- (1.) This appeal by special leave against the judgment and decree of the High Court of Madhya Pradesh, D/- September 10,1963, raises only one question. The former State of Madhya Bharat (for which the State of Madhya Pradesh now stands substituted) brought a suit against the firm of Badri Prasad Ratanlal of Dabra for damages for breach of a contract. THIS suit was dismissed by the Additional District Judge, Guna and on appeal to the High Court the decree was confirmed. The High Court and the Court below held that there was no binding contract in view af the breach of Article 299 of the Constitution. THIS is thej question that arises in this appeal. The facts were these:
(2.) On December 17, 1953, the Director of Food and Civil Supplies in the former Government of Madhya Bharat issued an advertisement (referred to occasionally in the case as notification) inviting tenders for the purchase of 9,000 maunds of gram lying in the Government godown at Ashoknagar. ON December 20, 1953, the firm of Badri Prasad Ratanlal submitted a tender addressed to the Director, Food and Civil.Supplies, Indore. The tender was accepted by telegram on January 6, 1954. The telegram said: "Badriprasad Ratanlal Harei Road Dabra, Your tender for purchase of Government Gram sanctioned as follows (.) Ashoknagar Rupees Thirteen pies three (.) Kindly arrange to take delivery according to terms laid down in this office notification dated 17th December. Foodsup Not to be telegraphed Sd /-R. L. Soni Indore 5-1-54 for Director of Food and Civil Sd /-Illegible Supplies, M. B. Stamp Indore No. 336/6-1-54. ON January 15, 1954 the firm wished to see samples from all stores and on February 2, 1954 the firm wrote to the Director that the gram had perished aDd was not acceptable. ON February 11, 1954 the Director wrote denying the allegation and demanded payment. Subsequently, after telegraphic notice the gram was sold by auction on March 9, 1954. It fetched a price of Rs. 7-8-0 per maund. The State Government, therefore, filed a suit for Rs. 44,930-1-3 and interest amounting to Rs. 5,927-4-0. There were many defences but inter alia the firm questioned the right of the State Government to bring the suit as the contract was neither made in writing nor executed by any authorised person on behalf of the State Government as required by Article 299 of the Constitution. The State maintained that an authorised officer had made the contract and it was legal and enforceable. We are not concerned with the other pleas because the suit failed in this Court of trial mainly on the ground that there was no contract binding on either party as it was not in accordance with Article 299 and on appeal the High Court agreeing with this conclusion, dismissed it on this short ground. In reaching the conclusion the High Court relied upon the decision in State of Bihar v. Karam Chand Thapar & Bros. Ltd., 1962 AIR(SC) 110 In this appeal it is contended that the case falls within the rule indicated in the later case of this Court reported in Union of India v. A. L. Rallia Ram,1962 AIR(SC) 1685 Article 299 of the Constitution, as it was at that time read: "299. Contracts. (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 or the Raj- pramukh 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 or the Rajpramukh by such persons and in such manner as he may direct or authorise. - (2)This Arl'cle had a direct counterpart in section 175 (3) of the Government of India Act, 1935. For comparison the earlier provision may also be reproduced here: "175. Power to acquire property and to make contracts etc. (1) (2) (3) 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". It is clear that these two provisions are in pari materia and what one may say about seotion 175 (3) must apply equally to Article 299 (1) because the intent underlying the two enactments is the same and the language is almost similar. Section 175 (3) has been the subject of a few decisions in this Court, the earliest being State of Bihar v. Karamchand Thapar & Bros.,1962 AIR(SC) 827 It was pointed out in that case that section 175 (2) laid down three conditions for the making of a contract by the Governor of a Province. They were that it must be expressed to be made by the Governor; it must be executed; and the execution should be by such person and in such manner as the Governor might direct or authorise. It was, however laid down that the authority need not be by a general rule but could be by an ad hoc order. The contract in that case was examined from these three points of view and it was held that there was no proper contract. The dictum laid down in Karamchand Thapar"s case (1) was applied in Seth Bhikraj Jaipuria v. Union of India, 1962 AIR(SC) 113 It is pointed out there that the manner of conferring authority upon persons by Governor for the purpose of the execution of contract may differ from case to case. Some times a rule, some times a notification and some times a special authority may with validity issue. It is also pointed out that the three tests which are laid down in Karamchand Thapar's case (1) must be satisfied and the section is mandatory and not directory. As the intention of the enactments is to make certain that Government is not exposed to unauthorised contracts, it is quite clear that such a provision to be effective must be mandatory and not directory. Several contracts thereafter came before this Court and were considered in State of West Bengal v. B. K. Mondal, 1962 AIR(SC) 779 and New Marine Coal Co. (Bengal) (P.) Ltd. v. Union of India,1964 AIR(SC) 162 These cases laid down that if the contract fails, payment may be ordered quantum meruit on the basis of section 70 of the Indian Contract Act for any benefit received as a result of the contract. In the two latter cases it is emphasised once again that the provisions of section 175 (3) of the Government of India Aot, 1935, were mandatory and not directory. Mr B Sen on behalf of the State Government contends that his case is covered by the decision of this Court reported in Union of India v. A. L. Rallia Ram (1). He points out that while holding that the provisions of section 175 (3) were mandatory this Court spelled out a binding contract from correspondence between the parties. In that case also there was an advertisement and a tender followed by acceptance of the tender and it was held that a binding contract between Government and the party resulted. Mr. Sen contends that in the present case there is an advertisement for the sale of the Government property, a tender in respect of it and an acceptance by the Director of Food and Civil Supplies and we must hold that a valid and binding contract comes into being. This case is governed by Article 299 of the Constitution but the reasoning of the cases above noted must apply to it. The three conditions stated by Mr. Justice Venkatrama Aiyar in Messrs. Karamchand Thapar'e cose(2) must be satisfied. The telegram accepting the tender in the present case was not even signed by the Director of Food and Civil Supplies who claimed to have been authorised to sell the gram. One of the conditions if not two is not thus fulfilled. This case also has no resemblance to Rallia Ram's case (1), because in that case the rules for purchase showed the Government of India in the Department of Food as the seller and the rules defined the Government of India as Governor-General in Council. The notice, therefore, was on behalf of the Governor-General in Council and the correspondence showed that there was an authorisation in favour of the Chief Director and he was not only selling the property on behalf of the Governor-General in Council. No such conclusion can be drawn in the present case because the vital document, namely, the telegram, accepting the tender was not even signed by the Director who claimed to possess authorisation from the State Government. This case, therefore, dope not fall within the rule stated by this Court in Rallia Ram's case (l)which was a case dependent on special facts. It rather falls within the rules in Karamchand Thapar's and Jaipuria's cases.
(3.) The Additional District Judge, Guna was, therefore, right in dismissing the suit of the State'Govenment on the ground that there was no binding contract which the State Government could enforce against the respondent and the High Court was right in not accepting the appeal. THE appeal fails and will be dismissed with costs. Appeal dismissed.;