 March 1964 by a bench comprising Justices Subbarao K. Gupta, K.C. Das Gupta and Raghubar Dayal. The parties were identified as petitioner Karamshi Jethabhai Somayya and respondent the State of Bombay. The citation for the decision is 1964 AIR 1714 and 1964 SCR (6) 984, and it is reported in the reference work RF 1980 SC1285 (10). The factual background involved an agreement that had been concluded by the Superintending Engineer concerning the supply of irrigation water. The legal issues revolved around the applicability of section 175(3) of the Government of India Act, 1935 and various provisions of the Bombay Irrigation Act, 1879, namely sections 3(6), 4 and 27‑30, as well as the Bombay Tenancy and Agricultural Lands Act. According to the facts, a person identified as K had obtained government sanction to irrigate certain lands using water from a canal. In the same year the Government announced its intention to reserve a portion of land along the canal for factory use. After a series of correspondences between the Government and K, the Superintending Engineer agreed to keep K’s land outside the proposed factory zone and to provide water on a perpetual basis, provided that K concentrated all of his holdings at the tail outlet of the canal and accepted water on a volumetric basis. Acting on that arrangement, K consolidated his holdings, moved his operations to the designated area, and received water according to the agreed terms. Subsequently the petitioner and K entered into a partnership for exploiting the area. A dispute later developed between them, which resulted in a consent decree granting the petitioner full ownership of the land together with the right to use the canal water. When the petitioner sought formal recognition of the transfer, the canal officer refused, and on further appeal the officer informed the petitioner that the request for water supply could not be granted. Consequently the water supply was discontinued. The petitioner then served statutory notice under section 80 of the Code of Civil Procedure and instituted a suit against the State seeking a declaration of his right to water from the canal and related reliefs. The State defended the suit, contending that no final agreement existed between the Government and K, and that even if an agreement existed it was void because it did not comply with section 175(3) of the Government of India Act, 1935. The State further argued that the petitioner could not lawfully claim the benefit of the agreement under section 30 of the Bombay Irrigation Act. The Civil Judge found that an agreement had indeed been concluded between the Government and K, but held that K’s transfer of the water right to the petitioner violated the Bombay Tenancy and Agricultural Lands Act, and therefore dismissed the suit. On appeal, the High Court held that no concluded agreement existed between K and the Government and that the purported arrangement failed to meet the statutory requirements, and it dismissed the appeal.

On appeal by special leave, the Court recorded several findings. First, the documents produced in the case demonstrated that a concluded agreement existed between the Superintendent Engineer, who was acting on the order of the Minister of the Public Works Department, and the party identified as K. The agreement provided that water would be supplied to K for as long as K continued to cultivate sugarcane in the designated concentrated area. Second, the Court explained the relevant provisions of the Bombay Irrigation Act. The Act requires that any person who wishes to obtain water from a canal must apply in the manner prescribed to the Canal Officer. Moreover, the person to whom water is supplied may not transfer that right to another person without first obtaining permission from the Canal Officer. However, the Act also provides that if the land for which the water is supplied is transferred, the agreement for water supply is presumed to be transferred together with the land. Third, the Court observed that the conduct of the Government, as well as the conduct of K and the appellant, indicated that the agreement was not made under the Bombay Irrigation Act but was instead an agreement between the Government and K. Fourth, the Court held that the agreement was void because it failed to satisfy the requirements of section 175(3) of the Government of India Act. The agreement had not been entered into by a person legally authorised to bind the Government, nor was it expressed as being made in the name of the Governor. The Court referred to the authorities Seth Bikhraj Jaipurja v. Union of India, [1962] 2 S.C.R. 860; New Marine Coal Co. v. Union of India, [1964] 2 S.C.R. 859; and Union of India v. Rallia Ram, A.I.R. 1963 S.C. 1685 in support of this conclusion. In addition, the Court noted that while a private party to litigation has a duty to place all relevant matters before the Court, the Government bears an even higher responsibility not to withhold any documents that are pertinent to the proceedings.

The judgment was delivered in a civil appellate jurisdiction as Civil Appeal No. 552 of 1962, filed by special leave from the judgment and decree dated 22 August 1960 of the former Bombay High Court in appeal No. 432 of 1954, which itself affirmed the decree of the Civil Judge, Senior Division, Ahmednagar. Counsel for the appellant included representatives of the appellant, while counsel for the respondent represented the State. The judgment was pronounced on 3 March 1964 by Justice Subba Rao. The appeal challenged the High Court’s confirmation of the lower court’s decision in Special Civil Suit No. 6 of 1953, in which the appellant sought a declaration of his right to obtain water from a specific source and the consequential reliefs. The appellant was identified as the owner of Shankar Tukaram Karale Rampur Farm, which was situated at the tail‑outlet of the Godavari Right Bank Canal, Distributary No. 17. The lands forming the farm originally belonged to Shankar Tukaram Karale, hereinafter referred to as Karale. In the year 1935, Karale possessed a farm for raising sugarcane, the details of which were to be further described in the subsequent portion of the judgment.

The appellant owned thirty‑five acres outright and also held about sixty‑five acres on lease in Ahmednagar District. He obtained official permission to irrigate his lands using outlet number seventeen of the Godavari Right Bank Canal. In the same year the Government of Bombay announced its intention to reserve a portion of land along that distributary canal as a “factory area”. After a series of letters exchanged between the landowner, known as Karale, and the Government, the Superintending Engineer, on 14 July 1939, concurred with the appellant’s version of events and agreed to exclude Karale’s holdings from the proposed factory zone. The Engineer further promised to supply water to Karale permanently, provided that Karale concentrated all of his property at the tail‑end of distributary number seventeen and accepted the water on a volumetric basis. Acting on that understanding, Karale, by purchase or other means, gathered his scattered holdings into the designated tail‑end area and relocated his agricultural activities there, after which he began receiving water in accordance with the agreed terms.

In approximately April 1948 the appellant and Karale formed a partnership concerning the export of the land in question, with the appellant holding three‑fourths of the partnership interest and Karale holding one‑fourth. Subsequent disagreements between them regarding the partnership led to a consent decree dated 7 February 1951, by which the appellant acquired complete ownership of the partnership business, including all assets and liabilities, the land, the compact block and the right to use canal water. When the appellant sought formal recognition of this transfer, the Canal Officer declined to record it. On appeal, the Canal Officer informed the appellant that his request for continued water supply could not be accommodated, and from April 1952 the water was discontinued. After serving a statutory notice under section 80 of the Code of Civil Procedure, the appellant instituted Special Civil Suit No. 6 of 1953 before the Civil Judge, Senior Division, Ahmednagar, seeking a declaration that he was entitled to water from the tail outlet of distributary number seventeen for irrigating one hundred acres of cane land described in Schedule 11, at rates prescribed by the Government under the Irrigation Act on a volumetric basis, specific performance of the alleged agreement between Karale and the Government, damages, and ancillary reliefs. The State of Bombay filed a written statement asserting, inter alia, that no definitive agreement existed between the Government and Karale as alleged, that any such agreement would be void for contravening section 175(3) of the Government of India Act, 1935, and that, in any event, the appellant could not claim the benefit of the agreement under section 30 of the Bombay Irrigation Act, 1879. On the basis of the pleadings, the court framed seven substantive issues reflecting the parties’ contentions.

The Civil Judge initially observed that a definitive agreement had indeed been concluded between the Government and Karale on the terms alleged by the appellant; however, the judge found that Karale’s conveyance of the water right to the appellant contravened the Bombay Tenancy and Agricultural Lands Act of 1948, and consequently there was no legally valid transfer of Karale’s water entitlement to the appellant, leading the judge to dismiss the suit. Upon appeal, the High Court examined the same questions and concluded that no definitive agreement existed between Karale and the Government, and moreover that any purported arrangement failed to satisfy the statutory requirements, resulting in the dismissal of the appeal. The present petition therefore arises from that dismissed appeal. Counsel for the appellant, identified as Mr M K Nambiar, presented his case in three main submissions. First, he asserted that a conclusive agreement had been entered into between Karale and the statutory authority, namely the Canal Officer, under which Karale was entitled to receive water permanently to his compact block from the tail outlet of Distributary No 17 of the Godavari Right Bank Canal, provided that he continued to pay the prescribed rates on a volumetric basis. Second, he argued that the compromise decree transferring the specified block of land from Karale to the appellant also transferred the right to receive canal water to the appellant, invoking section 30 of the Bombay Irrigation Act of 1879 (Bombay Act No 7 of 1879), hereinafter referred to as “the Act.” Third, he contended that section 175(3) of the Government of India Act of 1935 was inapplicable to the agreement for several reasons: (i) once the Legislature enacts a statute covering a particular matter, any functional power assigned to the Government or any other authority must be exercised solely under that statute and by virtue of the statutory authority, not as an exercise of the provincial executive power contemplated by section 175(3) of the Government of India Act; (ii) the agreement contemplated by section 30 of the Act is executed by a statutory authority pursuant to a statutory power and therefore falls outside the ambit of section 175(3) of the Government of India Act; and (iii) moreover, the term “agreement” in section 30 of the Act does not denote a formal contract but rather a sanction, permission, or consent granted by the Canal Officer pursuant to his statutory authority, and such a sanction does not constitute a contract within the meaning of section 175(3) of the Government of India Act. The appellant further emphasized that the issues raised in this appeal bear far‑reaching significance for the scope of executive authority exercised by the Governor under the Government of India Act, though the Court noted that it was not required to pronounce on that broader question in these proceedings.

The Court observed that the present appeal raised a question of great significance, but it declined to decide that question because it had already found that the agreement in dispute was concluded outside the provisions of the Act and therefore fell squarely within the ambit of section 175(3) of the Government of India Act, 1935. At the outset, the Court indicated that it would examine the agreement itself, specifically identifying the parties to the agreement and the terms that comprised it. While the civil suit was pending before the lower court, the appellant moved the court for an order directing the Government to produce, inter alia, the applications that Karale had submitted to the Government from time to time for water supply to his farm beginning in 1935 and thereafter; the official copies of the Government’s replies to those applications; all Government documents and papers relating to the matter; the water‑bills; and the records concerning the supply of water to Karale’s land from 1935 onward. The appellant also sought the correspondence that had passed between Karale and the Government between 1935 and 1939 regarding the consolidation of his lands. The appellant required these papers to prove that a concluded agreement existed between Karale and either the Government or the Canal Officer. Unfortunately, the Government failed to produce the requested documents. The record does not disclose the reasons or the circumstances under which the Government withheld the documents from the court. In the appellate judgment, the High Court remarked that “in the trial Court no attempt was made to have this endorsement produced in Court which could have been done if the plaintiff’s counsel had so desired by a proper application to the Court.” Nonetheless, the High Court considered it essential in the interest of justice to call upon the learned Government Pleader to produce the file concerning Endorsement No. 3033/36‑1 dated 28 April 1939, and it directed the Government to do so. After receiving the relevant endorsement, the High Court disposed of the appeal. Although the High Court placed the blame for the lapse on the appellant, the Court under review found no justification for that attribution. While the appellant had indeed asked for the production of all pertinent documents, the Government, as the defendant, bore the responsibility to produce documents relevant to the issue raised. A private litigant is obliged to place relevant matters before the court, but the Government carries a higher duty not to withhold such documents. Ultimately, the documents were produced before the court, and the High Court considered them in reaching its conclusion. Counsel for the appellant suggested that the documents pertained to another party, but the Court noted that the file also contained material concerning the alleged agreement between Karale and the Government. The relevant exhibits, identified as D‑67 and D‑68, formed the basis of the appellant’s reliance.

Exhibit D‑67 was presented as a government endorsement numbered 3033/36‑1 and dated 28 April 1939, with a subsequent entry dated 14 July 1939 at Poona. The document recorded that the applicant had already been permitted to continue his existing cane irrigation over ninety‑three acres using outlets two and the tail of Distributary 17 of the Godavari Right Bank Canal for one year beginning on 15‑February‑1939, pending a detailed consideration of his case. The pending consideration related to a demand made by the Sugar Company formed by Messrs Jagtap & Khilari on the same canal, which was recently referred to as the “Changdeo Sugar Factory.” The endorsement further noted that, in view of verbal orders issued by the Honourable Minister of the Public Works Department on 12‑July‑1939, the applicant would be allowed to concentrate all of his cane irrigation to a total of one hundred acres on the tail outlet of Distributary 17 of the Godavari Right Bank Canal by 15‑February‑1940, and that he could continue that arrangement permanently if he so desired, provided that he agreed to take water by measurement on a volumetric basis of one hundred twelve inches at the outlet head and to pay water rates that might thereafter be sanctioned by the Government. The applicant had indicated his willingness to accept those conditions, and the document specified that, until the new arrangement took effect, he would continue to be charged on the existing area‑based basis. Moreover, the endorsement stated that the area allotted to the applicant would be excluded from the Sugar Factory’s allotted area when the boundaries of the “Changdeo Sugar Factory” on the canal were fixed. The document bore the signature of W. H. E. Garrod, Superintending Engineer of the Deccan Irrigation Circle, and a copy was sent with compliments to the Executive Engineer of the Nasik Irrigation Division for information and guidance, referencing a correspondence ending with office number 3686 dated 22‑June‑1939.

Exhibit D‑68 comprised a letter from the same Superintending Engineer to Shankar Tukaram Karale, addressed at Belapur and dated 14 July 1939, bearing the reference number 4224 of 1939. The letter began by recalling office number 3686 dated 23‑June‑1939 and informed Mr Karale that, under the orders of the Honourable Minister of the Public Works Department, he would be allowed to irrigate cane over an area of one hundred acres on the tail outlet of Distributory No 17 of the Godavari Right Bank Canal on a permanent basis, provided he agreed to take canal water by measurement on a volumetric basis of one hundred twelve inches at the outlet head and to pay the water rates that might later be sanctioned by the Government. The letter clarified that this arrangement would apply to any new cane plantation from 15‑February‑1940 onward, while the existing irrigation on outlets two and the tail could continue until that date. The letter was signed by W. H. E. Garrod, Superintending Engineer of the Deccan Irrigation Circle, and a copy was also sent with compliments to the Executive Engineer of the Nasik Irrigation Division for information. A fair reading of these two documents left no room for doubt that a firm agreement had been entered into between the Government and Karale concerning the supply of water to his land for one hundred acres on the tail outlet of Distributary No 17 of the Godavari Right Bank Canal.

In this case the Court observed that a contract had been concluded between the Government and Mr Karale concerning the provision of water to his land covering an area of one hundred acres situated at the tail outlet of Distributary No 17 of the Godavari Right Bank Canal. The two letters placed before the Court demonstrated that there had been earlier correspondence between the Engineering Department and Mr Karale, that the Minister of the Public Works Department had intervened and had settled the terms of the agreement, and that those terms had been communicated to Mr Karale, who had accepted them. The agreed terms were as follows: first, Mr Karale was permitted to concentrate all of his cane irrigation on the specified one‑hundred‑acre area at the tail outlet of Distributary No 17 by fifteen February 1940 and to continue that irrigation permanently if he so wished; second, Mr Karale undertook to take water by measurement on a volumetric basis of one hundred and twelve inches at the outlet head and to pay any water rates that might subsequently be sanctioned by the Government; third, the said area was to be excluded from the designated sugar‑factory area while the boundaries of the allotted area of the Changdeo Sugar Factory were being fixed; and fourth, the conditions were to apply to any new cane plantation commencing from fifteen February 1940 onward.

The Court noted that an argument had been raised that the word “permanently” applied only to the cultivation of cane and not to the supply of water, a reading which would render the whole contract meaningless. The Court rejected that view because sugar‑cane cultivation could be carried out only with the permission of the department and could not be sustained without a reliable supply of canal water. When the Superintending Engineer had allowed Mr Karale to concentrate all of his cane irrigation permanently on the condition that he paid the prescribed rates, it was necessarily implied that water would be supplied permanently provided the rates were paid. The Court explained that cultivation and water supply were so inseparably linked that they could not be treated as separate obligations. Consequently, the permission to irrigate permanently on the basis of a stipulated rate inherently meant that the water supply would continue for as long as the irrigation took place.

Based on this reasoning the Court held that Exhibits D‑67 and D‑68, read together, recorded a completed agreement between the Superintending Engineer, acting on the orders of the Minister of Public Works, on the one hand, and Mr Karale on the other, whereby water would be supplied so long as Mr Karale maintained cane cultivation in the concentrated area. The Court further observed that the remaining documents, including those introduced for the first time in the High Court proceedings, did not alter this conclusion. Exhibit D‑78, which was undated, represented an application made by Mr Karale to the Chief Minister, the Public Works Department and the Irrigation Department. In that application Mr Karale asserted that Distributary No 17 had been permanently closed before 1935, that he had been responsible for reopening it by commencing plantation, and that the consent of the Prime Minister had given him assurance that the area previously occupied by gardeners would be excluded from the defined factory area. These statements supported the existence of the agreement as described above.

In the application filed by Karale, he stated that he had invested approximately Rs. 75,000 in establishing the plantation and, in view of those circumstances, he prayed that his land be excluded when the factory area was declared. The application was examined by the appropriate office under Government Letter No. 3033/36 dated 27 April 1939. The office prepared a note that summarized the substance of the application. Following that summary, the note contained the following passage: “With reference to the H.M.R.D.’s note dated 3‑4‑1939 it may be observed that Government has already accepted the principle that no ordinary irrigators should be allowed to operate in the sugar factory area. Under the general orders issued on the subject owner irrigators are to be allowed to continue irrigation, on yearly basis. It is for consideration whether this fact may be brought to the notice of the H.M.R.D. If it is decided to do so the papers may be submitted to the H.M., P.W.D. and the H.M.R.D. after the drafts put up are issued.” The Revenue Minister subsequently accepted this endorsement. The Court observed that this endorsement was merely an office note; the suggestion that irrigators be permitted to continue on a yearly basis was intended only to forestall further applications after the factory area had been declared. The endorsement did not relate to the exclusion of any specific parcel of land from the sugar factory area. The phrase “should see” that appears beneath the Revenue Minister’s endorsement was interpreted to mean that the papers should be forwarded to the minister concerned. Exhibit D‑79 consists of a letter from the Deputy Secretary to the Government of Bombay addressed to Changdeo Sugar Mills, which also references office endorsement No. 3033/36‑1. Although the Court was not directly concerned with this letter, it noted that Karale’s application was linked to the proposal to designate a certain area as a factory area and to provide water to Changdeo Sugar Factory for the lands therein, because Karale sought to have his own land excluded from that designation. Both matters were therefore handled together. Exhibit D‑79A is another document within the file pertaining to the factory area and again refers to office endorsement No. 3033/36‑1; the same file also contains Karale’s letter. Exhibit D‑81 is an endorsement on page 133 of the same file that deals with the sugar factories and includes a copy of a letter addressed to the Superintending Engineer, requesting that a draft agreement for the supply of water to the company's area on the Godavari Right Bank Canal be prepared as soon as possible on the terms set out in the margin thereof. Exhibit D‑82 is a further endorsement in the same file, which reads: “Endorsement at 191. Discussed with the Secretary.” In addition to his written submissions, Karale had also met with the late H.M.R.D.; during that discussion the H.M.R.D. made it clear that Karale could be allowed to continue only if he was willing …

In the record, it was stated that the applicant was required to consolidate his holdings into a single independent block so that cultivation by the company could be carried on without disturbance. The file does not contain a written order from H.M. either in Bombay or at the Secretariat; instead H.M., apparently after consulting with Mr. Sule, gave instructions to the Superintending Engineer, District and Canal (S.E.D.I.C.). Reference to page 107 of the antecedent material supports this observation. The requirement that Mr. Karale’s sugar‑cane crop be shifted to one block is evident from the wording of the Superintending Engineer’s letter, which reads: “The applicant is allowed to concentrate all his cane … on the tail outlet of D. 17.” That sentence constitutes the sole record of any order issued. The same letter further provides that Mr. Karale shall receive his water supply on a volumetric basis as soon as such a supply can be arranged, a condition that would also necessitate the concentration of his cane‑growing areas. The endorsement that records this content refers to Exhibit D‑67; consequently it could have been made only after 28 April 1939. The documents that follow do not advance the discussion beyond what has already been observed: namely, that the Government intended to create a factory area and that Mr. Karale had applied for his land to be excluded from that area. The departmental notes do not conflict with Exhibit D‑67 or Exhibit D‑68. Exhibits D‑67 and D‑68 cite Office No. 3686 dated 23 June 1939; that letter apparently belongs to another file that was not produced. Had that file been produced, it might have shed further light on the matter. In the present circumstances, the Court must proceed on the basis that Exhibits D‑67 and D‑68 embodied the terms of the agreement entered into between the Government and Mr. Karale pursuant to the application identified as Exhibit D‑78, which had been addressed to the Chief Engineer, Public Works Department. The Court has already held that those documents record the completed agreement between the Government and Mr. Karale concerning the supply of water to his holdings. Nevertheless, the question remains whether that agreement is enforceable, given that it may not have complied with the requirements of section 175(3) of the Government of India Act, 1935. Mr. Nambiar’s argument rests on the premise that the agreement was executed under the provisions of the Act; if, however, the agreement was concluded outside the ambit of the Act, that foundation would disappear. Accordingly, the Court will now consider whether the agreement was made under the Act. Section 3(6) of the Act defines “Canal‑Officer” as any officer lawfully appointed or invested with powers under section 4. Section 4 provides that such an officer may exercise powers and discharge duties assigned to him by the State Government. It is submitted that the Superintending Engineer was one of the officers so appointed and that the powers under sections 27 to 30 of the Act were assigned to him. Section 27, “Every person desiring to have a”

The Court explained that the provisions of the Act required any person who wanted water from a canal to submit a written application to a Canal‑Officer who had the authority to receive such applications, and that the terms of the application were to be prescribed by the State Government from time to time. Under the next provision, the Court noted that when canal water was supplied for the irrigation of one or more crops, the permission to use that water continued only until the designated crop or crops reached maturity, and the permission applied solely to those crops. The Court further observed that another provision declared that every agreement for the supply of canal water to any land, building, or other immovable property was transferable with the property, and that such an agreement was presumed to have been transferred whenever the land, building, or immovable property was transferred. However, the Court added that, except for such agreements, no person entitled to use canal water could sell, sub‑let, or otherwise transfer that right without the permission of a Canal‑Officer who was duly empowered to grant such permission. By reading these provisions together, the Court concluded that a person desiring canal water had to apply in the manner prescribed to the Canal‑Officer, and that the person receiving the water could not transfer the right to another without the Officer’s permission, although a transfer of the land automatically included a presumed transfer of the water‑supply agreement.

The Court then turned to the interpretation of the word “agreement” in the relevant section. It reported that the respondent contended that the term did not refer to a contract in the legal sense, but was merely a convenient expression indicating the sanction or permission granted by the Canal‑Officer. To support this view, the respondent referred to the Bombay Canal Rules of 1934, which were made under the powers conferred on the State Government by the Act. The Court described Part 11 of those Rules as dealing with the supply of water, outlining the filing of applications, the manner of disposal, the persons authorized to dispose, and the modes of water supply for different crops. The Rules prescribed forms that listed the necessary particulars under various headings, and the forms also contained the instructions and conditions on which permission would be granted. Rule 7, the Court noted, stated that an application for water supply for any period could be sanctioned, indicating that there was no fixed maximum period for which an application could be made.

Assuming, without deciding, that “agreement” in the Act meant only a sanction, the Court observed that both the Act and the Rules required an application to be made to the Executive Engineer, who, subject to the Rules, could grant the sanction. The Court further pointed out that Rule 36 provided for an appeal from the order of the Executive Engineer to the Superintending Engineer, and that an appeal could also be made from an order under Rule 18 or Rule 19 to the Collector.

In the present matter, the Court observed that the statutory framework provided for an appeal from the order of the Executive Engineer to the Superintending Engineer, and also an appeal from the Executive Engineer’s order made under rule 18 or rule 19 to the Collector. However, the Court found that neither the Act nor the Rules promulgated under it contained any provision allowing any party to file an application with the Chief Engineer in order to have his land excluded from a factory area and to obtain a permanent water supply for irrigating that land. Likewise, the statutes did not confer on the Government any power to enter into an agreement or to issue an order concerning such an application. Consequently, any such order or agreement lay entirely outside the scope of the Act and of the Rules made thereunder.

The Court noted that it was not required to determine whether the Government possessed any power outside the Act to make such an agreement; nevertheless, for the purpose of deciding the issues raised, the Court assumed that the Government did have such power and proceeded to examine the legal arguments on that basis. The documentary evidence adduced in the case, which the Court had already examined, showed that an application had been made to the Chief Engineer and that the Government, through the relevant ministry, had considered the application. Acting on instructions from the concerned Minister, the Superintending Engineer issued a letter identified as Exhibit D‑68 addressed to Karale. The Court characterized that letter as, in effect, an agreement between the Government and Karale, an agreement which fell outside the provisions of the Act.

The Court further observed that both parties understood that the arrangement was a contract between the Government and Karale, not a statutory entitlement under the Act. In or about February 1942, the Government of Bombay sent a draft agreement to Karale concerning the supply of canal water to his farm, but Karale did not execute the draft. The parties disagreed on certain conditions contained in the draft, yet Karale did not contest the Government’s position that a formal agreement compliant with the law was required. Again, around 1950, the Government of Bombay transmitted another draft agreement to Karale. Although Karale signed this draft, he stipulated that the agreement should be without prejudice to the permission already granted to him. The Government of Bombay, however, did not execute the agreement.

During the continued relationship between Karale and the appellant, both parties made yearly applications under the Act and consequently received water supplies for their plantation. This routine was presumably followed because, despite the existence of an agreement between Karale and the Government, a formal document intended for execution never materialised. The conduct of the Government as well as that of Karale and the appellant demonstrated that the arrangement was not made under the Act but was a contract between the Government of Bombay and Karale. Accordingly, the Court concluded that the contract entered into between the Government and Karale was a contract made in the exercise of executive authority, and therefore fell outside the statutory scheme of the Act.

In this case the Court noted that the contract under consideration was purported to have been made in the exercise of the executive authority of the Province within the meaning of section 175(3) of the Government of India Act, 1935. The relevant portion of that provision reads: “All contracts made in the exercise of the executive authority of a Province shall be expressed to be made by the Governor of the Province …… and all such contracts and all assurances of property made in the exercise of that authority shall be executed on behalf of the Governor by such persons and in such manner as he may direct or authorise.” The Court explained that the section imposes two essential conditions for a contract of this kind to be valid: first, the contract must be expressed to be made by the Governor of the Province; second, the contract must be executed on behalf of the Governor by persons and in the manner that the Governor directs or authorises. The record did not contain any evidence showing that the Superintending Engineer, although acting on oral instruction of the Minister, had been authorised by the Governor or by the applicable rules to enter into such a contract. Apart from that deficiency, even if Exhibits D‑67 and D‑68 were to be regarded as forming part of a contract between the Government and Karale, the Court found that the documents did not demonstrate that the contract was expressed to be made in the name of the Governor. On its face the documents therefore failed to satisfy the first condition. The counsel for the appellant argued that a liberal construction should be adopted, especially where the Government was seeking to retreat from a solemn promise, and that the required formality could be implied into the documents. Before addressing that argument, the Court considered earlier authorities that interpreted section 175(3). The question of construction of the provision arose in Seth Bikhraj Jaipuria v. Union of India. In that case the Divisional Superintendent of the East Indian Railway placed orders for the supply of foodgrains to the Railway’s employees. The orders were neither expressed to be made in the name of the Governor‑General nor executed on his behalf as required by section 175(3); they were signed by the Divisional Superintendent or his personal assistant. The Court held that because the contracts did not satisfy either of the statutory conditions, they were void, and that the provisions of section 175(3) were mandatory. That decision was subsequently followed in New Marine Coal Co. v. Union of India. The present counsel for the appellant also referred to the decision in Union of India v. Rallia Ram, contending that although on its face Exhibits D‑67 and D‑68 did not show the contract to be expressed in the Governor’s name, the fact could be inferred from the recitals. In Rallia Ram the Court had considered a tender notice issued in the name of the Chief Director of Purchases of the Government of India, Department of Food, and an acceptance note headed “Government of India, Department of Food (Division III), New Delhi”. The general conditions of that contract defined “Government” as meaning the Governor‑General for India in Council, and the Court held that the parties’ correspondence ultimately resulted in an acceptance that was effectively a contract made in the name of the Governor‑General.

In support of his argument, counsel for the appellant referred to the Court’s earlier decision in Union of India v. Rallia Ram (1). He maintained that, although the documents identified as Exhibit D‑67 and Exhibit D‑68 did not explicitly state that the contract was expressed to be made in the name of the Governor‑General, such a conclusion could be drawn from the surrounding statements in the record. In the cited case, the goods that were offered for sale were owned by the Government of India. The Government, through its Department of Food (Division III), issued a tender notice in the name of the Chief Director of Purchases. The Chief Director of Purchases subsequently agreed to sell the goods to the respondent on certain conditions, and those conditions were incorporated into an acceptance note that was also headed “Government of India, Department of Food (Division III), New Delhi”. The general conditions of the contract that accompanied the acceptance letter defined the term “Government” to mean the Governor‑General for India in Council. On the basis of those facts, the Court held that the exchange of correspondence between the parties, which ultimately produced the acceptance note, constituted a contract that was expressed to be made by the Government and therefore by the Governor‑General, because it was the Governor‑General who invited tenders through the Chief Director of Purchases and it was the Governor‑General, acting through the Chief Director, who accepted the respondent’s tender subject to the prescribed conditions. Although the acceptance note did not expressly state that the contract was executed on behalf of the Governor‑General, the Court concluded, after a fair reading of the letter in light of the obligations it created, that the contract had indeed been executed on behalf of the Governor‑General. The Court emphasized that this decision did not depart from the principle set out in Seth Bikhraj Jaipuria’s case (2). By a fair reading of the correspondence, the Court construed that the contract was entered into on behalf of the Governor‑General and was expressed to be made in his name.

The Court then considered whether, in the present matter, Exhibit D‑67 and Exhibit D‑68 demonstrated that the Superintending Engineer was authorized to enter into a contract of the kind described on behalf of the Provincial Government and whether the contract was expressed to be made in the name of the Governor‑General. The Court found that nothing had been placed before it to establish that the Superintending Engineer possessed legal authority to bind the Government in such a contract, nor did the documents, taken as a whole, show that the agreement was expressed to be made in the name of the Provincial Government. The letters referenced the name of the Minister of the Public Works Department and also used the term “Government” only in relation to rates that might be fixed later, but they did not purport to originate from the Governor‑General. At most, the documents appeared to have been issued under the direction of the Minister. The Court expressed difficulty in extending the interpretation further, as doing so would render the provisions of section 175(3) of the Government of India Act, 1935, ineffective.

The Court observed that interpreting the contract in the manner proposed would render the provisions of section 175(3) of the Government of India Act, 1935 ineffective, and therefore such a construction could not be sustained. Consequently, the Court stated that it could not accept that the contract had been entered into by a person who possessed the legal authority of the Government to do so, nor could it accept that the contract was expressed to have been made in the name of the Governor. Because the agreement failed to satisfy the requirements laid down in section 175(3) of the Government of India Act, 1935, the Court held that the agreement was void and had no legal effect. Having reached this determination, the Court considered it unnecessary to express an opinion on the other questions that had been raised during the proceedings, as those issues became moot in light of the voidness of the contract. Accordingly, the Court concluded that the appeal was unsuccessful and ordered that the appeal be dismissed. In the circumstances, the Court ordered that no costs be awarded to either side, finding that the dismissal should be without costs. Thus, the appeal was dismissed.