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PETITIONER: STATE OF PUNJAB AND ORS.

       Vs.

RESPONDENT: OM PRAKASH BALDEV KRISHAN

DATE OF JUDGMENT23/08/1988

BENCH: SEN, A.P. (J) BENCH: SEN, A.P. (J) SHARMA, L.M. (J)

CITATION:  1990 SCC  Supl.  673

ACT:     Constitution of lndia, 1950 Article 299-Contracts to  be made in the name of President/Governor-Requirement based  on public policy-Protection of general public-Cannot be  waived or dispensed with.

HEADNOTE:     The  tender  submitted-by the respondent  firm  for  the construction  of  a high level bridge was  accepted  by  the Executive  Engineer and they were asked to take up the  work in  hand,  and also to sign the agreement  which  was  under preparation, within 10 days. No such agreement was, however, signed nor had the tender of the respondent been accepted on behalf  of  the Governor of Punjab, which  was  a  mandatory constitutional requirement.     The  respondent subsequently withdrew his offer  on  the ground that no binding agreement had been signed between the parties.  The  Engineer-in-charge levied ia penalty  on  the respondent for failure to start the work. The Superintending Engineer  then  forwarded  the claim  for  arbitration.  The respondent’s application under section 33 of the Arbitration Act,  1940 was dismissed by the Sub-Judge who carne  to  the conclusion  that  the Executive Engineer was  authorised  to accept the tender. The High Court, in revision, held that no contract   in   conformity  with  Article  299(1)   of   the Constitution, had been entered into.     It was inter alia urged on behalf of the appellants that a valid and binding contract might come into existence  even without a formal agreement duly signed by the parties.     Dismissing the appeal, it was,     HELD:  (1) A contract entered into by the Governor  must satisfy three conditions, namely (i) it must be expressed to be made by the Governor; (ii) it must be executed; and (iii) the  execution should be by such persons and in such  manner as the Governor might direct or authorise. [543F-G]                                                   PG NO 536                                                   PG NO 537     State  of  Bihar v. M/s. Karam Chand  Thapar,  [1962]  1 S.C.R.  827;  and Seth Bikhraj Jaipuria v. Union  of  lndia, [1962] 2 S.C.R. 880, referred to.     [2)  The provisions of section 175(3) of the  Government of  India  Act and the corresponding provisions  of  Article

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299(1)  of  the Constitution have not been enacted  for  the sake   of  mere  form  but  they  have  been   enacted   for safeguarding the Government against unauthorised  contracts. These  provisions  are  embodied on  the  ground  of  public policy-  on the ground of protection of  general  public-and these formalities cannot be waived or dispensed with. At  he same  time  there  cannot be any  question  of  estoppel  or ratification in a case where there is contravention of these provisions. [545A-C]     Union  of India v. A.L. Rallia Ram, [1964] 3 S.C.R.  164 and  Timber  Kashmir Pvt. Ltd. v.  Conservator  of  Forests, Jammu and Ors., [1977] 1 S.C.R. 937.     Bihar Eastern Gangetic Fishermen Co-operative  Society$; Ltd.  v.  Sipahi  Singh  and  Ors.,  [1978]  1  S.C.R.  375; Mulamchand v. State of Mahdya Pradesh,  [l969j 3 S.C.R.  214 and  Union of India v. Mis. Hanumart Oil Mills Ltd.,  [1987) Suppl. S.C.R. 84, referred to.

JUDGMENT:     CIVIL  APPELLATE JURISDlCTION: Civil Appeal No. 776   of 1988.     From  the  Judgment  and Order dated  16.7.1987  of  the Punjab and Haryana High Court in Civil Revision No. 1993  of 1986.     C. M . Nayyar for the Appellants.     Dr. Y.S. Chitale, T.V.S.N. Chari, Ms. Vrinda Grover  and Mrs. Smita Rao for the Respondent.     The judgment of the Court was delivered by     SABYASACHI  MUKHARJI,  J. This appeal involves  a  short question  and  the  field is more or  less  covered  by  the constitutional provisions as well as the authorities of this Court. The Executive  Engineer (Construction Division No. 1) PWD  B  & R Branch, Patiala, invited tenders  for  the  work called  "Construction of high level bridge over Tangri  Nadi in Mile No.  1915 of Patiala-pehewa Road". The respondent to the said invitation submitted the tender for  the  aforesaid                                                   PG NO 538 work, which was opened on 7th October, 1975.  The  Executive Engineer informed the respondent on that date, who  happened to  be  the lowest tenderer and before the tender  could  be finally  considered,  that  the drawings  in  triplicate  be submitted  to  the  Chief  Engineer PWD  B  and   R,  Suptd. Engineer,  PWD  B & R and  Executive  Engineer  Construction Division No. 1 PWD B and R Branch, Patiala. B   The  tender, however,  was  recalled in February, 1976 by  the  Executive Engineer Construction Division No.  1. The respondent  again submitted  tender  on  3  lst  August  1976.  The  Executive Engineer  informed the respondent telegraphically  that  the tender  submitted  by him had been accepted  and  asked  the respondent to take up the work in hand. This was followed by the  letter  dated  3lst August,  1976  from  the  Executive Engineer. It was contended that the telegram as well as  the letter  mentioned hereinbefore revealed that the  tender  of the  respondent was not accepted by the Governor of  Punjab, as  it  was  mandatory under the Constitution  in  order  to amount  to  a  valid  acceptance and  to  create  a  binding contract  between  the  parties.  The  respondent.  however, withdrew   the  offer  on  6th  November.   1976.  On   22nd November,  1976 the respondent-contractor in its letter made it  clear  that  no agreement had been  signed  between  the parties.  In reply to the letter dated lst  December,   1976 from  the  Executive Engineer, the  respondent  vide  letter dated 6th December,  1976 reiterated and repeated that legal

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infirmity could not be met by the considerations as made  by the  appellant.  But  on 15th  April,  1980,  the  Executive Engineer  intimated the respondent that as he had failed  to start the work, and he became liable for action under clause 2  of  the  agreement. The letter further  stated  that  the Engineer-in-charge  on behalf of the Governor of Punjab  had levied  a  penalty  of  Rs.2,55,0000.  The  above  position, however,  was not accepted by the respondent and he  advised the  appellant  to settle the matter in  Court.  The  Suptd. Engineer PWD B & R Patiala, then forwarded the claim of  Rs. 4,56,040  for arbitration and asked the firm to  submit  the reply  in  duplicate within 30 days from the  issue  of  the letter.  Reply  was  sent by the respondent  to  the  effect stating   that   no  valid  contract  in  respect   of   the construction  of  high level bridge over river in  Mile  No. 19/5  of  Patiala-Pehewa  Road,  ever  came  into  existence between the parties. The Arbitrator again on 2nd July,  1983 issued  a letter after a lapse of one year and the same  was replied  more  or less in the same  manner.  The  respondent filed  an  application under section 33 of  the  Arbitration Act,  1940 hereinafter called ’the Act’). The  learned  Sub- Judge  Ist Class, Patiala, on 4th April, 1986  dimissed  the application  of the respondent with costs. It was  contended before  him that there was no valid acceptance of the  offer made  by the respondent herein and, therefore, there was  no valid  contract. It was contended that no agreement  between                                                   PG NO 539 the  parties  as  required by law,  had  been  brought  into existence.  Therefore,  there was no question of  breach  of agreement.  The  learned Sub-Judge commented  that  no  oral evidence  was  adduced  on behalf  of  the  respondent.  The learned  Sub judge came to the conclusion that there  was  a valid  offer. He observed that the only point that  required consideration  was  whether  the  acceptance  regarding  the allotment of work of construction of high level bridge  over river Tangri on Patiala Pehewa Road was issued on behalf  of the Governor of Punjab or not. The learned Judge came to the conclusion  after  discussing  various  evidence  that   the Executive  Engineer  was  authorised to  accept  tender.  He referred to various clauses. The learned Judge noted that it was  clearly laid down in the tender itself that the  tender together  with acceptance thereof would constitute  a  valid and  binding  contract  between the  parties.  The  relevant condition of the tender, that is, condition No. 4. 6 read as follows:     "The  tender together with letter of acceptance  thereof shall constitute  a binding contract between the  successful tenderer and the department and shall form the foundation of rights and obligations of both the parties."     The  learned  Sub-Judge recorded that the  above  tender form was duly signed by the respondent and the appellant. On an  analysis of the evidence on records, the  learned  Judge came  to the conclusion that there was a valid contract  and accordingly the application under section 33 of the Act  was dismissed  with  costs.  There was a revision  to  the  High Court. The High Court after discussing the relevant evidence came to the conclusion that there was no valid contract. The learned Judge of the High Court noted that in the acceptance letter  Ext. P. 7 and Ext. RW 1/14, the  Executive  Engineer had required the respondent at the end to sign the agreement which  was  under  preparation  within  ten  days.  No  such agreement  was  ever signed. That  position  is  undisputed. Therefore,  the High Court was of the view that no  contract in conformity with Article 299(1) of the Constitution, which was  a  constitutional requirement in this  case,  has  been

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entered  into and came to the conclusion that there  was  no contract between the parties. In that view of the matter the revision was allowed and the order passed by the trial Judge was set aside. This appeal arises from the said decision.     Shri  C.M.  Nayar advocate for the  appellant  contended that   there  was  a  valid  and  subsisting  contract.   He strenuously  argued  that  there   Was  authority  for   the                                                   PG NO 540 Executive  Engineer to enter into the contract on behalf  of the  Governor. He drew our attention to clause 2.76  of  the Public Works Department Code which provides as follows :     "2.76. No authority lower than an officer in charge of a Sub-Division  can accept any tender or make a  contract  for public works. The different classes of deeds, contracts  and other  instruments which may be executed by this  Department and  the authorities empowered to execute them are  detailed in Appendix I, while the financial limits up to which  these authorities are authorised to determine the terms of  deeds, are set forth in the Book of Financial Powers."     He  also  referred  to  the  Appendix  I  (referred   in paragraph  2.76) classifying the deeds, contracts and  other instruments.  It appears that the Executive Engineer of  the buildings  and  roads  was authorised to  enter  into  these contracts. He, therefore, sought to submit that by virtue of that  authority if any contract had been entered  into  then that  amounted to entering into contract in accordance  with Article  299(1)  of  the Constitution. It  appears  that  to understand  this problem, it is necessary to deal with  some other  documents. Our attention was drawn to a  letter  from the  Executive  Engineer to the  contractor,  which  stated, inter alia, as follows:     "As  per your modified lumpsum bids received  vide  your letter   No.   CM/3-T/OPBK  dated  24.3.76   alongwith   the Conditions  mentioned in the Original Tender  received  vide your  letter No. CH/3-T/OPBK/3341/76 dated 26.2.76 and  also further modification of the same as mentioned in your letter No.  CM/3-T/OPBK/3503/76 dated 24.3.76 and letter No.  CM/3- T/OPBK/3930/76  dated  6.8.76, the work of  construction  of High  Level  Bridge  over Tangri Nadi in Mile  No.  19/5  of Patiala  Pehewa  Road is hereby allotted to you  on  lumpsum basis  for an amount of Rs. 25.50 Lacs (Rupees  Twenty  five lacs  and  fifty thousands) with a time limit of  24  months from  the  date  of issue of this letter  coupled  with  the following conditions."     The said letter thereafter set out those conditions.  lt is,  however, not necessary to set out these. The  last  two paragraphs  of  the  said letter are relevant  and  read  as follows:                                                   PG NO 541     "The work may be taken in hand immediately after getting the detailed structural drawing and designs duly approved by this Department.     Please  attend this office within 10 days to  sign  your agreement which is under preparation."     This  was  signed  by the  Executive  Engineer  and  the signatures appeared as follows :                                                        "Sd/-                                                         30/8                                          Executive Engineer,                                 Construction Division No. 1,                                    P.W.D. B & R Br. Patiala.     Endst. No:                                                      Dated :     Copy  of  above  is  forwarded  to  (1)  Sub  Divisional Engineer,  Const.  Sub  Division No. 5 P.W.D.  B  &  R  Br.,

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Patiala   for  information  and  necessary  action.  He   is requested  to  get  the  work  started  immediately  as  per detailed terms and conditions which may be thoroughly studied.     (2) Divisional Acctt. for information & n/a.                                                         Sd/-                                          Executive Engineer,                               Construction  Division  No. 1,                                 P.W.D. B. & R Br., Patiala."     Dr.  Chitale  appearing  for  the  respondent  drew  our attention to a letter signed by the Executive Engineer which reads as follows:     "Regd. A.D.     Endst. No. 4466                            Dated 24.8.76     Copy confirmation by post is forwarded to M/s Om Parkash Baldev  Krishan,  New  Delhi-5  for  their  information  and necessary action. Their tender for lumpsum amount of  rupees thirtyone lacs and fifty thousands for construction of  high level  bridge  over markanda river crossing  Patiala  Pehewa                                                   PG NO 542 road  has  been  accepted.  Please take  the  work  in  hand immediately. Regular sanction follows separately.                                                         Sd/-                                          Executive Engineer"     Shri  R.L.  Bansal, Divisional Accountant  Construction, in  his deposition before the Trial Court stated that  there was  no  document concerning this contract  which  had  been issued  or  made  in  the name of  the  Governor  of  Punjab according to the records. He also admitted in his deposition that  the  letter of acceptance had not been issued  in  the name  of the Governor of Punjab. He reiterated that  he  was entitled to issue acceptance on behalf of the Governor.     It  was urged on behalf of the appellants by Shri  Nayar that a valid binding contract might come into existence even without  a  formal  agreement duly signed  by  the  parties. According to the learned advocate if one party made an offer in  writing  and the same was accepted by a  letter  to  the first  party,  these two documents might  be  sufficient  to spell  out a contract. Assuming that it is right, it is  not necessary for the purpose of this appeal in the view we have taken  to  decide that the tender submitted and  the  letter sent  by  the Engineer did not create in the facts  of  this case  a binding contract. The acceptance letter,  at  least, must  conform to the requirements of Article 299(1)  of  the Constitution  and since this letter was indisputably not  in the  name  of  the  Governor,  this  contention  cannot   be accepted.  The acceptance letter or any work letter sent  to the respondent had been written by the Executive Engineer on behalf  of  the Governor. Therefore, it is not  possible  to accept  the  contention  that  there  was  a  valid  binding contract.     Shri  Nayar further sought to urge that Article 299  was for  the  Governments’  protection in order  to  protect  it against  unauthorised contracts being entered on  behalf  of the  Government.  In  the instant case,  according  to  Shri Nayar, the Executive Engineer had issued the tender and  had accepted  the  tender,  authority to accept  the  tender  on behalf  of  the Governor, is thus  established.  Shri  Nayar submitted that once that authority is established and it  is made clear from the evidence that the authorities have acted on  that basis, then it must be presumed that  the  contract had  been entered into in accordance with the provisions  of Article  299  of  the Constitution. ln  view  of  the  clear position in law, it is, however, not possible to accept this submission.     Clause  (1) of Article 299 of the Constitution  provides

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as follows:                                                   PG NO 543     "(1) All contracts made in the exercise of the executive power  of the Union or of a State shall be expressed  to  be made  by the President, or by the Governor of the State,  as the  case may be, and all such contracts and all  assurances of  property  made in the exercise of that  power  shall  be executed on behalf of the President or the Governor by  such persons and in such manner as he may direct or authorise."     In  this  case, the Executive Engineer  has  signed  the contract  but  nowhere in the contract it  was  offered  and accepted  or  expressed  to  be made  in  the  name  of  the Governor. The constitutional requirement enjoined in  Clause (1)  of Article 299 of the Constitution is based  on  public policy.  This position has been made clear by this Court  in The  State  of Bihar v. M/s. Karam Chand Thapar  &  Brothers Ltd.,  [1962]  1  S.C.R. 827. There a  dispute  between  the respondent  and the Government of Bihar over the  bills  for the  amount  payable  to  the  company  in  respect  of  the construction works carried out by it for the Government  was referred to arbitration. Section 173(3) of the Government of India Act, 1935 provided as follows:     "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- 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."     This Court reiterated that under that section a contract entered  into  by the Governor of a  Province  must  satisfy three  conditions,  namely, (i) it must be expressed  to  be made  by the Governor; (ii) it must be executed;  and  (iii) the  execution should be by such persons and in such  manner as  the  Governor  might direct or  authorise.  These  three conditions  are required to be fulfilled. This position  was reiterated  by this Court again in Seth Bikhraj Jaipuria  v. Union  of India, [l962] 2 S.C.R. 880. This  Court  explained that three conditions as mentioned in State of Bihar v. M/S. Karam Chand Thapar (supra) had to be fulfilled, and  further reiterated that 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  must show on their faces that these were made  by                                                   PG NO 544 the  Governor-General  and  executed on his  behalf  in  the manner  prescribed by the person authorised. It is based  on public  policy.  No  question of waiver  arises  in  such  a situation.  If  once  that position  is  reached,  and  that position  is  well-settled by the authorities  over  a  long lapse of time, no question of examining the purpose of  this requirement  arises. In Union of India v. A.L.  Rallia  Ram, [1964]  3 S.C.R. 164, this Court again reiterated  that  the agreement  under arbitration with the Government must be  in accordance  with section 175(3) of the Government  of  lndia Act,  1935. These principles were again reiterated  by  this Court  in Timber Kashmir Pvt. Ltd. etc. etc. v.  Conservator of  Forests, Jammu & Ors. etc., [1977] 1 S.C.R. 937.  There, the  Court was concerned with section 122(1) of the Jammu  & Kashmir Constitution which corresponded to Article 299(1) of the  Constitution  of  India. In that  case  all  the  three applications  filed by the respondent State for a  reference to  an  arbitrator under section 20 of the Jammu  &  Kashmir

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Arbitrator  Act,  were dismissed by a single  Judge  of  the Jammu   &  Kashmir  High  Court  on  the  ground  that   the arbitration clause was, in each case, a part of an agreement which   was  not  duly  executed  in  accordance  with   the provisions  of  section  122(1)  of  the  Jammu  &   Kashmir Constitution  which corresponded to those of Article  299(1) of the Constitution of India. But the Division Bench allowed the  appeals  holding that if contracts were signed  by  the Conservator  of Forests in compliance with an order  of  the Government, the provisions of section 122(1) of the Jammu  & Kashmir  Constitution  could  not  be  said  to  have   been infringed.  This Court held that the contract could  not  be executed without the sanction. Nevertheless, if the sanction could be either expressly or impliedly given by or on behalf of  the  Government, as it could, and, if some acts  of  the Government   could   fasten  some   obligations   upon   the Government,   the  lessee  could  also  be   estopped   from questioning  the  terms of the grant of  the  sanction  even where  there  is no written contract executed  to  bind  the lessee. But, once there has been a valid execution of lessee by duly authorised officers, the documents would be the best evidence  of  sanction.  In that case,  the  contracts  were executed on behalf of the Government of Jammu & Kashmir. The only  question  with which the Court was concerned  in  that case  was whether the contracts executed by duly  authorised officials had been proved or not. lt was held that it was so proved.     In Bihar Eastern Gangetic Fishermen Co-operative Society Ltd.  v. Sipahi Singh and others, [1978] 1 S.C.R. 375  where this  Court relied on a previous decision in  Mulamchand  v. State of Madhya Pradesh, [1968] 3 S.C.R. 214 and  reiterated that   there   cannot  be  any  question  of   estoppel   or                                                   PG NO 545 ratification in a case where there is contravention  of  the provisions of Article 299(1) of the Constitution. The reason is  that the provisions of section 175(3) of the  Government of  India  Act and the corresponding provisions  of  Article 299(1)  of  the Constitution have not been enacted  for  the sake   of  mere  form  but  they  have  been   enacted   for safeguarding the Government against unauthorised  contracts. The  provisions  are  embodied  in  section  175(3)  of  the Government   of  India  Act  and  Article  299(1)   of   the Constitution on the ground of public policy-on the ground of protection  of general public  ..... and  these  formalities cannot  be  waived  or  dispensed  with.  This  Court  again reiterated the three conditions mentioned hereinbefore.  The same  principle was again reiterated by this Court in  Union of India v. M/s. Hanuman Oil Mills Ltd., and others,  [1987] Suppl. S.C.C. 84.     In  the instant case, we have referred to  letter  dated 31st  August,  1976 which towards the end  stated  that  the parties  to  attend the office within 10 days  to  sign  the agreement  which is under preparation. lt is  common  ground that no such agreement was signed     In  the aforesaid view of the matter the High Court  was right in the view it took and the submissions made on behalf of  the appellants cannot be entertained. The  appeal  fails and accordingly dismissed with costs. R.S.S.                                   Appeal dismissed.