http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 1 of 15  

PETITIONER: SETH BIKHRAJ JAIPURIA

       Vs.

RESPONDENT: UNION OF INDIA

DATE OF JUDGMENT: 24/07/1961

BENCH: SHAH, J.C. BENCH: SHAH, J.C. KAPUR, J.L. SUBBARAO, K. HIDAYATULLAH, M. DAYAL, RAGHUBAR

CITATION:  1962 AIR  113            1962 SCR  (2) 880  CITATOR INFO :  R          1962 SC 779  (6,7)  R          1963 SC1417  (19)  RF         1963 SC1685  (9)  R          1964 SC1714  (10)  RF         1966 SC 580  (21)  R          1967 SC 203  (7)  R          1968 SC1218  (6)  D          1969 SC 903  (23)  F          1972 SC 915  (9)  R          1977 SC 536  (17)  F          1977 SC2149  (8)  RF         1980 SC1285  (9)  R          1988 SC2149  (13)  F          1989 SC1160  (26)

ACT: Contract-Divisional   Superintendent  of   Railway   placing orders-Contract  not  expressed to be in name  of  Governor- Genera   and  not executed on  behalf  of  Governor-General- Whether binding on Government-Government of India Act,  1935 (26 Geo. 6 Ch. 2) s. 175 (3).

HEADNOTE: In the year 1943 the Divisional Superintendent, East  Indian Railway  placed certain purchase orders with  the  appellant for  the supply of foodgrains for the employees of the  East Indian Railway.  The orders were not expressed to be made in the  name of the Governor-General and were not "executed  on behalf of the Governor-General as required by S. 175 (3)  of the Government of India Act, 1935.  They were signed by  the Divisional  Superintendent either in his own hand or in  the hand   of  his  Personal  Assistant.   Some  deliveries   of foodgrain  s were made under these orders and were  accepted and paid for by the Railway Administration.  But the Railway Administration  declined  to accept  further  deliveries  of foodgrains.  The  appellant sold the balance  of  foodgrains under  the purchase orders and filed a suit to  recover  the difference  between  the  price realised  by  sale  and  the contract price.  The respondent resisted the suit inter alia

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 2 of 15  

on the ground that the contracts were not binding on it. Held, that the contracts were not binding on the  respondent and  it  was  not  liable for  damages  for  breach  of  the contracts.  Under s 175 (3) of the Government of India  Act, 1935,  as it stood at the relevant time, the contracts  had: (a) to be expressed to be made by the Governor-General,  (b) to be executed on behalf of the Governor-General and (F)  to be executed by officers duly appointed in that behalf and in such mariner as the Governor-General directed or authorised. The 881 authority to a person to execute contracts may be  conferred not   only  by  rules  expressly  trained  and   by   formal notifications  issued  in  this  behalf  but  may  also   be specially  conferred.  The evidence in the case showed  that such  authority was specially conferred upon the  Divisional Superintendent.  But the contracts were not expressed to  be made  by the Governor-General and were not executed  on  his behalf  The  provisions of s. 175(3)  were  mandatory.   The object  of  enacting  these provisions was  that  the  State should  not  be  saddled  with  liability  for  unauthorised contracts and hence it was provided that the contracts trust show  on  their face that they were made  by  the  Governor- General and executed on his behalf in the manner  prescribed by the person authorised. State  of Bihar v. M/s.  Karam Chand Thapar and Bros.,  Ltd. (1962) 1 S. C. R. 827, followed. 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. 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 v. G.T.  Sarin  and Co., 1. L. R. (1930) 11 Lah.  375,  U.  I’. Government  v.  Lal Nanhoo Mal Gupta, A. 1. R.  (1960)  All. 420, and Devi Prasad Sri Krishna Prasad Ltd. v. Secretary of State, I. L. R. (1941) All. 741, referred to. S.   K. Sen v. Provincial P. W. D., State of Bihar, A. 1. 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, distinguished.

JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeal No. 86 of 1959. Appeal  by special leave from the judgment and  order  dated March  27,  1957,  of the Patna High Court  in  Appeal  from Original Decree No. 359 of 1948. A.   V.   Viswanatha  Sastri  and  S.  P.  Varma,  for   the appellant. 882 H.   N.  Sanyal, Additional Solicitor-General of  India,  R. Ganapathy Iyer and T. M. Sen, for the respondent. 1961.  July, 24.  The Judgment of the Court was delivered by SHAH, J. Bikhraj Jaipuria-hereinafter called the  appellant- is  the sole proprietor of a grocery business  conducted  in the  name and style of "Rajaram Vijai Kumar" in the town  of Arrah  in  the State of Bihar.  In the months  of  July  and August,  1943, the, Divisional Superintendent,  East  Indian

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 3 of 15  

Railway  under three "-’purchase orders’ agreed to  buy  and the  appellant  agreed to sell certain  quantities  of  food grains for the employees of the East Indian Railway. The  ’following  table  sets out the  purchase  prices,  the commodities,  the dates of purchase orders,  the  quantities and the rates and the method of supply. Purchase   Date of   Kinds     Quantity           Rates. Order      purchase   of        of No.       orders.     commo-   commo-               dity.     dities. (1)     (2)        (3)        (4)           (5) 69. 20-7-1943.  Gram 1st 1000 mds.          @ Rs. 15/             quality.               per md. (plus                                    cost of new                                    bags    not                                    exceeding                                    Rs. 75/- per                                    100   bags)                                    F.O.R. any                                    E.I.Rly. sta-                                    tion in Bihar. 76.  :4-7-1943. Rice     1000 mds.         @ Rs. 22-8-0   Dhenki                           (plus cost of   Medium                           bags not ex-   quality.                    ceeding Rs.75 883 (1)       (2)       (3)           (4)          (5)                                      per cent) per                                      md. F.O.R. any                                      station on the                                      division.            ii. Wheat 5000 mds.       @ Rs. 20-8-0                  white               per md. with               as per                 bags F.O.R.              sample.                 any station                                      on E.I.R. on                                      the Division. 106. 24-8-1943.    Rice  15000 mds.         @ Rs. 24/-           medium                      per md. with-            quality.                   out   bags                                       F.O.R. E.I.                                       Rly. station                                       in Bihar. Purchase orders Nos. 69 and 76 were signed by S.C.  Ribbins, Personal  Assistant  to the Division at  Superintendent  and purchase  order  No.  106  was  signed  by  the   Divisional Superintendent.   Under  the  purchase  orders  delivery  of grains was to commence within seven days’ of acceptance  and was  to’  be  completed within  one  month.   The  appellant delivered diverse quantities of foodgrains from time to time but  was unable fully to perform the contracts  within,  the period  stipulated.  Between July.), 20, 1943 and August  of 4,  1943,  he  supplied  3465 maunds  of  rice  and  between September  1, 1943 and September 19, 1943 he  supplied  1152 maunds  35  seers  of  wheat.  In  exercise  of  the  powers conferred by cl.(b) of Sub-r. (2) of r.81 of the Defence  of India  Rules,  the Government of Bihar by  notification  No. 12691-P.C.   dated   September  16,   1943   directed   that commodities  named  in column I of the schedule  shall  not, from  and  including September 20, 1943  and  until  further notice,  be sold at any primary source of supply or  by  the proprietor, manager or employee of any mill in the  Province of Bihar at prices exceeding those 884 specified  in  the  second  column  of  the  schedule.   The

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 4 of 15  

controlled rat-. of rice (medium) was Rs. 18/- per  standard maund,  of wheat (red) Rs. 17/-, of wheat (white)  Rs.  18/- and  of  gram Rs. 12-8-0.   The  Sub-Divisional  Magistrate, District Arrah issued on September 21, 1943, a price-list of controlled articles fixing the same prices as were fixed for wheat,  rice  and  gram by the notification  issued  by  the Government  of  Bihar.  By cl. (2) of  the  notification,  a warning was issued that in the event of the dealers  selling controlled articles at rates exceeding those fixed or  with- holding  stocks  of such articles from sale, "they  will  be liable to prosecution under r.81 (1) of the Defence of India Rules." By  a telegraphic communication dated Sep. tember 28,  1943, the  Divisional Superintendent informed the  appellant  that under the purchase orders, foodgrains tendered for  delivery will  not,  unless  despatched before October  1,  1943,  be accepted,  and barring a consignment of 637 maunds 20  seers accepted  on  October 7, 1943,  the  Railway  Administration declined  to  accept,delivery of food grains offered  to  be supplied  by  the  appellant after  October  1,  1943.   The appellant served a notice upon the Divisional Superintendent coraplaining of breach of contract and sold between February la and February 23, 1944 the balance of foodgrains under the purchase  orders  which  were lying either  at  the  various railway stations or in his own godowns.  The appellant  then called upon the Railway Administration to pay the difference between  the price realised by sale and the  contract  price and  failing  to obtain satisfaction,  commenced  an  action (Suit  No.  359/48A) in the court of  the  First  Additional Subordinate Judge, Patna for a decree for Rs.  2,89,995-15-3 against  the Dominion of India.  The appellant  claimed  Rs. 2,32,665-12-0  being  the difference  between  the  contract price and the price realised, Rs.42,709-10-3 as interest and Rs. 14,620-9-0 as freight, wharf. 885 age, cartage, price of packing material, labour charges and- costs incurred in holding the sale.  The appellant submitted that  under the terms of the purchase orders, supply was  to commence  within  seven days of the date of receipt  of  the orders and was to be completed within one month, but it  was not  intended  that  time should be of the  essence  of  the contract,   and   in  the  alternative  that   the   Railway Administration had waived the stipulation as to time in  the performance of the contracts and therefore he was  entitled, the  Railway Administration having committed breach of  ,the contracts, to recover as compensation the difference between the  contract price and the price for which the grains  were sold.   The  suit  was resisted by  the  Dominion  of  India contending  inter  alia that the appellant had no  cause  of action for the claim in the suit, that the contracts between the appellant and the Divisional Superintendent Dinapur were not valid and binding upon the Government of India and  that the  contracts were liable to be avoided by the  Government, that  time  was  of  the  essence  of  the  contracts,  that stipulations as to time were not waived, and that no  breach of  contract  was  committed  by  the  East  Indian  Railway Administration  and  in  any event, the  appellant  had  not suffered  any  loss  as a result of  such  breach.   By  the written  statement,  it wag admitted that  the  East  Indian Railway  through the Divisional Superintendent, Dinapur  had by three orders set out in the plaint agreed to buy and  the appellant  had  agreed  to sell  the  commodities  specified therein,   but   it   was   denied   that   the   Divisional Superintendent had been ""given complete authority to  enter into contracts for the supply of foodgrains."

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 5 of 15  

The  trial court held that time was not of the  essence  of the contracts and even if it was, breach of the  stipulation in  that behalf was waived.  It further_held that  the  plea that  the  contracts  were void because  they  were  not  in accordance with the 886 provisions  of  s. 175 (3) of the Government of  India  Act, 1935,  could  not  be.permitted to be urged,  no  such  plea having  been raised by the written statement.  Holding  that the  Divisional Superintendent was authorised to enter  into the  contracts for purchase of foodgrains, and that  he  had committed breach of contracts the trial Judge awarded to the appellant Rs. 1,29,460-7-0 with interest thereon at the rate of  6%  per annum from October 1, 1943, to the date  of  the institution  of  the  suit and further  interest  at  6%  on judgment.   Against that decree, an appeal was preferred  by the Union of India to the High Court of Judicature at  Patna and  the  appellant  filed cross-objections  to  the  decree appealed  from.   The High Court held that time was  of  the essence  of  the contracts, but the  Railway  Administration having a accepted the goods tendered after the expiration of the  period prescribed thereby, the stipulation as  to  time was  waived.   The  High  Court further  held  that  by  the notification  under  r. 81 of the Defence  of  India  Rules, performance  of the contracts had not been rendered  illegal but the Divisional Superintendent had no authority to  enter into  contracts  to purchase food grains on  behalf  of  the Railway Administration and that in any event, the  contracts not having been expressed to be made by the Governor-General and  not  having been executed on behalf  of  the  Governor- General by an officer daily appointed in that behalf and  in manner  prescribed, the contracts were  unenforceable.   The High Court also held that the appellant was not entitled  to a decree for compensation because he had failed to prove the ruling  market  rate on the date of breach viz,  October  1, 1943.   The  High Court also observed that the  trial  court erred in awarding interest prior to the date of the suit and in  so  holding,  relied upon the  judgment  of  the  Privy- Council in Bengal Nagpur Railway Co., Ltd. v. Ruttanji Ramji and others (1). (1) L.    R. (1938) 65 J. A. 66.                     887 In  this appeal by the appellant, two questions fall  to  be determined,  (1)  whether relying upon the  purchase  orders signed by the Divisional Superintendent which were not  made and  executed in the manner prescribed by s.175 (3) of  the, Government  of India Act 1935, the appellant could  sue  the Dominion  of India for compensation for breach of  contract, and  (2) whether the appellant has proved the ruling  market rate on October 1, 1943 for the commodities in question. , The  finding that the Railway Administration had waived  the stipulation  as to the performance of the  contracts  within the  time prescribed though time was under the agreement  of the  essence, is not challenged before us on behalf  of  the Union  of  India.  If the finding as to waiver  is  correct, manifestly by his telegraphic intimation dated September 28, 1943,  that the foodgrains not despatched before October  1, 1943,  will  not be accepted the  Divisional  Superintendent committed a breach of the contract. Section  175 (3) of the Government of India Act as in  force at the material time provided : "Subject to the provisions of this Act, with respect to  the Federal  Railway  Authority,  all  contracts  made  in   the exercise of the executive authority of the Federation or  of a  Province shall be expressed to be made by  the  Governor-

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 6 of 15  

General, or by the Governor of the Province, as the case may be,  and all such contracts and all assurances  of  property made in the exercise of that authority shall be executed  on behalf  of the Governor-General or Governor by such  persons and in such manner as he may direct or authorise." The  Federal Railway Authority had not come. into  being  in the  year 1943: it was in fact never set up.  The  contracts for  the supply of foodgrains were undoubtedly_ made in  the exercise of executive 888 authority  of the Federation.  The contracts  had  therefore under  s.  175(3),  (a) to be expressed to be  made  by  the Governor-General,  (b)  to  be executed  on  behalf  of  the Governor-General,  and (e) to be execrated by officers  duly appointed in that behalf and in such manner as the Governor- General  may direct or authorise.  But no  formal  contracts were executed for the supply of foodgrains by the  appellant :  he  had merely offered to supply  foodgrains  by  letters addressed to the Divisional Superintendent and that  officer had  by  what are called "purchase  orders"  accepted  those offers.  These purchase orders were not expressed to be made in the name of the Governor-General and were not executed on behalf  of the Governor-General.  The purchase  orders  were signed  by the Divisional Superintendent either in  his  own hand or in the hand of his Personal Assistant.  In the first instance  it  has to be considered  whether  the  Divisional Superintendent  had authority to contract on behalf  of  the Railway Administration for buying foodgrains required by the Railway Administration.  By Ex.M-2 which was in operation at the  material time, all instruments relating to purchase  or hire, supply and conveyance of materials, stores, machinery, plant,  telephone lines and connections, coal etc. could  be executed  amongst others by the  Divisional  Superintendent; but  contracts  relating to purchase of foodgrains  are  not covered  by  that  authority.  Under item 34  which  is  the residuary  item,  all  deeds  and  instruments  relating  to railway matters other than those specified in items 1 to  33 may  be executed by the Secretary of the Railway Board.   It is  common  ground  that  there  is  no  other  item   which specifically   authorises  the  making  and   execution   of contracts  relating  to purchase of  foodgrains;  deeds  and instruments  relating to purchase of food  grains  therefore fall within item 34.  The Secretary to the Railway Board had not  executed  these purchase orders : but the  trial  Court held 889 that  the Divisional Superintendent was authorised to  enter into  contracts  with  the  appellant  for  the  supply   of foodgrains.  In so holding, the trial judge relied upon  the evidence  of  Ribbins,  Grain Supply  Officer  and  Personal Assistant  to the Divisional Superintendent,  Dinapur.   The High  Court  disagreed  with  that  view.   The  High  Court observed that the authority of the officer acting on  behalf of  the Governor-General "must be deduced from  the  express words  of  the Governor-General himself expressed  by  rules framed  or  by  notification issued, under  s.  175(3).   No notification has been produced in this case showing that the Divisional   Superintendent  had  been  authorised  by   the Governor  General to execute such contracts on  his  behalf, nor  has  any rule been produced which  conferred  authority upon the Divisional Superintendent to make such contracts." After referring to paragraph 10 of the notification, Ex.  M- 2 items 1 to 34, the High Court observed: "Therefore   this   notification  rather  shows   that   the Divisional  Superintendent had no authority to  execute  the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 7 of 15  

contracts for the purchase of food grains." In our view, the High Court was in error in holding that the authority  under s. 175(3) of the Government of  India  Act, 1935  to execute the contract could only be granted  by  the Governor  General  by rules expressly  promulgated  in  that behalf or by formal notifications.  This court has  recently held that special authority may validly be given in  respect of a particular contract or contracts by the Governor to  an officer other than the officer notified under the rules made under s. 175(3).  In The State of Bihar v. M/s.  Karam Chand Thapar  and Brothers Ltd.(,), Venkatarama Aiyar J.  speaking for the court observed : (1)  (1962) 1 S.C.R. 827. 890 It  was further argued for the appellant that there being  a Government notification of a formal character we should  not travel outside it and find authority in a person who is  not authorised  thereunder.  But s. 175 (3) does  not  prescribe any  particular mode id which authority must  be  conferred. Normally, no doubt, such conferment will be by  notification in the Official Gazette, but there is nothing in the section itself  to preclude authorisation being conferred ad hoc  on any  person, and when that is established, the  requirements of the section must be held to be satisfied." In that case, an agreement to refer to arbitration on behalf of  the  Government of Bihar was executed by  the  Executive Engineer   whereas  by  the  notification  issued   by   the Government of Bihar under s.175 (3) all instruments in  that behalf  had  to be executed by the Secretary  or  the  Joint Secretary to the Government.  This Court on a  consideration of  the correspondence produced in the case agreed with  the High  Court that the Executive Engineer had  been  specially authorised  by the Governor acting through his Secretary  to execute the agreement for reference to arbitration.  Section 175  (3)  in terms does not provide that  the  direction  or authority given by the Governor-General or the Governor to a person to execute contracts shall be given only by rules  or by notifications, and the High Court was in our judgment  in error  in assuming that such authority can be given only  by rules expressly framed or by formal notifications issued  in that behalf. In para 5 of the plaint, the appellant pleaded: "’That for the purposes and under the authority conferred as noted in the para 3 above in July and August, 1943 the  said E.  1.  Rly.  through its  then  Divisional  Superintendent, Dinapur,  by  three  diverse orders agreed to  buy  and  the plaintiff  agreed to sell the following commodities  at  the rates mentioned against them, 891 By  para 3 of the written statement, the Dominion  of  India accepted  the allegations made in para 5 of the plaint.   It is true that by paragraph 1, the authority of the Divisional Superintendent  to enter into contract with,  trading  firms dealing  in  foodgrains  for the supply  of  foodgrains  was denied  and  it  was  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." There  was some inconsistency between the averments made in  paragraphs 1  and 3 of the written statement, but there is  no  dispute that  the  purchase  orders were issued  by  the  Divisional Superintendent for and on behalf of the East Indian  Railway Administration.  Pursuant to these purchase orders, a  large quantity of foodgrains was tendered by the appellant:  these were  accepted by the Railway Administration  and,  payments

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 8 of 15  

were  made  to  the  appellant  for  the  grains   supplied. Employees of the Railway Administration wrote letters to the appellant  calling  upon him to intimate the  names  of  the railway  stations where grains will be delivered  and  about the  date  when  the  supply.  will  commence.   They  fixed programmes  for inspection of the goods, kept ’wagons  ready for  accepting delivery, held meetings on diverse  occasions for  settling programmes for the supply of grains,  rejected grains  which  were not according to the  contract,  entered into  correspondence with the appellant about the return  of empty bags accepted bills and railway receipts and made pay- ments,  returned  certain  bills in respect  of  the  grains tendered beyond the period of contract and did diverse other acts in respect of the goods which could only be  consistent with  the contracts having been made with the  authority  of the   Railway  Administration  granted  to  the   Divisional Superintendent.  There is also the evidence of Ribbins which clearly  supports the vie* that the agreements  to  purchase foodgrains by the Divisional 892 Superintendent were part of a. scheme devised by the Railway Administration at the time of the, serious famine in 1943 in Bengal.  In cross-examination, Ribbins stated: "When  the  Bengal  famine  arose  in  April-May  1943,  the (necessity  for  a  scheme  of)  arrangement  of   supplying foodgrains to E. I. Railway employees arose ... A scheme was drawn  up for carrying out this work in writing.   In  other words  orders were received from Head Office Calcutta  about it.  The Deputy General Manager, Grains, Calcutta issued the necessary  orders ... The agent or General Manager as he  is called  appropriated  the above functionary.  He  must  have done  so presumably under orders ... The entire  scheme  did subsequently get the assent of the Railway Board.  From time to  time order came with instruction from Head Office.   All such  directions  should  be in the  office  of  D.  Supdt., Dinapur.  Some posts had to be created for carrying out this scheme.  Originally one post of Asstt.  Grain Supply Officer was created.  Subsequently, two posts were created one on  a senior  scale and the other as Asstt. in Dinapur  Dv.  staff had  to  be appointed to be in charge of  the  grain  shops. They  were  exclusively  appointed to work  the  grain  shop Organisation.   The  Railway made some arrangement  in  some places  for  accommodation  and  additional  storage...Grain shops  were located At these places when  accommodation  was made for additional storage." Ribbins  was for some time a Grain Supply Officer under  the East  Indian Railway and he admitted that orders  similar.to the  purchase  orders in question in  this  litigation  were drawn  up in cyclostyled forms "as per orders from the  Head Office."  The  witness stated that the instructions  of  the Head  Office  were  "in the office  file".   None  of  these documents were, however, produced or tendered in evidence by the Railway Administration. 893 The  evidence on the whole establishes that with a  view  to effectuate  the  scheme  devised by the  Railway  Board  for distributing  foodgrains to their employees at  concessional rates,  arrangements  were made  for  procuring  foodgrains. This  scheme received the approval of the Railway Board  and Railway Officers were authorised to purchase, transport  and distribute  foodgrains.   If, in the implementation  of  the scheme,   the  foodgrains  were  received  by  the   Railway Administration, special wagons were provided and goods  were carried  to  different places and distributed  and  payments were  made  for  the  foodgrains  received  by  the  Railway

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 9 of 15  

Administration after testing the supplies, the inference  is inevitable that the Divisional Superintendent who issued the purchase  orders acted with authority specially  granted  to him.   The evidence of Ribbins supported by  abundant  docu- mentary   evidence   establishes  beyond  doubt   that   the Divisional Superintendent though not expressly authorised by the  notification Ex.  M-2 to contract for the  purchase  of foodgrains,  was  specially authorised to enter  into  these contracts for the purchase of foodgrains. The  question  still  remains whether  the  purchase  orders executed by the Divisional Superintendent but which were not expressed  to be made by the Governor-General and  were  not executed on behalf of the Governor-General, were binding  on the  Government of India.  Section 175(3)  plainly  requires that contracts on behalf of the Government of India shall be executed  in  the  form prescribed  thereby  ;  the  section however does not set out the consequences of non-compliance. Where  a statute requires that a thing shall be done in  the prescribed  manner  or  form  but  does  not  set  out   the consequences  of  non-compliance, the question  whether  the provision  was mandatory or directory has to be adjudged  in the  light of the intention of the legislature as  disclosed by the 894 object,  put-pose and scope of the statute.  If the  statute is  mandatory,  the  thing done not in the  manner  or  form prescribed  can  have  no  effect or validity  :  if  it  is directory,  penalty may be incurred for non-compliance,  but the  act or thing done is regarded as good.  As observed  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.  It may perhaps be found generally correct to say that nullification is the natural and usual  consequence of  disobedience, but the question is, in the main  governed by considerations of convenience and justice, and when  that result  would involve general inconvenience or injustice  to innocent  persons,  or  advantage to  those  guilty  of  the neglect,  without promoting the real aim and object  of  the enactment  such an intention is not to be attributed to  the legislature.   The  whole scope and purpose of  the  statute under consideration must be regarded." Lord  Campbell  in  Liverpool  Borough  Bank  v.   Turner(1) observed "No universal rule ’can be laid down as to whether mandatory enactments shall be considered directory only or  obligatory with  an implied nullification for disobedience.  It is  the duty of Court of justice to try to get at the real intention of the Legislature by carefully attending to the whole scope of the statute to be construed." It  is  clear that the Parliament intended in  enacting  the provision contained in s. 175(3) that (1)  (1861) 30 L. J. Ch. 379                     895 the   State  should  not  be  saddled  with  liability   for unauthorised  contracts and with that object  provided  that the contracts must show on their face that they are made  on behalf  of  the State, i. e., by the Head of the  State  and executed  on his behalf and in the manner prescribed by  the person authorised.  The provision, it appears, is enacted in the  public  interest,  and  invests  public  servants  with

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 10 of 15  

authority  to  bind  the State  by  contractual  obligations incurred for the purposes of the State. It  is  in  the interest of the  public  that  the  question whether  a binding contract has been made between the  State and a private individual should not be left open to  dispute and litigation ; and that is why the legislature appears  to have  made a provision that the contract must be in  writing and  must  on its face show that it is executed for  and  on behalf  of  the  head  of  the  State  and  in  the   manner prescribed.  The whole aim and object of the legislature  in conferring  powers  upon  the head of  the  State  would  be defeated  if  in  the case of t contract which  is  in  form ambiguous,  disputes are permitted to be raised whether  the contract  was intended to be made for and on behalf  of  the State or on behalf of the person making the contract.   This consideration  by  itself  would be sufficient  to  imply  a prohibition  against  a  contract  being  effectively   made otherwise  than in the manner prescribed.  Itm is true  that in  some  cases,  hardship  may  result  to  a  person   not conversant with the law who enters into a contract in a form other than the one prescribed by law.  It also happens  that the Government contracts ,ire sometimes made in disregard of the forms prescribed ; but that would not in our judgment be a  ground for holding that departure from a provision  which is  mandatory  and  at  the  same  time,  salutary  may   be permitted. There is a large body of judicial opinion in the High Courts in India on the question whether 896 contracts  not ill form prescribed by the Constitution  Acts are binding upon the State.  The view has been  consistently expressed   that  the  provisions,  under   the   successive Constitution  Acts relating to the form of contract  between the Government and the private individual are mandatory  and not merely directory. In  Municipal  Corporation of Bombay v. Secretary  of  State (1),  the  true effect of s. 1 of Si. 22 and 23 Vic.  c.  41 fell  to  be determined.  The Governor-General of  India  in Council  and the Governors in Council and officers  for  the time  being entrusted with the Government were,  subject  to restrictions  prescribed  by  the  Secretary  of  State   in Council, empowered to sell and dispose of real and  personal estate  vested  in Her Majesty and to raise  money  on  such estate  and  also  to  enter  into  contracts  within.   the respective  limits  for  the purposes of  the  Act.  it  was provided  that  the Secretary of State in  Council.  may  be named  as a party to such deed, contract, or instrument  and the  same  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 Governor in Council, but  may be  executed  in  other respects in like  manner  as  other, instruments  executed  by  or  on  behalf  of  him  or  them respectively  in his or their official capacity, and may  be enforced by or against the Secretary of State in Council for the time being.  In a suit between the Government of  Bombay and the Municipal Corporation of Bombay, the latter  claimed that it was entitled to remain in occupation on payment of a nominal  rent,  of an extensive piece of land because  of  a resolution  passed by the Government of  Bombay  sanctioning such user.  Jenkins C. J. in delivering the judgement of the Court observed. "I think that a disposition in 1865 of Crown’ (1)  I. L. R. (1905) 29 Bom. 580.                     897 lands  by  the  Governor in Council was  dependent  for  its

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 11 of 15  

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." In  Kessoram Poddar and Co. v. Secretary of State for  India (1),  it  was  held that in order that  a  contract  may  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 and if it is not so  made, it is not valid as against him. The  same  view  was expressed in S. C.  Mitra  and  Co.  v. Governor-General of India in Council (2), Secretary of State v. Yadavgir Dharamgir(3), Secretary. of State and another v. G. T. Sarin and, Company U. P. Government v. Lala Nanhoo Mal Gupta  Devi Prasad Sri Krishna Prasad Ltd. v.  Secretary  of State (6), and in S. K. Sen v. Provincial P. Way D. State of Bihar(7). But  Mr.  Viswanatha  Sastri  on  behalf  of  the  appellant contended  that this court in Chatturbhuj Vithaldas  Jasanth v. Moreshwar Parashram (8) has held that a contract for  the supply  of goods to the Government which is not in the  form prescribed  by  Art. 299 (1) of the  Constitution  which  is substantially the same form as s. 175 (3) of the  Government of India Act, 1935) is not void and unenforceable.  In  that case,  the election of Chatturbhuj Jasani to the  Parliament was challenged on the ground that he had a share or interest in  a  contract  for  the  supply  of  goods  to  the  Union Government.  It was found that Jasani was partner of a firm, which  had entered into contracts with the Union  Government for  the  supply of goods and these contracts  subsisted  on November 15, 1951 and (1) I.L.R. (1927) 54 Cal. 969.(2) I.L.R. (1950) 2 Cal. 431., (3) I.L.R. (1936) 60 Bom. 42.(4) I.L.R. (1930) 11 Lah.375. (5)  A.I.R. (1960) All. 420. (6) I.L.R. (1941) All. 741  (7) (7)   A.I.R. (1960) Pat. 159. (8) (1954) S. C.R. 817. 898 February  14,  1952 respectively the last  date  for  filing nominations  and the date of declaration of the  results  of the election.  This court held that Jasani was  disqualified from being elected by virtue of the disqualification set out in  s. 7 (b) of the Representation of the People Act  43  of 1951.  The contracts in that case were admittedly not in the form  Prescribed  by Art. 299 (1) of the  Constitution,  and relying  upon  that  circumstance, it  was  urged  that  the contracts were void and had in law no existence.  In dealing with this plea, Bose J. speaking for the court observed : "We  feel that some reasonable meaning must be  attached  to article  299(1).   We  do  not  think  the  provisions  were inserted for the sake of mere form.  We feel they are  there to safeguard Government against unauthorised contracts.   If in fact a contract is unauthorised or in excess of authority it  is right that Government should be safeguarded.  On  the other hand, an officer entering into a contract on behalf of the  Government  can  always  safeguard  himself  by  having recourse to the proper form.  In between is a large class of contracts,  probably by far the greatest in  numbers,  which though authorised, are for one reason or other not in proper form.   It is only right that an innocent contracting  party should  not suffer because of this and if there is no  other defect or objection we have no doubt Government will  always accept  the  responsibility.   If  not,  its  interests  are safeguarded as we think the Constitution intended that  they should be." The learned Judge also observed: "It  would, in our opinion, be disastrous to hold  that  the hundreds of Government officers who have daily to enter into

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 12 of 15  

a  variety  of  contracts,  often of  a  petty  nature,  and sometimes in an emergency, cannot contract orally or through correspondence and that every petty contract must be effect- ed  by  a ponderous legal document couched in  a  particular form."                     899 The  rationale of the case in our judgment does not  support the  contention that a contract on behalf of a State not  in the form prescribed is enforceable against ’the State.  Bose J. expressly stated that the "Government may not be bound by the contract, but that is a very different thing from saying that  the contract ",as void and of no effect, and  that  it only meant the principal (Government) could not be sued; but there will be nothing to prevent ratification if it was  for the benefit of the Government." The  facts proved in that case clearly establish  that  even though  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 that in fact  there subsisted  a  relation between the Government and  the  firm under  which the goods were being supplied and  accepted  by the Government.  The agreement between the parties could not in the case of dispute have been.enforced at law, but it was still  being  carried out according to its terms :  and  the Court held that for the purpose of the Representation of the People  Act,  the existence of such an agreement  which  was being   carried   out  in  which   Jasani   was   interested disqualified  him.   It was clearly so stated when  Bose  J. observed: "Now  section 7 (d) of the Representation of the People  Act does  not  require that the contracts at ’which  it  strikes should  be  enforceable  against the  Government  ;  all  it requires  is that the contracts should be for the supply  of goods to the Government.  The contracts in question are just that and so are hit by the section". Reliance  was also placed by counsel for the appellant  upon cases  decided  under s.40 of the Government of  India  Act, 1915,  which  was  continued in operation.  even  after  the repeal  of  the  Act,  1915, by  the  9th  schedule  to  the Government of India                     900 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  shall  be expressed to be made by the Governor-General in Council  and shall be signed by a Secretary to the Government of India or otherwise as the Governor-General in Council may direct  and shall  not be called in question in any legal proceeding  on the  ground  that they were not duly made by  the  Governor- General in Council. In J.K. Gas Plant Manufacturing Co., (Rampur) Ltd., v.  King Emperor  (1),  certain  persons  were  accused  of  offences committed  by them in contravention of cls. (5) and  (8)  of the  Iron and Steel (Control of Distribution)  Order,  1941, which  order was not expressed to be made by  the  Governor- General  in  Council  as required by s.  40(1)  of  the  9th schedule  to the Constitution Act.  The Federal  Court  held that  the  scope  and purpose of the Act did  not  demand  a construction  giving  a mandatory rather  than  a  directory effect  to the words in s. 40: for, in the  first  instance, the  provision  that all orders of the  Governor-General  in Council  shall  be  expressed to be made  by  the  Governor- General in Council did not define how orders were to be made but  only how they are to be expressed; it implied that  the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 13 of 15  

process  of  making  an order  preceded  and  was  something different  from  the  expression of it.   Secondly,  it  was observed, the provision, was not confined to orders only and included proceedings and in the case of proceedings, it  was still  clearly a method of recording proceedings  which  had already taken place in the manner prescribed rather than any form  in which the proceedings, must take place if they  are valid.   Thirdly,  it  was  observed,  that  the   provision relating  to the signature by a Secretary to the  Government of  India or other person indicated that it was a  provision as (1)  (1947) F.C.R. 141.                     901 to  the  manner in which a previously made order  should  be embodied  in publishable form, and it indicated that if  the previous  directions as to the expression of the  order  and proceedings and as to the signature were complied with,  the order  and proceedings shall not be called in question in  a court of law on one ground only. The rule contained in s. 40 (1) was in the view of the court one of evidence which dispensed with proof of the  authority granted  by  the  GovernorGeneral in respect  of  orders  or proceedings which complied with the requirements  prescribed : the making of the order or the proceedings was independent of the form of the order or proceedings expressing it.   But it  cannot  be  s aid that the making  of  the  contract  is independent  of  the  form in which  it  is  executed.   The document  evidencing the contract is the sole repository  of its  terms and it is by the execution of the  contract  that the liability ex contracti of either party arises. The  principle of J. K. Gas Plant Manufacturing  Co.’s  case has therefore no application in the interpretation of s. 175 (3) of the Government of India Act, 1935. Reliance was also placed upon Dattatreya Moreshwar Pangarkar v.  The  State  of Bombay (1) and The  State  of  Bombay  v. Purshottam Jog Naik(2). In both these cases, orders made  by the Government of Bombay under the Preventive Detention  Act were challenged on the ground that the orders did not comply with  the  requirements  of Art. 166  of  the  Constitution. Article.  166  substantially prescribes the same  rules  for authentication  of the orders of the Governor of a State  as s.  40 to the 9th schedule of the Government of  India  Act, 1935 prescribed for the authentication  of the orders of the Governor-General  and  the Governors.  In the  former  case, this court observed that (1)  (1952) S.C.R. 612. (2) (1952), S.C.R. 674. 902 the  Preventive Detention Act contemplates and requires  the taking  of an executive decision for confirming a  detention order under s. 11 (1) and omission to make and  authenticate that decision in the form set out in Art. 166 will not  make the decision itself illegal,for the provisions in that arti- cle  are merely directory and not mandatory.  In the  latter case, an order which purported to have been made in the name of  the  Government  of Bombay instead of  the  Governor  of Bombay as required by Art. 166 was not regarded as defective and  it was observed that in any event, it was open  to  the State  Government  to prove that such an order  was  validly made.   The  court in those cases therefore  held  that  the provisions of Art. 166 are directory and not mandatory. , These  cases  proceed on substantially the same  grounds  on which  the  decision in J. k. Gas  Plant  and  Manufacturing Co.’s  case  ,  proceeded,  and  have  no  bearing  on   the interpretation of s.     175 (3) of the Government of  India

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 14 of 15  

Act, 1935. Reliance was also placed upon the State of U.P. v. Manbodhan Lal  Srivastava(1)  in which case this court held  that  the provisions  of  Art.  320 el. (3) (e)  of  the  Constitution relating  to  the  consultation  with  the  Public   Service Commission  before discharging at public servant are  merely directory. The  fact that certain other provisions in the  Constitution are  regarded as merely directory and not mandatory,  is  no ground for holding that the provisions relating to the  form of contracts are not mandatory.  It maybe said that the view that the provisions in the Constitution relating to the form of  contracts on behalf of the Government are mandatory  may involve  hardship to the unwary.  But a person who seeks  to contract  with  the Government must be deemed  to  be  fully aware of (1)  (1958) S.C.R. 533.                     903 statutory requirements as to the form in which the  contract is to be made.  In any event, inadvertence of an officer  of the  State executing A contract in manner violative  of  the express  statutory  provision, the other  contracting  party acquiescing in such violation out of ignorance or negligence will  not  justify  the court in not giving  effect  to  the intention of the legislature, the provision having been made in  the interest of the public.  It must therefore  be  held that  as  the contract was not in the form required  by  the Government  of India Act, 1935, it could not be enforced  at the instance of the appellant and therefore the Dominion  of India  could not be sued by the appellant  for  compensation for breach of contracts. We  are  also of the view that the High Court was  right  in holding  that  the  appellant failed to prove  that  he  was entitled to compensation assuming that there was a valid and enforceable  contract.   The appellant claimed that  he  was entitled  to the difference between the contract  price  and the  price realised by sale of the foodgrains offered  after October   1,1943   but   not   accepted   by   the   Railway Administration.  The High Court rightly pointed out that the appellant was, if at all, entitled only to compensation  for loss  suffered  by him by reason of the wrongful  breach  of contract committed by the State, such compensation being the difference between the contract price and the ruling  market rate on October 1,1943, and that the appellant had failed to lead  evidence  about  the ruling  market  rate  on  October 1,1943.   The trial judge held that the "control  price-list xxx was reliable for ascertaining the measure of damages  in the case".  This document was a notification relating to the controlled  rates in operation in the district of Arrah,  by which  the sale of foodgrains at prices exceeding the  rates prescribed was made an offence.  The appellant had obviously the option of delivering foodgrains at an railway station F. O. R. in the Province of 904 Bihar, and there is no evidence on the record whether orders similar  to Ex.M-2 were issued by the authorities  in  other districts  of  the  Bihar State.  But  if  the  grains  were supplied  in  the  district of Arrah,  the  appellant  could evidently  not seek to recover price for the goods  supplied and  accepted  on  and  after  October  1,  1943,  at  rates exceeding those fixed by the notification; for, by the issue of the control orders, on the contracts must be deemed to be superimposed  the  condition that foodgrains shall  be  sold only  at rates specified therein.  If the grains were to  be supplied  outside  the district of Arrah, the  case  of  the

http://JUDIS.NIC.IN SUPREME COURT OF INDIA Page 15 of 15  

appellant  suffers from complete lack of evidence as to  the ruling  rates  of the foodgrains in dispute  on  October  1, 1943.   The High Court was therefore right in  declining  to award damages. On  the view taken by us, this appeal must  stand  dismissed with costs. Appeal dismissed.