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The State of Bombay Vs. Pannalal Kanhyalal Desraj Jat and ors. - Court Judgment

LegalCrystal Citation
SubjectContract
CourtMumbai High Court
Decided On
Case NumberFirst Appeal Nos. 105, 106 and 107 of 1952
Judge
Reported inAIR1959Bom56; (1958)60BOMLR1420; ILR1959Bom416
ActsIndian Contract Act, 1872 - Sections 10, 70, 73 and 197; Government of India Act, 1935 - Sections 175(3); Code of Civil Procedure (CPC), 1908 - Order 41, Rule 33
AppellantThe State of Bombay
RespondentPannalal Kanhyalal Desraj Jat and ors.
Appellant AdvocateW.B. Pendharkar, Spl. Government Pleader
Respondent AdvocateM.N. Phadke and ;D.B. Padhye, Advs.
Excerpt:
.....court even in cases relating to admissions. - this defence as well some other defences raised on behalf of the state of madhya pradesh were negatived by the learned trial judge and the suits were decreed against the state of madhya pradesh alone. is herewith forwarded in currency notes as earnest money, the full value of which is to be absolutely forfeited to he said secretary of state or his successors in office, without prejudice to any other rights or remedies of the said secretary of state or his successors in office, should i/we fail to commence to the work specified in the above memorandum, or (a) should i/we not deposit the full amount of security deposit specified in the above memorandum, in accordance with clause 1(a) of the said conditions of contract, otherwise the said of..........private nor a missionary hospital. on behalf of the respondent no. 1 it is contended that it is a government hospital while on behalf of the appellant it is said that it is a dispensary fund hospital. as stated in paragraph 366 government hospitals are of two kinds, viz. special hospitals and public hospitals. special hospitals are those which supply the medical needs of persons serving in or under the control of the following departments:(1) police (2) jail (3) forest and survey (4) canal and (5) others. public hospitals and dispensaries are specified in paragraph 368 of the manual. mayo hospital, nagpur victoria hospital, jabalpur, silver jubilee hospital, raipur and irwin hospital, amraoti, which are termed 'provincial hospitals' and dispensaries at dharni and chikalda are the only.....
Judgment:

1. This judgment will also govern First Appeal Nos. 106 of 1952 and 107 of 1952.

2. These three appeals arise out of the decrees passed in three suits instituted by the respondent No. 1 Pannalal Desraj against the State of Madhya Pradesh, the Deputy Commissioner, Bhandara, Shri G.K. Tiwari, who was Deputy Commissioner, Bhandara, at the relevant time, and also against certain other parties. In all these suits the claim of the respondent No. 1 was for damages for breach of certain contracts entered into by the Deputy Commissioner, Bhandara, with him. In the suit out of which First Appeal No. 105 of 1952 arises, the contract was for making certain extensions in the Bai Gangabai Memorial Hospital at Gondia. In the suit out of which First Appeal No. 106 of 1952 arises, the contract was for remodelling the Kunwar Tilaksingh Civil Hospital, Gondia. In the suit out of which First Appeal No. 107 of 1952 arises, the contract was for the construction of a new Hospital to be known as Twynam Hospital, Tumsar.

3. Various defences were raised by the appellant and the various defendants to the suits on the basis of which each defendant disputed his liability. The trial Court dismissed the suits against all the defendants except the present appellant, the State of Madhya Pradesh, which is now represented before us by virtue, of the provisions of the State Reorganization Act by the State of Bombay. The main contention raised on behalf of the State of Madhya Pradesh was that none of the contracts entered into by the Deputy Commissioner, Bhandara, was binding on it because the Deputy Commissioner was not authorised to enter into those contracts. This defence as well some other defences raised on behalf of the State of Madhya Pradesh were negatived by the learned trial Judge and the suits were decreed against the State of Madhya Pradesh alone. In the appeals various grounds have been taken on behalf of the appellant but we need not concern ourselves with all those grounds except the one to which we have already adverted, that is that none of the contracts was entered into on behalf of the State of Madhya Pradesh and as such the State of Madhya Pradesh was not bound by any of the contracts.

4. The contracts on the basis of which the suits out of which First Appeals Nos. 105 of 1952 and 106 of 1952 arise, were entered into on forms prescribed for building contracts in the Public Works Department Manual. Those forms have been corrected at several places, though we must confess that the corrections have not been very carefully carried out. For entering into the contract with which we are concerning in First Appeal No. 107 of 1952, however, a P.W.D. Form was not used but an independent contract had been drawn up.

5. In the P.W.D. Form used for entering into the contract out of which First Appeal No. 105 of 1952 arises most of the references to the Government of the Central Provinces and Berar Public Works Department have been scored out and in their places 'Deputy Commissioner Bhandara' is mentioned. The Form used appears to be an obsolete one because at the end it contains the following:

'The above tender is hereby accepted by me on behalf of the Secretary of State for India in Council'

However, the words 'on behalf of the Secretary of State for India in Council' have been scored out. The letters 'D.C.' have been substituted for the words 'Sub-Divisional Officer'/Divisional Officer wherever they occur in the Form. At two places however the reference to the Government has not been scored out. These references occur towards the end of the contract Form where it is said:

'Should this tender be accepted I/we hereby agree to abide by and fulfill all the terms and provisions of the said conditions of contract annexed hereto so far as applicable or in default thereof to forfeit and pay to the D.C. or his successors in office the sums of money mentioned in the said conditions. The sum of Rs. is herewith forwarded in currency notes as earnest money, the full value of which is to be absolutely forfeited to he said Secretary of State or his successors in office, without prejudice to any other rights or remedies of the said Secretary of State or his successors in office, should I/we fail to commence to the work specified in the above memorandum, or (a) should I/we not deposit the full amount of security deposit specified in the above memorandum, in accordance with Clause 1(A) of the said conditions of contract, otherwise the said of sum of Rs. shall be retained by Government as on account of such security deposit as aforesaid; or (b) the full value of which shall be retained by Government on account of the security deposit specified in Clause I (B) of the said conditions of contract.'

It will be seen that the reference to Government here would be significant only if either (a) or (b) had been struck out. Since neither of them has been struck out, this clause is meaningless and cannot be regarded as affecting the relationship between the parties in any way. For these reasons we think that the omission to strike out the word 'Government' makes very little difference.

6. From what we have said above, it will be clear that the contract was expressly made by the Deputy Commissioner on his own behalf and not on behalf of the Government. Now, under Section 175(3) of the Government of India Act, 1935, which was in force when the aforesaid contract was made, all contracts made in the exercise of the executive authority of a Province were required to be expressed to the made by the Governor of the Province, and all such contracts made in the exercise of that authority were required to be executed on behalf of the Governor by such person and in such manner as the Governor may direct or authorise. No rule, regulation or notification has been brought to our notice by virtue of which the Deputy Commissioners were generally authorised to enter into contracts of the kind we have in these appeals. Nor has anything been brought to our notice to show that the Government of the Central Provinces and Berar had specifically authorised the Deputy Commissioner, Bhandara, to enter into those contracts.

7. On the other hand, we have before us the Rules of Business of the Executive Government of the Central Provinces and Berar published in the year 1939 which show that the Deputy Commissioners generally were not authorised to enter into contracts of this kind. Rule 11 of these rules runs thus:

'All orders or instruments made or executed by order or on behalf of the Government of the Central Provinces and Berar shall be expressed to be made by or by order of the Governor of the Central Provinces and Berar.'

Then follows Rule 12, which says -

'Save in case where an officer has been specially empowered to sign an order or instrument of the Government of the Central Provinces and Berar, every such order or instrument shall be signed by either the Secretary, the Additional Secretary, the Joint Secretary, the Deputy Secretary, the Under Secretary, or the Assistant Secretary, to the Government of the Central Provinces and Berar and such signatures shall be deemed to be the proper authentication of such order or instrument.'

From these rules two things follows: one is that the Government will not be bound unless the contract is expressed to be made by the Governor; the other thing is, that special authorisation of the Deputy Commissioner, Bhandara, in respect of these contracts had to be alleged and proved. These is no such allegation or proof. In these circumstances it cannot be said that he aforesaid contract could bind the State of Madhya Pradesh or can bind the State of Bombay.

8. In the contract Form used in the suit out of which First Appeal No. 106 of 1952 arises, while the words 'Government of Central Provinces and Berar Public Works Department' have been scored out and replaced by the words 'Deputy Commissioner, Bhandara', the words 'accepted by me on behalf of the Secretary of State for India in Council' have not been scored out. It will also appear that there is, in fact, one more reference to the Secretary of State for India in Council but other references to the Secretary of State for India have been scored out. Apart from the fact that after the coming into force of the Government of India Act of 1935, the Secretary of State for India in Council could not enter into a contract of this kind so as to bind the revenues of a Province, the fact remains that the Deputy Commissioner did not even purport to act on behalf of the Governor of the Central Provinces and Berar. We may add that even with regard to the other two contracts he did not purport to act on behalf of the Governor of the Central Provinces and Berar. In these circumstances, it is difficult to see how the appellant before us could be held liable under this contract.

9. As regards the contract which is the basis of the suit out of which First Appeal No. 197 of 1952 arises, there is still less difficulty because it has not been engrossed upon a printed Form as were the contracts on which the suits out of which the two other appeals arise were engrossed. Here, there is no reference at any stage to the Government of the Central Provinces and Berar.

10. It is however urged by Shri Phadke, who appears for the respondent No. 1, that the Government of the Central Provinces and Berar having accorded its sanction to the projects to which the three contracts relate it must be deemed to have ratified the action or the contracts entered into by the Deputy Commissioner. In the first place, there is no plea to the effect that there was such a ratification. No doubt, Shri Phadke says that at one place in the plaint it is said that the Government having received the benefit of the work executed by the respondent No. 1, it would be bound to pay the value of that work. With this particular aspect of the argument we shall deal hereafter. At the moment what we have to consider is whether there was any ratification at all. Apart from the absence of a plea to that effect, it is seems to us that the ground on which Shri Phadke says that there was a ratification is without substance. In this connection he draws our attention, in particular, to the sanction given by the Government to the projects as evidenced by Exhibit 1 D-14 in First Appeal No. 106 of 1952. This document is a copy of a memo sent by the Under Secretary to the Government C.P. and Berar, Medical Department, to the Inspector General of Civil Hospitals, C.P. and Berar, and contains the forwarding endorsement of the Inspector General of Civil Hospitals. It reads thus:

'Subject: Remodelling of the Main Hospital, Gondia.

Reference: Your endorsement No. 9784, dated the 16th October, 1943.

Under Paragraph 487 of the Medical Manual, the Provincial Government is pleased to accord sanction to the plans and estimates of remodelling of the main hospital, Gondia, the total cost of which is estimated at Rs. 35,316/-, (thirty five thousand three hundred and sixteen) only. Government will not, however, be committed to any increased liability on account of the improvement to the Hospital.

(2) The plans and estimates received with your endorsement referred to above,are returned herewith.'

The endorsement of the Inspector General runs thus:

'Copy with the site plan and the estimate forwarded to the Deputy Commissioner, Bhandara, for information in continuation of this office memo No. 9577, dated the 11th October, 1943, and favour of necessary action.'

Below it also is the forwarding endorsement of the Deputy Commissioner, Bhandara, who sent it to the Engineer-in-charge of the Hospital Construction Work at Bhandara. Now the argument is that the document shows that the Government has agreed to defray the cost of construction to the extent of Rs. 35,316/- and has sanctioned the plans and estimates. In support of his argument, the learned counsel relies particularly on the words 'Government will not however be committed to any increased liability on account of the improvement to the Hospital.' According to the learned counsel these words clearly show that the Government accepted its liability to pay to the extent mentioned earlier but did not commit itself to pay anything over and above that. That is not a proper construction of the document. The document only means that the Government has sanctioned the particular work but it does not undertake to pay any higher grants for running the hospital consequent on the improvements made to that hospital.

11. In this connection we would like to refer to certain provisional of the Medical Manual. Chapter XXVII of the Manual deals with the classification of Hospitals and Dispensaries. The hospitals are described thus: (1) Government, (2) Municipal, (3) District Council, (4) Dispensary fund, (5) Private and (6) Missionary. It is accepted that this is neither a municipal hospital nor a district council hospital nor a private nor a missionary hospital. On behalf of the respondent No. 1 it is contended that it is a Government hospital while on behalf of the appellant it is said that it is a Dispensary fund hospital. As stated in paragraph 366 Government hospitals are of two kinds, viz. special hospitals and public hospitals. Special hospitals are those which supply the medical needs of persons serving in or under the control of the following departments:

(1) Police (2) Jail (3) Forest and Survey (4) Canal and (5) Others.

Public hospitals and dispensaries are specified in paragraph 368 of the Manual. Mayo Hospital, Nagpur Victoria Hospital, Jabalpur, Silver Jubilee Hospital, Raipur and Irwin Hospital, Amraoti, which are termed 'Provincial Hospitals' and dispensaries at Dharni and Chikalda are the only institutions of this kind. The paragraph further makes it clear that all Government hospitals are maintained by provincial funds and are under Government management. Paragraph 370 deals with Dispensary fund hospitals and dispensaries. We will quote the whole paragraph:

'Dispensary fund hospitals and dispensaries.

The financial control of these hospitals and dispensaries is vested in dispensary fund committees and their management in the Civil Surgeon. The fact that such an institution is aided by private subscriptions, grants from local bodies and assistance from Government in the shape of salary of medical officer, grants for medicines, etc., should not be regarded as a reason for not classing it as a dispensary fund hospital or dispensary so long as its existence is ultimately depending upon the dispensary fund.'

It will be clear from this that none of the hospitals with which we are concerned in the three appeals could be classified as a Government hospital, and therefore each of them would fall within the category of Dispensary fund hospitals. These hospitals are in a sense independent of the Government will be clear from paragraph 384, which says that the financial control of these institutions is vested in the dispensary fund committee and their management in the Civil Surgeon. That apart from the supervision, control and giving of grants to the hospitals, the Government has no further connection with them would be clear from paragraph 488 which says that the Inspector General of Civil Hospitals has, however, no power to sanction Government grants-in-aid of local bodies and in sanctioning the estimates of local fund works he should be careful not to commit Government to the giving of a grant-in-aid of works of which the Government may possibly not approve. It is made clear in paragraph 489 that all contracts with respect to any undertaking to be made on behalf of such hospitals are to be entered into by the dispensary committee and that for every work given on contract, an agreement on a stamped paper has to be taken except where such work does not exceed Rs. 50/-. Now, the only inference to be drawn from all these provisions is that the Government is not the owner of these hospitals nor does it manage any of these hospitals, but that it exercises an overall control over the hospitals. These hospitals receive grants from the Government under Chapter XXXV of the Manual. For entitling them to receive these grants they have to satisfy certain conditions. Similarly, the Government is also entitled to know that the money given by it for a particular purpose is spent over that purpose only and not on any other purpose. The Government is also entitled to see that no unnecessary demands for further grants are made. Because of these things it is imperative that the Government should have a voice in saying what new works, or improvements or repairs, should be undertaken and subject to what conditions. Sanction is required under paragraph 485 only for this purpose and nothing more. By according sanction the Government cannot be deemed to be undertaking any financial responsibility for the carrying out of the work which has been sanctioned. The work has to be carried out under the immediate supervision of the dispensary committee, the Civil Surgeon and the Deputy Commissioner and not of the Government. Indeed, where a work is done at the instance of or for the benefit of the Government, it would certainly be entrusted to the Public Works Department as is always done by the Government, whether a work is executed departmentally or through a contractor. For, even where contractors are employed they have got to work under the direct supervision of the Public Works Department. That is not the case here. We are therefore of the opinion that there was no ratification of what the Deputy Commissioner did by the Government. Apart from that, the question of ratification really arises where one person purports to act for or on behalf of another. In the instant case, as pointed out, the Deputy Commissioner did not even purport to act for or on behalf of the Government. We cannot therefore accede to the argument of the learned counsel.

12. Finally, it is said that the Government has received the benefit of the works and must therefore pay for them. As to this argument what we have already quoted from the Medical Manual would be sufficient to show that the hospitals in question are not Government hospitals and therefore the Government can in no sense be regarded as having benefited by anything done with respect to them. They may be public institutions but every public institution is not a Government institution. It is difficult therefore to see how the Government can be said to have received any benefit out of the works carried out by the respondent No. 1. In the circumstances, we hold that no liability whatsoever can be cast on the appellant in respect of the three contracts. Accordingly, we set aside the decrees passed in each of these three suits out of which the three appeals arise against the appellant.

13. Shri Phadke then prayed that under Order 41 Rule 33 of the Code of Civil Procedure we should pass decrees against the Deputy Commr. Bhandara, who was indubitably, a party to the contracts. Though the provisions of Order 41, Rule 33 are wide enough to permit this we do not see any reason why we should exercise our power when it was open to the respondent No. 1 to prefer a cross-objection against the dismissal of his suits against these defendants, as well as against some other defendants.

14. Shri Phadke then asked us to grant him leave to file a cross-objection now. More than five years have elapsed since the decrees were made by the trial Court. We do not see any adequate reason for exercising our discretion in allowing the respondent No. 1 to prefer a cross-objection at this late date.

15. In this view, we allow the appeals with costs and dismiss all the three suits in their entirety.

16. Appeals allowed.


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