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PETITIONER: UNION OF INDIA

       Vs.

RESPONDENT: J. K. GAS PLANT

DATE OF JUDGMENT29/04/1980

BENCH: KOSHAL, A.D. BENCH: KOSHAL, A.D. FAZALALI, SYED MURTAZA

CITATION:  1980 AIR 1330            1980 SCR  (3) 893  1980 SCC  (3) 469

ACT:      Contract Act,  Section 70,  Scope of-Conditions  to  be applied- Government  of India  Act,  1935,  Section  175(3), applicability of-Defence  of India Act, Section 17(2), scope of.

HEADNOTE:      The appellant had supplied some steel to the respondent plaintiff Company  for manufacturing  gas plants  at Rampur. Only a  part of  the steel  so supplied was utilized for the intended purpose  and with  regard to the rest, the Regional Deputy Iron & Steel Controller, U.P. Circle, Kanpur directed the  respondents   through  a  letter  dated  8th  /10th  of November, 1944  to deliver  the same  to the U.P. Registered Stock Holders Associations and to send to the Kanpur office, the bill  of costs  of the  material, handling  charges etc. made in the name of Iron & Steel Controller, Calcutta. Since the order  contained in that letter could not be implemented on account  of lack of transport facilities, the Kanpur Con- troller, directed  the respondent  company  to  deliver  the surplus steel  to M/s  G. Brothers  Ltd., Rampur and to this extent  the   order  dated   8th/10th  November  1944  stood modified.      Though the  surplus material  was  delivered  to  Govan Brothers between  11th April  1945 and  30th of April, 1945, the price  therefor to  the tune  of Rs. 43,728-6-6 remained unpaid inspite  of repeated  demands made by the respondent. Ultimately,  the   Iron  &  Steel  Controller  informed  the respondent to take up the matter with Govan Brothers.      As the  price of the steel remained unpaid by the Union of India  as well as G. Brothers the plaintiff company filed its suit for Rs. 46,652-14-6 which was inclusive of interest on the  principal price calculated at the rate of 6 per cent per annum from April, 1945, upto the date of the institution of the  suit, after serving the defendant with the requisite notice under section 80 of the Code of Civil Procedure.      The trial  Court decreed  the claim  of  the  plaintiff company in  full and also directed that it would be entitled to the  costs of  the suit as also interest at the rate of 3 per cent  per annum  from the date of the institution of the suit to  the date  of payment. The trial Court held that the Kanpur Controller  had undertaken  the liability  to pay the

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price of  the goods to the plaintiff Company even in respect of the  delivery to G. Brothers and that the defendant could not escape liability by reason of the contents of section 65 of the  Indian Contract  Act even  though the  provisions of section 175(3) of the Government of India Act, 1935, had not been complied  with. The  contention raised by the defendant to the effect that section 17(2) of the Defence of India Act was a bar to the suit was negatived.      In appeal,  the High Court agreed that Section 17(2) of the Defence of India Act would be a complete bar to the suit if it was one for damages or 894 compensation but  held that  the suit was not of that nature and, on  the other hand, it was for recovery of the price of the goods  supplied to  G. Brothers as was also found by the trial Court. It further held that even though the provisions of section  175(3) of  the Government  of India Act were not complied   with    the   agreement    resulting   from   the correspondence  which   took  place  between  the  plaintiff company and  the officers of the defendant was good. Relying on Section  70 of  the Indian  Contract Act and on the basis thereof, it  held the  plaintiff company  to be  entitled to recover the price of the goods from the defendant even if it was assumed that the provisions of section 175(3) were a bar to  the   recognition  of  the  contract  envisaged  by  the correspondence between the parties. The High Court dismissed the  appeal,   but  granted   a  certificate  under  Article 133(1)(a) of the Constitution to the appellant.      Dismissing the appeal, the Court ^      HELD: 1.  The suit  is  not  one  for  compensation  or damages etc. as contemplated by Section 17(2) of the Defence of India Act and hence is not barred by nat section [898 A].      2.  The   legality  of   the  matter  under  which  the respondent company  transferred its  stock  to  G.  Brothers cannot be  allowed to  be questioned at the appellate stage. The question  whether the  requirements of clause (5) of the Indian Iron  and Steel  Control order, 1941 which postulates only a written direction for disposal of surplus stocks were satisfied or  not is  a mixed question of fact and law which was never raised in the Courts below. Further the plea taken in paragraph  (4) of  the written  statements filed  by  the appellant was  categorically to  the effect  that "the fresh instructions issued  to the  plaintiff are  contained in the letter in  the possession  of the plaintiff" runs counter to the factual  part of  the argument. Besides another question would  arise  whether  the  word  "written"  in  clause  (5) aforesaid is directory or mandatory. [898 C-D]      3. Three conditions must be satisfied before Section 70 of the  Indian Contract  Act can be invoked: first, a person should lawfully  do something  for another person or deliver something to  him;  second,  in  doing  the  said  thing  or delivering  the  said  thing  he  must  not  intend  to  act gratuitously; and third, the other person for whom something is done  or to  whom something  is delivered  must enjoy the benefit thereof. [898 H, 899 A]      In the instant case, the appellant had enjoyed the full benefit of  the delivery  of the  goods to  G. Bros. and not merely an indirect benefit thereof. [901 B]      State of  West Bengal  v. M/s.  B. K.  Mondal [1962]  2 Suppl. S.C.R. 876; reiterated.      S.I. Indian  Rly. Co.  v. Madura  Municipality,  A.I.R. 1964 Madras 427; distinguished.

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JUDGMENT:      CIVIL  APPELLATE   JURISDICTION  :   Civil  Appeal  No. 1273/70.      Appeal by  Special leave  from the  Judgment and Decree dated 28-1-1966  of the Allahabad High Court in First Appeal No. 431 of 1957. 895      P.P. Rao,  Subodh Markendeya, R. Venkataramani and Miss A. Subhashini for the Appellant.      Soli.  J.   Sorabjee  and   Rameshwar  Nath   for   the Respondent.      The Judgment of the Court was delivered by      KOSHAL, J.  This appeal  by certificate  granted  under article 133(1)(a)  of  the  Constitution  of  India  by  the Allahabad High  Court is directed against its judgment dated the 28th  of January,  1966, confirming  on appeal  a decree passed by  the Civil  Judge, Kanpur, for the recovery of Rs. 46,652-14-6 with interest at the rate of 3 percent per annum from the date of the institution of the suit till payment in favour of  M/s. J.K. Gas Plant Manufacturing Company Limited against the sole defendant, namely, the Union of India.      2. The  case of  the plaintiff  company may  be briefly stated thus. The Government of India had supplied some steel to the  plaintiff company  for manufacturing  gas plants  at Rampur. Only  a part  of the  steel so supplied was utilized for the  intended purpose  and with  regard to  the rest the Regional Deputy  Iron and  Steel  Controller,  U.P.  Circle, Kanpur (here  in after referred to as the Kanpur Controller) directed the  plaintiff company  through a  letter dated the 8th/10th of  November, 1944 (exhibit 16) to deliver the same to the U.P. Registered Stock Holders Association Kanpur (for short the Association). In relation to the recovery of price of the material the letter stated:           "Your bill  for cost  of the material supported by      original receipts  from suppliers should be made out in      the name  of lorn  and Steel  Controller, Calcutta, and      submitted to  this office.  Please make  out a separate      bill for  handling, storage expenses, etc., and send to      this office supported with original freight and payee’s      receipt.’      The order  contained in  letter exhibit 16 could not be implemented on  account of lack of transport facilities. The Kanpur Controller  therefore directed  the plaintiff company to deliver  the surplus  steel to  M/s. Govan Brothers Ltd., Rampur (hereinafter  referred to as G. Brothers) and to this extent the  order  contained  in  letter  exhibit  16  stood modified      The plaintiff  company delivered  to  G.  Brothers  the surplus material  lying with it between the 11th April, 1945 and 30th of April, 1945. The deliveries totalled 135 tons, 6 cwt., 1  quarter and  1 pound, the price whereof amounted to Rs. 43,728-6-6  which remained  unpaid inspite  of  repeated demands  made  by  the  plaintiff  company  through  letters addressed to  the Kanpur  Controller to  whom the  bills had been forwarded  as desired. Ultimately the plaintiff company was informed  by the  Accounts officer  attached to the Iron and Steel  Controller, Calcutta,  that it should take up the matter with G. Brothers. 896      As the  price of the steel remained unpaid by the Union of India  as well as G. Brothers the plaintiff company filed its suit for Rs. 46,652-14-6 which was inclusive of interest on the  principal price calculated at the rate of 6 per cent per  annum   from  April,  1945,  up  to  the  date  of  the

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institution of  the suit,  after serving  the defendant with the requisite  notice under  section 80 of the Code of Civil Procedure.      3. In its written statement the Union of India admitted the correctness of the order contained in letter exhibit 16. It pleaded however that  order was cancelled in toto and not merely in  regard to the party to whom the plaintiff company had to  make over  the surplus  steel. It  was  specifically denied that  the disputed  goods had  been delivered  to  G. Brothers at the risk and responsibility of the defendant and that the  defendant Was  liable to pay the price thereof. It was asserted  that the  defendant was merely controlling the supply and  distribution of  iron and  steel  and  that  the liability to  pay the price of any goods dealt with by it in the exercise  of its powers of control rested upon the party receiving the  goods. Another  plea taken  was that the suit was not  maintainable in  view of  the provisions of section 175(3) of  the Government  of India Act, 1935, which enjoins that a  contract between the Government of India and a third party has  to be in writing and in a particular form. It was emphasized that  G.  Brothers  alone  were  liable  for  the payment demanded by the plaintiff company.      4. The  trial court held that the Kanpur Controller had undertaken the  liability to  pay the  price of the goods to the plaintiff  company even in respect of the delivery to G. Brothers and  that the  defendant could not escape liability by reason  of the  contents’ of  section 65  of  the  Indian Contract Act even though the provisions of section 175(3) of the Government  of India  Act, 1935,  had not  been complied with. The  contention raised  by the defendant to the effect that section  17(2) of the Defence of India Act was a bar to the suit  was negatived  by  the  trial  court.  Some  other findings were also arrived at which are not relevant for the purposes of  this appeal.  The trial court therefore decreed the claim of the plaintiff company in full and also directed that it  would be  entitled to the costs of the suit as also interest at  the rate  of 3 per cent per annum from the date of the institution of the suit to the date of payment.      5. When the first appeal came up for hearing before the High Court the contention based on the provisions of section 17(2) of  the Defence  of India  Act was  reiterated on  the ground that  the suit  was one  for damages or compensation. Section 17(2) states:           "Save as  otherwise expressly  provided under this      Act, no  suit  or  other  legal  proceeding  shall  lie      against the Crown for 897      any damage caused or likely to be caused by anything in      good  faith done or intended to be done in pursuance of      this Act  or any  rules made  thereunder or  any  order      issued under any such rule."      The High  Court agreed with the learned counsel for the defendant that  this section  would be a complete bar to the suit if it was one for damages or compensation but held that the suit  was not  of that nature and, on the other hand, it was for  recovery of  the price  of the goods supplied to G. Brothers  as   was  also  found  by  the  trial  court.  The contention was  therefore rejected  as untenable.  The  High Court then  proceeded to  examine the  true  nature  of  the transaction culminating  in the  delivery  of  steel  to  G. Brothers and held that the defendant had failed to establish that the  direction regarding  preparation and submission of bills contained in letter exhibit 16 had been cancelled when the plaintiff  company was  required to deliver the goods to G. Brothers.  It was  further  held  that  even  though  the

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provisions of  section 175(3) of the Government of India Act were not  complied with  the agreement  resulting  from  the correspondence which  took 1  place  between  the  plaintiff company and  the officers of the defendant was good. In this connection reliance  was placed  on  Debi  Prasad  Srikrisna Prasad Ltd.  v, Secretary  of State(l).  The sheet anchor of the judgment  of the  High Court however was its reliance on section 70  of the  Indian Contract  Act and  on  the  basis thereof it  held the  plaintiff company  to be  entitled  to recover the price of the goods from the defendant even if it was assumed that the provisions of section 175(3) were a bar to  the   recognition  of  the  contract  envisaged  by  the correspondence  between  the  parties.  In  this  connection reference was  made to  New Marine Coal Co. (Bengal) Private Ltd. v.  Union of  India(2). It  was argued  before the High Court that the conditions requisite for the applicability of section 70  of the Indian Contract Act were not available in the present  case in  as much  as the defendant had not been shown to  have enjoyed  the benefit of the transaction which accrued only  to G.  Brothers. The High Court however took a contrary view with the observation:           "The benefit or advantage that has been derived by      the defendants  lies in  the fact that it has been able      to distribute  the  stock  to  persons  of  its  choice      according to the rules and regulations framed by it." It was  in these  premises that the High Court dismissed the defendant’s appeal with costs. 898      6. The  argument based  on section 17(2) of the Defence of India Act has been reiterated before us but it has merely to be  noticed to be rejected. We are clearly of the opinion that the  suit  is  not  for  damages,  etc.,  such  as  are contemplated by that section.      7. It  was seriously  argued on behalf of the defendant that  throughout   the  period   during  which   the  Kanpur Controller  dealt   with  the   matter  in  dispute  he  was exercising the  powers conferred  on him  under the Iron and Steel Control  order, 1941,  that under clause of that order the plaintiff  company could  dispose of  its stock of steel only in  pursuance of  a written  direction from  the Kanpur Controller  and  that  the  mandate  issued  by  the  Kanpur Controller to  the plaintiff company requiring the latter to deliver the  goods to G. Brothers having been found to be an oral one,  the whole  transaction fell  outside the ambit of the law so that the Union of India could not be bound by it. The  argument  as  it  stands  does  not  lack  plausibility although it  would be  a question whether the word ’written’ occurring in clause (S) of the Indian Iron and Steel Control order is  directory or mandatory. However we refuse to allow the argument to be raised and that for two reasons. Firstly, it is  a mixed  question of  fact and  law which  was  never raised in  the courts  below. Secondly,  the plea  taken  in paragraph 4  of the written statement filed by the defendant was categorically to the effect that "the fresh instructions issued to  the plaintiff  are contained in the letter in the possession of the plaintiff", which plea runs counter to the factual part of the argument. In this view of the matter the legality of  the order  under which  the  plaintiff  company transferred its stock to G. Brothers cannot be allowed to be questioned at this a stage.      8. The  only other ground put forward in support of the appeal was  that the  provisions of section 70 of the Indian Contract Act were not applicable to the facts of the present case. That section reads:           "Where a person lawfully does anything for another

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    person or delivers anything to him, not intending to do      so gratuitously,  and  such  other  person  enjoys  the      benefit  thereof,   the  latter   is  bound   to   make      compensation  to  the  former  in  respect  of,  or  to      restore, the thing so done or delivered."      As pointed  out in  State of  West Bengal  v. M/s.  B.K Mondal, three  conditions  must  be  satisfied  before  this section can be invoked:      "The first  condition is  that a person should lawfully      do something for another Person or deliver something to      him. The  second condition  is that  in doing  the said      thing or ’delivering the said 899      thing he  must not  intend to act gratuitously; and the      third is  that the  other person  for whom something is      done or  to whom  something is delivered must enjoy the      benefit thereof.  When these  conditions are  satisfied      section  70   imposes  upon   the  latter  person,  the      liability to make compensation to the former in respect      of or to restore, the thing so done or delivered."      On behalf  of the defendant the objection raised to the applicability of  this section to the transaction in dispute is two-fold. The first contention in this behalf is that the delivery to  G. Brothers  was unlawful-a contention which we have already  turned down.  Secondly  it  is  said  that  no benefit at all was derived from the transaction by the Union of India  and that  its sole beneficiaries were G. Brothers. This objection has not only been overruled by the High Court but appears  to us  also to  be without  substance. In  this connection reference  may be  made to  some documentary  and oral evidence.  To  begin  with,  letter  exhibit  16  which directed the  plaintiff company  to deliver the goods to the Association specifically required that the plaintiff company would make  the bills  in the  name of  the Iron  and  Steel Controller, Calcutta,  and send  them  for  payment  to  the Kanpur Controller,  The inference  which may  reasonably  be drawn from  the contents  of the  letter is  that the Kanpur Controller was dealing with the goods as if they belonged to the Government  of India  whose duty  it was to pay for them when they  changed hands, and that the identity of the party to whom  the goods  were to  be delivered  by the  plaintiff company under  the  orders  of  the  Kanpur  Controller  was immaterial. Secondly,  the Kanpur Controller (Mr.R.R. Chari) in his  deposition dated  the 24th of June, 1946 made before the  Second  Special,  Tribunal,  Lahore  (Camp  Bombay)  in Criminal Case No. 3 of 1946, stated thus:           "In September,  1944, J.K. Gas Plant Manufacturing      Co., Rampur,  Ltd., handed  over 137  tons of  iron and      steel  to   Messrs.  Govan   Brothers,  Rampur,   under      instructions from our department. Messrs Govan Brothers      thus held the, materials on behalf of the Government."      It has  been urged by learned counsel for the defendant that this  statement is not admissible in evidence as it was not made  at the  trial of  the case in hand. But’ it is too late in the day for such an objection to be entertained. The statement was  admitted in  evidence as  exhibit 15  at  the trial presumably, without objection and cannot now be thrown out. According  to it  G. Brothers  held the supply of steel made to then by the plaintiff company not for themselves but on behalf  of the Government. Besides, a letter (exhibit 51) which was issued by the 900 Kanpur Controller  to Mr.  Siddiq Ali Khan of the Department of Industries and Commerce, Rampur, also states:           "In this,  connection I may mention that the steel

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    is virtually  the property  of the Government of India,      War Transport Department and under no circumstances can      the Government  loose ,  money in  the  bargain.  I  am      obtaining the  actual cost  of the  materials plus  all      incidental charges  and I  will let you know the amount      to be  paid by  each party along with written orders re      gularising the  issue of these materials to the various      parties. I  have to  hold you  and you  in turn Messrs.      Govan Bros. (Rampur) Ltd., responsible for the recovery      of the cost of the materials when intimated to you."      There is  no reason  for us  to hold,  in view  of this statement that  the steel  supplied by the plaintiff company to G. Brothers was not being held by the latter on behalf of the Government  of India  and if  that be so, the Government must be  held to have reaped full benefit of the delivery to G. Brother’s  and it is immaterial how the steel supplied to the latter was dealt with later on.      9. Learned  counsel  for  the  defendant  cited  S.  1. Railway Co. v. Madura Municipality  for the proposition that the benefit to the defendant was in any case an indirect one which  would   not  fall  within  the  ambit  of  the  third condition; envisaged  by the provisions of section 70 of the Indian Contract  Act. In  that case the South Indian Railway had, widened a culvert in compliance with an order passed by the Provincial  Government under  certain provisions  of the Railways Act,  1890. The  work was  done primarily  for  the benefit  of   the  private   owners  of   property  in   the neighborhood. The Railway Company however sued the Municipal Committee   within   the   territorial   limits   of   whose jurisdiction the  culvert lay for the cost of widening it on the ground  that the  Municipal Committee received a benefit because it  recovered taxes  from the owners or occupiers of the property.  In turning down the claim of the South Indian Railway Company  Leach, C. J., who delivered the judgment of the division  Bench consisting of himself and Lakshmana Rao. J. stated:           "This is  a very  indirect benefit, and section 70      can in our opinion only have application where there is      direct benefit to the person for whom the work is done.      The persons  who are  enjoying the benefit of this work      are the  owners and  occupiers of  the buildings in the      locality. It would be doing violence to 901      the section to say that in these circumstances the work      was done for the benefit of the municipality."      The judgment  of the Division Bench was upheld by their Lord ships  of the  Privy  Council  in  Governor-General  In Council, Represented  by the  General Manager.  South Indian Railway  v.   Municipal   Council,   Madura,   Through   its Commissioner along  with the  reasons on which it was based. But then  the case  is of  no help  to the defendant who had enjoyed the  full benefit  of the  delivery of  goods to  G. Brothers and not merely an indirect benefit thereof.      10. For  the reasons  stated the  appeal fails  and  is dismissed with costs. S.R.                                        Appeal dismissed 902