G.K. Misra, J.
1. The election to the Orissa Legislative Assembly from the Nowrangpur Constituency was held on the 21st February, 1967. 21st of January, 1967 had been fixed as the date for scrutiny of nominations. The persons filing nominations were Sarbasri Abdul Rahiman (petitioner). Sadasiva Tripathy (Respondent). Habibulla Khan and Kasi Viswanath Sahu. The nomination of the petitioner was rejected by the Returning Officer on the 22nd of January, 1987. Sri Habibulla Khan withdrew his nomination. In a contest between Sri Sadasiva Tripathy and Sri Kasi Viswanath Sahu, the former obtained the majority of votes and was declared elected on 22nd of February, 1967. The petitioner has filed this election petition for a declaration that the election of the respondent is void.
In the petition filed under Section 81 of the Representation of the People Act, 1951 (hereinafter to be referred to as the Act), the material facts pleaded may be stated in brief. The petitioner held a contract with the State of Orissa to construct some houses at Nowrangpur under the Rental Housing Scheme. The contract was entered into in March, 1965. After the work was half done, the petitioner met with an accident, on 13th October 1965. He was hospitalised for a long time. He accordingly wrote to the authorities concerned to cancel his contract and to pay up his dues for the building constructed in part. The petitioner's prayer was accepted and an order was passed that the actual work done by the petitioner was to be measured and paid for. Thus there was termination of the contract between the petitioner and the State of Orissa. In March, 1966, the remaining work of the building was given to one Harihar Bissoi by the Public Works Department for construction. Only Government had the liability to make payment of the dues of the petitioner.
On the date of the scrutiny of nominations a verbal objection was raised on behalf of the respondent before the Returning Officer that the petitioner had a subsisting contract with the State of Orissa for execution of the houses under the Rental Housing Scheme undertaken by the Government and as such he was disqualified under Section 9A of the Act. The petitioner contended that the contract had been terminated and that for the half done work, the Government had the liability to make payments only, and the petitioner was protected by the Explanation to Section 9A. As the respondent was the Chief Minister of Orissa then, the Returning Officer improperly rejected the petitioner's nomination on an erroneous view of law that the contract subsisted.
The election petition has been filed for declaring the election of the respondent as void and for setting it aside.
2. The material facts averred by the respondent in his written statement may be noticed in brief. The petitioner entered into a contract with the State of Orissa for construction of houses under the Rental Housing Scheme. He had constructed the building in part. After meeting with an accident, the petitioner did not ask for cancellation of his contract. On the other hand, he sought for extension of time for completion of work. There was no cancellation of the contract. As the half finished work done by the petitioner was likely to bedamaged by rains the Sub-divisional officer (P.W. D.) Nowrangpur gave the work order to Sri Harihar Bossol, without calling for tenders, to do the balance work on job basis. The action of the S. D. O. did not meet with the approval of the Executive Engineer who was the only competent authority to issue the work order. The Executive Engineer refused to make payments to Sri Harihar Bissoi for some work done by him, The work order given by the S. D. O. to Sri Harihar Bissoi cannot be treated as a termination of the contract with the petitioner The order of the authorities to make measurement of the half finished work of the petitioner and to make payment for the same was on account of sympathy for the petitioner who met with an accident and does not amount to termination of the contract. On the 31st of March, 1967, the petitioner applied for extension of time to enable him to complete his work and he further prayed for cancellation of the tenders given by other contractors for completing the incomplete work. Thus, after the accident, the petitioner did not express his inability to execute the work but was willing to continue execution of the same and asked for payment of advance in December, 1966. Sri Harihar Bissoi is a petty contractor and was the Benamadar of the petitioner. A tentative final bill prepared in respect of the petitioner's work was not accepted by him despite persuasion by the Executive Engineer. On the 19th of January, 1967 a telegram was sent to the petitioner demanding return of 435 bags of cement and 7.9 tons of iron rods issued to him in course of the work which he was bound to return in case he wanted to withdraw from the contract. The petitioner did not return the same till 20th of January, 1967, the date of filing the nomination or on the date of scrutiny, though the Executive Engineer. Koraput gave him all facilities to obtain a clearance certificate. The Petitioner's nomination was rightly rejected as he had a subsisting contract. The allegation that the petitioner's nomination was rejected as the respondent was the Chief Minister of Orissa is malicious.
3. It would be seen from the pleadings of the parties that it was the common case of both that the petitioner entered into a contract with the State of Orissa for construction of some houses under the Rental Housing Scheme. The controversy was raised merely on the question whether the contract had terminated or was subsisting on the date of scrutiny of nominations.
In the written statement no averment was made that there was a subsisting contract with regard to construction of a bridge on Mydalpur road. In paragraph 12 of the written statement, there was a reference to the bridge on Mydalpur road in respect of which it was alleged that the tender of the petitioner was accepted by the Superintending Engineer, Berhampur. Mr. Sahu, thelearned Advocate for the respondent conceded that the acceptance was not by the Superintending Engineer, Berhampur but by theExecutive Engineer, Koraput. In evidence though some questions were put here and there regarding the construction of the culvert on Mydalpur road, no documents were called for to prove that a contract subsisted in respect of the construction of a culvert on Mydalpur road. Though the petitioner had also a contract relating to construction of a culvert on the Mydalpur road, it was not a part of the contract relating to construction of houses under the Rental Housing Scheme. It is conceded by Mr. Sahu that at the time of drafting the written statement, he had a misconception that the contract for construction of the culvert was under the Rental Housing Scheme. The learned Advocates for the parties concede that they are two different contracts. The contract for the construction of the culvert is separate and distinct from the contract relating to the construction of houses under the Rental Housing Scheme. As no dispute was raised in the written statement regarding subsistence of the contract relating to the construction of culvert, no evidence has been led on this point excepting casual questions put to witnesses here and there. Mr. Sahu also did not call for the relevant documents relating to the contract for the construction of the culvert. It is accordingly made clear that there is no controversy in this case that the contract relating to the construction of the culvert subsisted. That topic is foreign to the subject matter of this litigation. The only question to be dealt with in this case is whether the contract relating to the construction of houses under the Rental Housing Scheme subsisted or not on the date of the scrutiny of nominations.
4. Parties had filed draft issues. On the 18th of August. 1967 the learned Advocates were heard on the question of framing of issues. The following issues have been framed.
(1) Was there any contract subsisting between the petitioner and the State of Orissa on the 21st of January, 1967 for execution of the work undertaken by the OrissaGovernment?
(2) If there was any was the petitioner disqualified for being chosen to fill the seat in the Orissa Legislative Assembly from theNowrangpur Constituency for that reason?
The draft issues filed by the parties not covered by the aforesaid two issues were abandoned by them
5. Despite the clear stand taken by the petitioner before the Returning Officer in Exs. 10 dated 21st January, 1987 and 10(a) dated 22nd January 1967 and in the election petition itself that there was a contract between him and the State of Orissa, but that it did not subsist on the date of the scrutiny of nomination, a complete somersault wasmade in course of arguments that there was no contract in fact and law. In view ofthe change of front, it would be profitable to enumerate hereunder the various arguments advanced by Mr. Mohanty.
(i) There was no contract between the parties in fact.
(ii) The contract was not executed in accordance with Article 299 of the Constitution. As such, it is void and unenforceable in law.
(iii) Clause (6) of the Tender call Notice (Ex. 6), which constitutes one of the tender documents, runs thus-
'The written agreement to be entered into between the contractor and Government shall be the foundation of the rights of both the parties and the contract shall be deemed to be incomplete until the agreement has first been signed by the contractor and then by the proper officer authorised to enter into the contract on behalf of the Government.' The execution of the further contract was a condition of the term of bargain. As the F-2 agreement was not executed, there was no enforceable contract between the parties.
(iv) Assuming that there was an enforceable contract between the parties, it was a simple contract to build houses under the Rental Housing Scheme. Supply of cement and iron rods by the Executive Engineer to be used in the work did not constitute an integral part of the contract but was separate and severable. It was collateral and ancillary to the contract for construction of the houses. Failure on the part of the contractor to return the excess cement or iron rods, if any, did not amount to non-performance of the contract.
(v) The incomplete work made by the contractor was accepted as a complete performance of the work. If the liability on account of non-return of excess materials 13 excluded from the contract, the contractor had fully performed his part of the contract and was to merely get payment for the work done. In such a case, Explanation to Section 9A of the Act has full operation and no contract further subsisted.
(vi) The order of the Executive Engineer that the work of the petitioner was to be finally measured and closed without penalty resulted in a complete rescission of the contract and thereafter the contract did not subsist
(vii) Section 9A of the Act has application only to executory and not to executed contracts.
(viii) if the contract was void and unenforceable, there was no ratification by the Government to make it enforceable
(ix) The petitioner made out a prima facie case that the contract did not subsist. The onus shifted to the respondent to prove that the contract subsisted and it had not been discharged.
Many of these points involve questions of facts which were not pleaded and noissues were struck thereon. The contentions, however, require careful examination.
6. It would not be possible to appreciate the contentions of Mr. Mohanty without giving a chronological history of the facts which were not unfurled in the pleadings. It is the common case of the parties that tender notices were issued for construction of houses at Nowrangpur under the Rental Housing Scheme in question and tender notices were preceded by tender call notices. The tender notices and the tender call notices relating to the contract of the petitioner have not been brought into record. The tender notice containing the tender call notices relating to the fresh tender issued on 19th December, 1966 in respect of the balance work under the Rental Housing Scheme after Harihar Bisoi (P. W. 2) did some work has been marked Ex. 6. In response to the tender notices, the petitioner submitted various tenders (Ex. V series) on 19th January, 1965.
On 30th March, 1965 interim K-2 agreements (Ex. Y series) were signed by the petitioner and the Executive Engineer. All these agreements are similar in terms. The main recital therein runs thus-
'I do hereby tender to the Executive Engineer the under mentioned description of work by piece work, and in accordance with the conditions noted before in consideration of payment being made for the quantity of work executed at rate specified in the following schedule.'
A schedule of 5 items was appended. The further recital is 'conditions as per F2 contract which will be finalised'. The Executive Engineer signed the agreement with an endorsement to the effect-
'Accepted by me for items five only.'
It would be thus noticed that in the interim K2 agreements the conditions of F2 agreement were incorporated by making a reference to 'conditions as per F2 contract'. F2 Contract is in a sample form. Conditions mentioned therein may vary with different contracts. That is why it was mentioned that the conditions in F2 contract to be finalised.
These tenders were checked in the office of the Executive Engineer on 19th April, 1965. He passed an order for moving the Superintending Engineer to approve the excess items as those involved little costs.
(a) Advance payments were made to the petitioner after execution of Ex. Y series and the petitioner proceeded with the construction work even before the tenders were finally accepted. On 13th October, 1965 the petitioner met with an accident. On 6th January, 1966 the S.D.O.P.WD., Nowrangpur addressed a letter (Ex. 22) to the petitioner that he should resume his work on or before 12th January, 1966, failing which his contract would be terminated and uptodate measurements would be recorded by 12-1-66 positively, and the work would be done through suitable job workers. Possibly the petitioner gave up the work after the accident and Ex. 22 was issued for resumption of the work.
(b) On 10th February, 1966 the petitioner filed an application (Ex. 2) to the Executive Engineer which constitutes the basis of the petitioner's case of rescission of the contract. Relevant portions of it with the remarks passed thereon by the S. D. O. as per Ex. 2(a) on 26th October. 1966 run thus-
'Suddenly I fell ill and injured seriously by electric shock and one of my legs has been fractured seriously. Now I am under treatment at King George Hospital Vishakhapatnam since six months.
Under the above circumstances it is not possible on my part now to take up the work till its completion and now the work is at half way. Owing to my medical disability, I pray you to cancel the tender contract without imposing any penalty. Further the work upto which I have done may be measured immediately and final payment be made to me early.
Sd. A. R. Khan 10-2-66.'
On the margin of the application the S.D.O. passed the following remarks-
'Submitted to the Executive Engineer, Koraput Division. The reason for terminating the contract, as mentioned by Sri A R. Khan, contractor is correct. His contract may be terminated and without imposing penalty and permission given to take up work through job worker to complete the work.' (c) Before receipt of any reply from the Executive Engineer to Ex. 2 fa), the S.D.O. addressed a letter (Ex. 3) to Harihar Bisol (P.W. 2) directing him to take up the unfinished portions of the petitioner's work. Ex. 3 runs thus-
'Ref: Your application dated 5-3-66
Please take up the rental housing scheme building works at Nowrangpur immediately at current schedule of rate after taking detailed instructions from Sectional Officer. Nowrangpur.
x x x x x Copy to Sectional Officer, Nowrangpur for information. He will please submit the final bills of the contractor Sri A. R. Khan in complete shape with all upto date accounts immediately and the work taken up through this job worker limiting the amount of each to Rs. 2,500/- (See Ex. 3(a)).'
Copy of this letter was forwarded to the Executive Engineer. Koraput On 11th March 1966 the Executive Engineer, Koraput passed an order as per Ex. 2(b) on the margin of Ex. 2 thus-
'I know the unfortunate accident. As the applicant is injured in the Vizag Hospital his work may be finally measured andclosed without penalty. The balance of the work may be completed through job worker.' On 12th March, 1966 the Executive Engineer passed an order Ex. 3 (c) on Ex. 3 to the following effect-
'The S.D.O. will please intimate if the final measurements of Sri A. R. Khan for the R. H. S. Buildings have been taken up. The work should not be taken up on job work basis unless the final measurements taken up and bills submitted to Divl. Office, so that there may not be unnecessary complications and claims in future.' On 16th March, 1966 by another letter Ex. B the Executive Engineer gave similar direction in reply to the S.D. O.'s letter dated 5-3-66. On 18th March, 1966 he wrote to the same effect by his letter (Ex. Z-4). On 12th April, 1966 the S.D.O. wrote a letter (Ex. Z-5) to the petitioner intimating that if he failed to resume his work, his name would be reported for blacklisting and the work would be taken up through others. A copy was submitted to the Executive Engineer stating therein that the contractor was silent and left the iob since August 1965 and that the work would be taken up by job work basis after final measurements as per letter (Ex. 2-4). A copy was also sent to the Sectional Officer asking him to explain why he had not yet submitted the final measurements to the S.D.O.
(d) On 15th April 1966 the petitioner filed an application (Ex. 4) to the S.D.O., P. W. D. narrating the history as to why he was unable to look after the work and requesting the S.D.O. not to blacklist him. He requested him to make final measurements upto the slab level and to pay up the amount to him. The S.D.O. passed an order (Ex. 4 (a)) D/- 27th April, 1966 for taking final measurement, immediately.
(e) On 22nd July 1966 the petitioner filed the application (Ex. C) to grant him time for six month to complete the work. The S. D. O. forwarded this application to the Executive Engineer for favourable orders. The order passed on this application has not been brought on the records.
(f) On 8th August, 1966 by letter (Ex. 26) the S. D. O. Nowrangpur asked Sri S.K. Panigrahi (R.W. 3), Sectional Officer. Beriguma, to explain why he did not make measurements and submit final bills of the petitioner despite repeated reminders On 14th and 15th September, 1966 final measurements of the work done by the petitioner were made though wrongly R.Ws. 1 and 4 stated that final measurements were made not only on these two dates but also on 14-4-1966. In one of the Bills the number '9' appeared like '4' and accordingly such a wrong statement was made. On 7th December, 1966 by letter (Ex. 5) the Executive Engineer asked the S.D.O. to explain why he did not submit final bills after eight months. A reference in that letter was made to Ex. Z-4 dated 18-3-66. Accordingto the evidence of the Executive Engineer (R. W. 4) and the Accountant (R. W. 1) the word 'not' was inadvertently omitted in between the words 'has' and 'submitted'. I am satisfied that their explanation is correct. Mr. Mohanty tried to make out a point that some other final bills had been submitted and were being suppressed. There is no basis for such a statement. The various letters written from time to time clearly show that no measurement had been taken before 14-9-66 and no bills had been submitted. On 19-12-66 by noticed (Ex. 6) tenders for the unfinished work of the petitioner were called for. The moment such a notice was issued, the petitioner wrote the letter (Ex. D) dated 20th December, 1966 (same as Ex. 18) to the Superintending Engineer, Berhampur, requesting to grant him further time upto the end of March, 67 for completion of the work and for payment of his dues in respect of the work already done. A copy of the application was sent to the Executive Engineer, whereon he passed an order to the effect-
'This is an old case wherein Executive Engineer has already ordered to close the contract and do by job. Please order it without penalty as it is a case of accident and cause is genuine. Please put up draft to S. E., Special Circle. Please discuss. (See Ex. 18(b).' The application was submitted to the S. E. (Superintending Engineer) for favour of ordering about penalty to be imposed in rescinding the contract (Ex. 18 (c)) dated 4th January, 1967. No order of the Superintending Engineer agreeing not to impose penalty has been produced.
(g) On 8th January, 1967, the petitioner wrote to the Executive Engineer under the subject 'Resignation of P.W.D. Contractorship'. Therein he stated that he had decided to contest from the Nowrangpur Constituency as a candidate in the coming election and thereby he resigned from the contractorship from the P.W.D. He requested the Executive Engineer to clear up his account and to Issue a certificate after finalising everything before the 13th of that month. The Accountant (R. W 1) on behalf of the Executive Engineer forwarded a copy of the application Ex. 7(a) on 11th January, 1967, to the S. D. O. Nowrangpur, for information and necessary action and asked him to immediately submit all the final bills of the contractor including his liabilities.
(h) On 18th of January, 1967, the S.D.O. submitted five final bills (Ex. 8 series) with site account and material statements with the accompanying letter (Ex. 9). On the very day, the Executive Engineer wrote the letter (Ex. W) to the S.D.O. asking him to state the circumstances under which he entrusted the balance work of the petitioner to another contractor without taking final measurements and without finalsing the accounts of the petitioner in contravention ofthe orders of the Executive Engineer previously passed. From the material statements it appeared that the petitioner had taken 435 bags of cement and 7.9 quintals of iron rods in excess and had not returned the same. Accordingly, on 19th January, 1967 a telegram (Ex. X) was sent to the S.D.O. for recovery of the excess materials.
(i) On 20th January, 1967 the petitioner filed his nomination. On the very day the Executive Engineer sent the letter (Ex. E) to the S.D.O. asking him to accept the excess materials to be delivered by the petitioner and submitting a certificate forthwith that the materials were delivered for issuing a clearance certificate to the petitioner. As the contractor was willing to deliver the materials at Jeypore, the S.D.O. was directed to verify the materials and take delivery at Jaypore store. The conveyance charges of the materials from Jeypors to Nowrangpur where delivery was to be made, were ordered to be recovered from the contractor's bill.
(j) On 21st January, 1967 the S.D.O. informed the Executive Engineer by his letter (Ex. F) that the petitioner did not return the excess materials. By his letter (Ex. R) dated 21st January, 1967, the Executive Engineer intimated the S.D.O. the objections against the passing of the bills. The bills were accordingly sent back for further check up and removal of defects. On the very day the petitioner asked the Executive Engineer to supply him a copy of the order canceling his contract. He also filed his statement (Ex 10) before the Returning Officer that no contract subsisted.
The S.D.O. P.W.D. wrote the letter (Ex. 8) on 22nd January, 1967 in response to the letter (Ex. 12) dated 22nd January, 1967 from the Returning Officer stating therein the facts of the case. He referred to the two letters of the contractor dated 22nd July 1966 and 20th December. 1966 whereunder the contractor had requested for six month's time for completion of the balance work and stated that the contractor had not returned the excess materials issued and that the bill had not been finally passed. The Returning Officer rejected the nomination of the petitioner by his order dated 22nd January 1967 (Ex. 15).
The rest of the exhibits are all subsequent to 22nd January, 1967
7. A chronological narrative of facts was presented to bring into bold relief the jural relationship between the petitioner and the State of Orissa relating to the contract under the Rental Housing scheme.
The first question for consideration is whether there was any contract between the petitioner and the State of Orissa. The contract was admitted before the Returning Officer in the application (Ex. 10) and the representation Ex. 10 (a) In paragraph 2 Ex 10 (a), the petitioner stated that the contract work taken by him was cancelled and given to another person. Similarly in Ex. 11he asked for an urgent copy of the letter from the Assistant Engineer showing cancellation of the contract work given to him. In paragraph 10 of the Election Petition there is an unequivocal admission to the effect-
'that in fact the petitioner held a contract under the State of constructing houses under Rental Housing Scheme at Nawarangpur Such a contract was entered upon by the petitioner in March 1965. But after the work was half done, the petitioner met with an accident. In his deposition, the petitioner admits that he entered into a contract and in pursuance thereof partially constructed the houses. His statement in examination in chief runs thus '1 submitted tenders (Ex. V series) to the Executive Engineer, Koraput Division for construction of houses under the Rental Housing Scheme. .... I did not sign any agreement in F2 form for any of the work undertaken by me. The Executive Engineer Koraput, invited tenders and accepted the same.'
Ex. Y series are the interim agreements signed by the petitioner and the Executive Engineer. It is the admitted case of the parties that the Executive Engineer was the proper authority representing the Government for acceptance of the contracts under the Rental Housing Scheme. Even before the contract was accepted on 30-4-65, the petitioner started doing construction of the houses and was taking advances on running account under the interim K2 agreements.
It is also admitted by the petitioner that he took cement and iron rods from the store of the Public Works Department for the purpose of execution of work. In para 14 of his deposition he states-
'Ordinarily no excess issue of iron rods and cement is made. If, however, they are issued in excess, the cement may be either returned back or adjusted against final payments''
Clause (10) of the Tender Call Notice in Ex. 6 shows that if the contractor removes any materials or stock so supplied to him from the site of the work with a view to dispose of the same dishonestly he shall in addition to any other liabilities, civil or criminal, arising out of the contract be liable to pay penalty equivalent to five times the price of the materials or stock according to the stipulated rate and penalty as imposed shall be recovered from any sum that may then or at any time thereafter become due to the contractor or from his security. P.W. 4 admits that tender notices are given in the prescribed form and reference is made therein to tender call notices as in Ex. 6. The petitioner in para 13 of his deposition admits that notice inviting tenders was issued in a Form similar to Ex, 6 and tender call notice is hanged on the Notice Board. Thus though Ex 6 does not, relate to the Impugned contract, a similar document was a part of the tender document. In manyof the letters already referred to, the petitioner asked for cancellation of his contract and payment for the work already done. The aforesaid facts and circumstances lead to the following conclusions;
(1) There was a contract between the petitioner and the State of Orissa for execution of work.
(2) One of the terms of this contract was that the P.W. Department would supply materials like cement and iron rods for use in the work and the excess materials were to be returned back on failure of which the prices would be adjusted in the bills even with penalty. The term regarding the return of excess materials is an integral part of the contract and not collateral or ancillary to it. The case of the petitioner that the contract regarding issue of materials was collateral and ancillary to the main contract was not pleaded nor proved and must be rejected.
8. The next question is whether the contract is enforceable in law in the absence of F2 agreement. In order to comply with the requirements of Article 299 of the Constitution, three conditions must be satisfied: (i) the contract must be executed by a person duly authorised by the Governor I on behalf of the Governor.
(ii) It must be expressed to be madein the name of the Governor.
(iii) It must be in writing. The writing,however, need not be expressed in a formaldocument A valid contract may result fromcorrespondence if the requisite conditionsare fulfilled.
In AIR 1967 SC 203, K.P. Chowdhury v. State of M.P., all the previous decisions were noticed. If the contract is not in conformity with Article 299 of the Constitution, it is void and unenforceable in law. If either the Government or the contractor had brought a suit to enforce the contract, or to recover dues under the contract, such a suit would fail for non-compliance with the provisions of Article 299
This principle is not, however, wholly applicable to contracts under Section 9A of the Act. It would be profitable to notice the relevant provisions of the Act as amended from time to time and the view of the Supreme Court on this aspect of the matter. Section 7(d) of the Act, as it stood in 1951 ran thus -
'7. A person shall be disqualified for being chosen as, and for being a member of either House of Parliament or of the Legislative Assembly or Legislative Council of aState -
XX XX X (d) if, whether by himself or by any person or body of persons in trust for him or for his benefit or on his account, he has any share or interest in a contract for the supply of goods to, or for the execution of any works or for the performance of any services undertaken by, the appropriate Government.'
This section came up for consideration in AIR 1954 SC 236, Chaturbhuj v. Moreshwar. An argument was advanced that as the contract was not executed in conformity with Article 299, the contract was void and unenforceable. While accepting this proposition, it was held that if there could be ratification of the contract it would be valid for the purpose of the section. Their Lordships observed thus -
'It may be that Government will not be bound by the contract in that case, but that is a very different thins from saying that the contracts as such are void and of no effect. It only means that the principal cannot be sued; there would be nothing to prevent ratification, especially if that was for the benefit of the Government. When a Government officer acts in excess of authority, the Government is bound if it ratifies the excess. The contracts in question were not void simply because the Union Government could not have been sued on them by reason of Article 299(1).'
In subsequent decisions, the Supreme Court always accepted it as laying down good law in the context of the relevant provision of the Act. (See AIR 1962 SC 113, Bhikraj v. Union of India; AIR 1962 SC 779, State of West Bengal v. B.K. Mondal and Sons; AIR1966 SC 580, Laliteswar v. Bateswar and AIR1967 SC 203). By Act 58 of 1958. Section 7(d) of the 1951 Act was amended and it stood thus -
'7. A person shall be disqualified for being chosen as, and for being a member of either House of Parliament or of the Legislative Assembly or Legislative Council of a State -
XX XX X (d) if there subsists a contract entered into in the course of his trade or business by him with the appropriate Government for the supply of goods to, or for the execution of any works undertaken by that Government.'
In AIR 1966 SC 580 on this section a clear pronouncement was made that a contract for execution of any work did not cease to subsist only because the work had been executed and that it continued to subsist till payment was made and the contract was fully discharged by performance by both sides They held that, they were bound by AIR 1954 SC 236 and Section 7(d) applied both to executory and executed contracts.
Their Lordships, however, observed that the decision could not be extended to cover a case where the Government had in fact not ratified the contract. They said thus-
'If we were to hold that this type of transaction is covered, then we would be giving no effect to the word 'contract' in Section 7(d) and we would be substituting the word 'agreement' for it. The Legislature has not chosen to use the word 'agreement' but has used the word 'contract'. Therefore, mere agreement entered into in contravention of Article 299 and in fact not ratifiedcannot be called 'contract' within Section 7(d) of the R. P. Act.'
Though the minority took a different view on facts, there was no difference of opinion as to the correctness of AIR 1954 SC 236.
AIR 1966 SC 580 thus determined two principles: (i) A contract subsists until there is performance by both the parties. In case of execution of work, the contract subsists so long as payment has not been made by the Government. This principle applies to all contracts, executory or executed, Under Section 7(d) of the 1951 Act as amended in 1958 (ii) Contracts envisaged Under Section 7(d) of the 1951 Act, though not executed in accordance with Art 299 are valid if they were ratified in fact.
On application of the aforesaid principle, the contract between the petitioner and the Government would be valid Under Section 7(d) if it was ratified.
9. Mr. Mohanty next contended that according to Clause (6) of the Tender Call Notice the written agreement to be entered into between the contractor and the Government shall be the foundation of the rights of the parties and the contract shall be deemed to be incomplete until the agreement had first been signed by the contractor and then by the duly authorised person on behalf of the Government. As no F2 agreement was executed, the contract was unenforceable in law. It is contended that this was an essential part of agreement between the parties for the non-fulfilment of which the contract would be unenforceable. Reliance was placed on AIR 1933 PC 29, Currimbhoy v. Creet. Their Lordships accepted the following observations of Parker. J.
'It appears to be well settled by the authorities that if the documents or letters relied on as constituting a contract contemplate the execution of a further contract between the parties, it is a question of construction whether the execution of the further contract is a condition or term of the bargain or whether it is a mere expression of the desire of the parties as to the manner in which the transaction already agreed to will in fact go through. In the former case there is no enforceable contract either because the condition is unfulfilled or because the law does not recognise a contract to enter into a contract. In the latter case there is a binding contract and the reference to the more formal document may be ignored.'
Mr. Sahu contends that Ex. 6 is merely the same form and is not the tender call notice of the impugned contract. This is not correct for reasons already discussed. Parties proceeded on the footing that the tender notice and tender call notice in respect of the impugned contract are in the same form as Ex. 6. Mr. Sahu's contention that Clause (6) comes within the latter part of the aforesaid pronouncement is also not acceptable. Every contract executed with the Government mustbe in conformity with Article 299 of the Constitution. Clause (6) of Ex. 6 merely incorporated a provision for compliance with Article 299. The dictum of the Privy Council is of importance in cases where rights are to be worked out inter se amongst the contracting parties by enforcing the contract. The identical principle, that though the contract is unenforceable on account of non-compliance with the provisions of Article 299 yet it is valid under Section 7(d) if there was ratification, would apply even in this case. The aforesaid Privy Council decision lays down good law with reference to the rights and liabilities arising under Contract Act and has no application to contracts under Section 9A of the Act if in fact there is ratification.
10. The next question for consideration is whether the view in AIR 1966 SC 580 has in any way been affected by the introduction of Section 9A in 1966 in the Act. It runs thus -
'9A. Disqualification for Government contracts, etc. -- A person shall be disqualified if, and for so long as, there subsists a contract, entered into by him in the course of his trade or business with the appropriate Government for the supply of goods to or for the execution of any works undertaken by, that Government.
Explanation -- For the purposes of this section, where a contract has been fully performed by the person by whom it has been entered into with the appropriate Government, the contract shall be deemed not to subsist by reason only of the fact that the Government has not performed its part of the contract either wholly or in part.'
The main part of Section 9A is the same as Section 7(d) after its amendment in 1958. Only the Explanation has been added. Under the explanation, if the contract has been fully performed by the contractor, the contract would be deemed to be wholly performed even though Government had not performed its part. A person would not be disqualified Under Section 9A if the work had been executed but payment had not been made by the Government. To this extent. AIR 1966 SC 580 stands modified.
If on the other hand, the work had been executed, but the contractor had liability to pay to the Government in relation to the contract, he cannot be said to have performed his part of the contract. AIR 1966 SC 580 will have full application in such a case and the contractor would be disqualified from being a candidate.
Both in Section 7(d), as amended in 1958 and in Section 9A introduced in 1966, the expression 'entered into in the course of his trade or business' was introduced. In AIR 1965 SC 93, C.V.K. Rao v. Dantu Bhaskar Rao their Lordships held that it was not necessary that a course of business based on the other transaction must first exist before the offending contract can be said to be in the course of business. The contract may itself be the start of the business and the words 'incourse of business' may still be apt. In this case, the petitioner admits that he had contract work from 1947 to 1957 and again he started doing contract work in 1965. He took also another contract for the culvert, which is not the subject matter of this litigation. Mr. Mohanty conceded that the impugned contract of the petitioner was in course of his business and the point need not be pursued in view of the Supreme Court decision.
11. The next question for consideration is whether the contract was ratified by the Government. It is the admitted case of the parties that the Executive Engineer is the proper authority to execute the contract on behalf of the Governor and in the name of the Governor under Article 299(1) of the Constitution. It has already been discussed that it is the Executive Engineer who accepted the tenders and executed the K2 agreements. In accordance with the contract, the petitioner proceeded to execute the Rental Housing Scheme and did the work half way. Money was advanced under running account from time to time even before the tenders were accepted. Materials like cement and iron rods were also advanced under the authority of the Executive Engineer for use in the work. Thus the contract was being carried out according to its terms by both the parties. The executive Engineer being the authority to execute the contract in the name and on behalf of the Governor, there was a ratification of the contract by the Government. If the contract subsists, the petitioner would be disqualified under Section 9A of the Act on the authority of AIR 1966 SC 580.
12. It has already been found that a contract existed between the petitioner and the State of Orissa by ratification in fact. The further question is whether that contract subsisted on the date of the scrutiny of the nomination. Petitioner's case is that the contract was terminated. In support of his case, reliance is placed on Exs. 2 series and 3 series. By his letter dated 10-2-66 (Ex 2), the petitioner clearly stated that suddenly he fell ill and was seriously injured by electric shock and that it was not possible on his part to take up the work till its completion. He stated that the work was done half way and prayed for cancellation of the contract without imposing penalty. He wanted measurement of the work and final payment at an early date. His case was recommended by the S.D.O. by Ex. 2(a) on 26-2-1966. The executive Engineer by his order (Ex. 2(b)) dated 11-3-66 said that the work might be finally measured and closed without penalty and the balance of the work might be completed through job work basis.
Mr. Mohanty advanced two contentions -
(i) By Ex. 2(b) the entire contract was rescinded and. (ii) in the alternative, the contract regarding performance of the balance work was rescinded and as such the contract was fully performed.
The first contention is wholly unacceptable. Section 63 of the Contract Act lays down that every promisee may dispense with or remit whole or in part the performance of the promise made to him or may extend time for such performance or may accept any such of it in satisfaction which he thinks fit. Ex. 2(b) does not say that the contract was rescinded as a whole. In the context of facts, the contract could not have been rescinded as a whole. The work had been executed in part. Due to accident, the contractor expressed his inability to perform further work. It was open to the Government not to accept the proposal. The Executive Engineer was, however, sympathetic. He, therefore, agreed to pay for the incomplete work done by the contractor and exonerated him from further performance. Ex. 2(b) only means that the contractor was not to be penalised for the non-performance of the further work. The order does not, however, mean that the contract was to be closed without determination of the right and liabilities of the contracting parties. It was accordingly made clear that measurements would be taken, final bills submitted and thereafter work would be entrusted to job worker. Even if the balance work was given to any job worker without determination of inter se liabilities, the contract cannot be said to have been terminated. The Executive Engineer had even no power to relieve the petitioner from payment of penalties. By Ex. 18(b) dated 4-1-1967, recommendation was made by the Executive Engineer to the Superintending Engineer for non-imposition of penalty. No order of the Superintending Engineer agreeing to the proposal has been produced. There is, therefore, no final decision of the competent authority to give up penalty (See Orissa P. W. D. Code p. 153 Appendix IV. Clause 21). To derive the benefit of the Explanation to Section 9A, the petitioner must establish that he had fully performed his part of the contract. Once the petitioner was exonerated from doing further work, the incomplete work done by him would be taken as a complete performance of his part of the contract provided he had no liabilities against him in relation to the contract. For instance, if the contractor had taken more money by way of advances towards the execution of the incomplete work, or had taken excess materials which had not been returned, or on the adjustment of the price of which he was to pay some money to the Government, he cannot be said to have discharged his part of the contract. All these factors form integral constituents of the contract. The principle laid down in AIR 1966 SC 580 will have full application and the explanation would not enure to his benefit. From all the orders and letters, such as Exs. 3(c). B, Z-4. Z-5, 4. C, 5, D and 18 etc., it would be clear that the department was always insisting that final measurement is to be done and the bills are to be prepared. With the preparation of the bills, material statements are to be given and the rights and liabilities were to be determined. The bills ultimately to be drawn may be plus bills whereby payments are to be made to the contractor by the Government or minus bills whereby the contractor was to return the money or excess materials to the Government. No single document could be brought to notice whereby the Executive Engineer said that the contract of the petitioner would be closed without determination of mutual rights and liabilities. In the absence of any such unequivocal acceptance on the part of the Executive Engineer, it is difficult to accept the petitioner's contention that the contract was rescinded even in part. I am clearly of opinion that the contract was not rescinded either in whole or in part. The position that was accepted by the Executive Engineer was that the petitioner was exonerated from the liability of doing the further work as originally contracted. But the contract in respect of the part of the work was not closed or terminated and the matter was kept pending until final measurements were done and final bills were prepared.
This conclusion is reinforced by the petitioner's own conduct in asking for extension of time to complete the work. By his letter (Ex. C) dated 22-7-66, the petitioner asked for six month's time to complete the work. In his deposition, the petitioner states that he applied for extension as by then ha had no knowledge that his contract had been cancelled and that he knew of the cancellation from Habibullah in August, 1966. Even assuming that this explanation is true there was no justification for him to again apply for extension to the Superintending Engineer till March, 1967 by his application (Ex. D) dated 20th December 1966. This document contains the clear admission that the contract had not been previously cancelled. The relevant recitals run thus -
I learn that department wants to cancelmy contract.
x x x x
If mycontract is cancelled, I will sustain heavyloss x x x x I, therefore, requestyou to grant me time till March 1967.
The petitioner (P.W. 1) gave an explanation that he wrote Ex. D as advised by the Executive Engineer (R. W. 5) who denies the suggestion. I accept denial of R.W. 5 as reliable.
On the aforesaid facts and circumstances, conclusion is irresistible that there was no rescission of the contract either in part or in whole.
13. Even assuming that the contract was rescinded in part, in other words, the incomplete work was accepted as the complete performance of the contract, it is necessary to decide whether the petitioner had any liabilities to discharge in respect of the execution of the incomplete work. It is the admitted case that the petitioner was taking advance payments on running accountbills and had also taken materials, such as, cement and iron rods, for use in execution of the work. P. W. 1 deposed that when R.W. 5 asked him to return the excess materials on 19th January, 1967, he told him that he had returned the same to Harihar Bisoi under orders of the Executive Engineer. R.W. 5 denies this fact. Once, however, the petitioner admitted that excess cement and iron rods were issued to him, it is for him to prove that he had returned the same. Exs. 20 and 21 dated 15th July, 1966 only bear the signature of an office clerk hut not of the S.D.O. There is no document or register of the office of the S.D.O, in support of the contents of Exs. 20 and 21. These two documents appear to have been fabricated with the help of the office clerk Sri K. C. Kar. The originals should have been called for. As early as 21st Sept. 1966 the Executive Engineer made queries regarding issue of materials to the petitioner by his letter Ex. 23.
Five final bills (Exs. 8 series) were drawn up. Exs. 8, 8(a), 8fc) and 8(d) show that the contractor had to pay Rs. 605-43 p. Rs. 179-93 p. Rs. 500-98 p. and Rs. 239-13 p. respectively under these bills. Ex. 8fb) is a plus bill showing that the contractor was to get Rs. 59-89 p. from the Government. Taking all the bills into consideration, the petitioner was under a liability to pay Rs 1465-58 p. to the Government towards the excess advance taken on account of running bills and price of the empty cement bags not returned. In these bills, Rs. 36-50 p., Rs. 31-50 p., Rs. 53-78 p., Rs. 78-00 and Rs. 77 in all amounting to Rs. 276-78 p. has been collected towards the cost of empty cement bags under Exs. 8 to 8(b) respectively. R. W 4 had deposed that the contractor had to return empty cement bags and, in case of failure, the cost of the bags was to be recovered. R. W. 1 had deposed that Rs. 123-75 p. towards the price of 11 bags of cement was wrongly deducted from the contractor's dues, and if this is taken into consideration, the contractor had to pay Rs. 1341-83 p. R. W. 1 also stated that Rs. 1411-00 was deducted from the payments made under running bills towards the security deposit If this amount is adjusted, the liability of the Government to pay to the contractor is Rs. 69-17p. The contractor had taken 230 bags of cement in excess towards the execution of the work (See R W. 5 and Ex. T). Its price comes to Rs. 2587-50 p. Deducting Rs. 69-17 p. from out of this amount the contractor had still a liability of paying Rs. 2518-33 p. Thus, even excluding the liability on account of iron rods, the contractor was to pay substantial amount to the Government. In this view of the matter, it cannot be said the contractor had performed his part of the contract. The explanation to Section 9A is of noavail. The main part of the section affects the petitioner's case. As the contractor had a liability to discharge in favour of the Government in relation to the contract, it wasnot brought to an end but subsisted on the date of the scrutiny of the nomination.
14. It was very seriously contended by Mr. Mohanty that he had prima facie discharged the onus and it is for the respondent to establish that the contract subsisted. This argument has no force. The Returning Officer's order was against the petitioner. Under Section 100(1)(c) of the Act, it is for the petitioner to establish that his nomination had been improperly rejected. This he can prove only by showing that the contract did not subsist. Materials on record are enough to establish that the contract subsisted despite the fact that the petitioner was exonerated from doing the residual work. The final bills had not been passed and even on the final bills prepared, the petitioner had certain liabilities to discharge to the Government in relation to the contract. That apart, the question of onus loses significance when evidence has been led on either side.
15. On the aforesaid analysis, conclusion is irresistible that there was a subsisting contract on the date of the scrutiny of the nomination in course of business between the petitioner and the Government of Orissa for the execution of the Rental Housing Scheme undertaken by the Government, and, as such, the petitioner was disqualified from standing as a candidate for the election from the Nowrangpur Constituency under Section 9A of the Act and his nomination was not improperly rejected by the Returning Officer.
16. The Election Petition fails and is dismissed with costs. Hearing fee of five hundred rupees.