HINDUSTAN CONSTRUCTION CO Vs. STATE OF BIHAR

JUDGEMENT

(1.) In the suit out of which this appeal arises the plaintiff alleged that the State of Bihar required bricks, Jhama and brickbats for the construction of (1) Muzaffarpur-Hajipur Road, (2) Muzaffar-Border Champaran-Sagauli Road, (3) Buildings at Muzaffarpur, (4) Buildings at Darbhanga, and (5) Buildings at Lohata (Motihar). The plaintiff offered tenders in response to the notification by the Public Works Department for supply of bricks etc. for the execution of the aforesaid schemes. The tenders of the plaintiff were accepted and accordingly bricks were laid and the necessary process for the supply of materials was taken in hand by the plaintiff. It is said that one of the terms of the contract between the parties was that the Public Works Department would arrange for the supply of the proper quantity of coal for burning the bricks in various kilns. The defendant, however, failed to fulfil this part of the contract with regard to the supply of the requisite quantity of coal. As a result of this the bricks were not burnt and a huge quantity of imburnt bricks was damaged and destroyed by the rains which caused considerable loss to the plaintiff. The plaintiff, therefore, brought the suit claiming damages for breach of contract. The plaintiff also made an additional claim for the price of burnt bricks which were actually supplied to the defendant, but the price of which was not paid. The suit was resisted by the defendant mainly on the ground that the contracts were void as they did not comply with the requirements imposed by Section 175(3) of the Government of India Act and the plaintiff cannot be granted damages For breach of such contracts. With regard to the claim of the plaintiff for the price of the burnt bricks actually supplied to the Government, the defence was that the amount has already been paid. The suit was dismissed by the learned Subordinate Judge of Muzaffarpur and the plaintiff preferred an appeal to the High Court against the decree and judgment of the learned Subordinate Judge. The appeal to the High Court was heard by Misra and Anant Singh, JJ. It was argued on be half of the appellant that the provisions of Section 175(3) of the Government of India Act were not mandatory in character and it is open to the State Government to waive the irregularities and to ratify the contracts. It was contended that the plaintiff was entitled to damages from the defendant for its failure to supply the requisite quantity of coal and the consequent loss to the plaintiff with regard to the huge quantity of unburnt bricks destroyed by the rains. With regard to the claim of the plaintiff for the price of the burnt bricks actually supplied to the Government, the argument was that the finding of the learned Subordinate Judge was erroneous and the plain tiff has not been paid the price of the fully burnt bricks actually supplied. In support of these contentions counsel on behalf of the plaintiff relied upon the decision of a Division Bench of the High Court in State v. K. T. and Brothers Ltd., ILR 35 Pat 1067 where it was held that non-compliance of the formalities of Section 175(3) of the Government of India Act 1935, only rendered the agreement between the parties unenforceable and not void. It was also held by that Bench that such a contract might be ratified by the Government, which ratification may not be in accordance with the provisions of Section 175(3) of the Government of India Act. Reliance was also placed on behalf of the appellant on the observations of Bose, J. in Chaturbhuj Vithaldas v. Moreshwar Parashram, AIR 1954 SC 236. On behalf of the respondent the learned Government Pleader relied upon a decision of another Division Bench of this High Court in Dominion of India v. Bhikraj Jaipuria, (S) AIR 1957 Pat 586 where it was held that the provisions of Section 175(3) of the Government of India Act were mandatory in character and, therefore, a contract in order to he binding and enforceable against the Union Government must be made in strict conformity with the formalities prescribed by Section 175(3) of the Government of India Act. It was further held in that case that if these formalities were not complied with, the contracts were void and unenforceable against the Union Government and there was no question of estoppel or ratification in such a case. In view of these conflicting decisions the learned Judges hearing the First Appeal have formulated the following questions of law for decision by the Full Bench:

(2.) After hearing learned counsel for both the parties we consider that the third question referred to the Full Bench should be slightly modified in the following manner in order to bring out the real point in controversy between the parties:

(3.) After the reference was made to the Full Bench there have been three decisions of the Supreme Court State of Bihar v. Karam Chand Thapar and Bros. Ltd., AIR 1962 SC 110; Bhikraj Jaipuria v. Union of India, AIR 1962 SC 113 and State of West Bengal v. B. K. Mandal and Sons, (an unreported decision of the Supreme Court in Civil Appeal No. 286 of 1958, D/- 5-12-1961 (now reported in AIR 1962 SC 779)) which fully cover the questions arising for decision in the present case. It is also necessary to notice that the decision of this High Court in ILR 36 Pat 633: (S) AIR 1957 Pat 586 which is a decision of Ramaswami, C. J. and Kanhaiya Singh, J., has been affirmed by the judgment of the Supreme Court reported in AIR 1962 SC 113. It has been held irr this case that where a contract between the Dominion of India and the private individual is not in the form required by Section 175(3) of the Government of India Act, it is void and cannot be enforced, and, therefore, the Dominion of India cannot he sued by a private individual for compensation for breach of such a contract. The same principle has been reiterated by the Supreme Court in the later case, Civil Appeal No. 286 of 1958, D/- 5-12-1961: (AIR 1962 SC 779). The principle is that the provisions of Section 175(3) of the Government of India Act 1935, or the corresponding provisions of Article 299(1) of the Constitution of India, are mandatory in character, and the contravention of these provisions nullifies the contracts and makes them void. There is no question of estoppel or ratification in such a case. 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. If the plea of the appellant regarding estoppel or ratification is admitted, that would mean in effect the repeal of an important constitutional provision intended for the protection of the general public. That is why the plea of estoppel or ratification cannot be permitted in such a case. But if goods are supplied or if services are rendered in terms of the void contract, the provisions of Section 70 of the Indian Contract Act may be applicable. It has been held by the Supreme Court in Civil Appeal No. 286 of 1958, D/- 5-12-1961: (AIR 1962 SC 779) that if the conditions imposed by Section 70 of the Indian Contract Act are satisfied, then the provisions of that section can be Invoked. It has been pointed out by the Supreme Court in that case that three conditions should be satisfied before Section 70 of the Indian Contract Act 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 thing he must not intend to act gratuitously; and the third condition 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. It was pointed out by Gajendragadkar, J. that in a case falling under Section 70 the person doing something for another or delivering something to another cannot sue for the specific performance of the contract, nor ask for damages for the breach of the contract, for the simple reason that there is no contract between him and the other person for whom he does something or to whom he delivers something. So where a claim for compensation is made by any person against another under Section 70, it is not on the basis of any subsisting contract between the parties (sic-but?) a different kind of obligation. In my opinion, the juridical basis of the Obligation in such a case is not founded upon a contract or tort but a third category of law, namely, quasi-contract or restitution. In Fibrosa v. Fairbaim, 1943 AC 32 at p. 61, Lord Wright has stated as follows: