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State of Rajasthan Vs. Jairam Das - Court Judgment

LegalCrystal Citation
SubjectContract;Constitution
CourtRajasthan High Court
Decided On
Case NumberSecond Appeal Nos. 485 to 489 of 1963
Judge
Reported inAIR1972Raj38
ActsConstitution of India - Article 299 (1)
AppellantState of Rajasthan
RespondentJairam Das
Appellant Advocate B.C. Chatterjee, Additional Adv. General
Respondent Advocate P.C. Bhandari, Adv.
DispositionAppeals dismissed
Cases Referred and Mulamchand v. State of Madhya Pradesh
Excerpt:
- - thus there is no escape from the conclusion that the decree granted by the lower court restraining the defendant from realising the balance of the contract money is perfectly in order. but in absence of any such evidence, i fail to see how the restitution of the deposits made by the plaintiffs can be refused more so when the circumstances indicate that for want of communication of the acceptance of the bid the bidder had not only not collected any royalty but had communicated his desire not to execute the contract, as the sanction had not been given in time and two months of the contract period had already elapsed......no contract at all and could not be enforced either by the government or by the other person as a contract. article 299(1) provides that 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 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 by such persons and in such manner as he may direct or authorise. admittedly in the present case no contracts were executed as provided in article 299(1) of the constitution. it has been repeatedly held by their lordships of the supreme court that in view of article 299(1) of the constitution there can be no implied.....
Judgment:

C.M. Lodha, J.

1. All these appeals by the defendant State of Rajasthan involve a common question of law, and can be conveniently disposed of by a single Judgment.

2. It appears that the respondent-plaintiff in all these cases gave highest bid in the auction held on different dates in respect of different areas for royalty collection contract in respect of building stone for the period commencing from 1-4-1958 to 31-3-1959 as provided in the Rajasthan Minor Mineral Concession Rules, 1955, which were then in vogue, no bid was to be regarded as accepted unless confirmed by the Government. The plaintiff's complaint is that they deposited 25% of the amount of bid for one year on completion of the auction as provided in Rule 37 of the aforesaid Rules (which for the sake of brevity called 'the Rules' hereinafter). But the acceptance of the Government was not conveyed to the plaintiff till 3-6-1958 by which time two months of the period of contract had already expired. It was alleged that on the receipt of the sanction dated 30-5-1958 on 3-6-1958 the plaintiff in all the cases refused to execute the contract and informed the Government that they were not prepared to enter into the contract and the amount deposited by them may be refunded to them. However, the Mining Engineer informed the plaintiffs that they were even liable to pay full amount of the contracts and action was being taken to recover the same under the Public Demands Recovery Act. Subsequently it appears that for realisation of the dues the Government actually attached some property belonging to the plaintiff under the Public Demands Recovery Act. Consequently the plaintiffs filed the present suits for refund of the 25 per cent of the amount of bid for one year paid by them at the time of auction and also prayed for issue of an injunction against the State of Rajasthan restraining them not to realise any amount from the plaintiff in respect of the contracts in dispute.

3. The defendant State of Rajasthan contested the plaintiff's claims, and pleaded that the plaintiff in all the cases had commenced the work from 1-4-1958 and they were liable to pay the whole of the contract money. The defendant took some other technical objections also, but they were not pressed in this appeal, and, therefore, it is not necessary to make any reference to those objections.

4. None of the parties examined any witness and merely relied upon the documents produced by them. The learned Munsiff-Magistrate Jaipur City (East) Miss Mohini Saxena by her judgments dated 18-10-62 decreed the plaintiff's claims in all the cases for refund of the 25 per cent of the amount of bid deposited by them and also issued a perpetual injunction restraining the defendant from realising the balance of the contract money.

5. The defendant State of Rajas-than filed appeals which have been dismissed by the Senior Civil Judge. Jaipur City and consequently the State of Rajasthan has come in second appeal in these cases.

6. The only point for determination in these appeals is whether the plaintiffs are entitled to get back the deposits made by them at the time of completion of the auction and whether they are not liable to pay the balance of the contract money

7. The learned District Judge has held on the basis of a series of decisions of various High Courts that if the contract between the Government and any other person is not in compliance with Article 299(1) of the Constitution, it would be no contract at all and could not be enforced either by the Government or by the other person as a contract. Article 299(1) provides that 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 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 by such persons and in such manner as he may direct or authorise. Admittedly in the present case no contracts were executed as provided in Article 299(1) of the Constitution. It has been repeatedly held by their Lordships of the Supreme Court that in view of Article 299(1) of the Constitution there can be no implied contract between the Government and any other person, the reason being that if such implied contracts were allowed they would in effect make Article 299(1) useless. It has been further held that if there is no contract in full compliance with the aforesaid Article it would be no contract at all and could not be enforced either by the Govt. or by the other persons as a contract. Reference in this connection may be made to K. P. Chowdhri v. State of Madhya Pradesh, AIR 1967 SC 203, and Mulamchand v. State of Madhya Pradesh, AIR 1968 SC 1218. In view of this position of law it is crystal clear that the Government of Rajasthan is not entitled to realise the balance of the contract money as no contract will be deemed to have come into existence in the eye of law in absence of compliance with Article 299(1) of the Constitution.

8. The learned Additional Advocate General, however, argued that Article 299 has been introduced in the Constitution for the benefit of the Government who alone can take advantage out of it, and not any other party to the contract. Learned Additional Advocate General could not cite any law in support of this submission which in my view cannot be accepted in face of the clear pronouncement of their Lordships of the Supreme Court in the cases referred to above to the effect that the provisions of Article 299(1) of the Constitution are mandatory in character and the contravention of these provisions nullifies the contracts and makes them void. In other words it would be no contract at all and could not be enforced either by the Government or by the other person as a contract. Thus there is no escape from the conclusion that the decree granted by the lower court restraining the defendant from realising the balance of the contract money is perfectly in order.

9. As regards the refund of deposits made by the plaintiffs in these cases on completion of the auction, the learned Additional Advocate General contended that the bidder had actually taken the benefit of the contract and had started collecting royalty in question from 1-1-1958 and did so upto 9-6-1958 when they communicated to the Government that they did not want to execute the contract. It may be observed that even though the defendant-appellant took a plea in the written statement that the plaintiff had actually availed of the contract for two months, it did not press for any issue on that point, nor the defendant led any evidence to show that the plaintiff had actually collected royalty for any period. It may be noticed that in the letter dated 9-6-1958 whereby the plaintiff in each case had expressed the desire not to take the contract it was mentioned that two months' period of the contract had already elapsed and nobody had paid royalty to him. In the reply to this letter it was never asserted by the Government that the bidder had started collecting royalty and could not back out of the contract. On the other hand, in the reply dated 21-6-1958 (Ex. 3) it was stated by the Government that notice for surrender was not acceptable unless and until the proper agreement was executed, and from this letter it is further clear that the Government insisted on execution of the contract by the bidder. In this state of affairs it is not possible to hold that the bidder had actually availed of the contract and had collected any royalty for two months or for any lesser period. It is true that even if the contract is void but if it were proved that the bidder had collected the royalty in parsuance of the completion of auction in his favour but later on abandoned the collection of his own accord, the State could have legitimately claimed the forfeiture of the deposit and the plaintiff could not have claimed restitution of the deposit made by him at the time of completion of the auction. But in absence of any such evidence, I fail to see how the restitution of the deposits made by the plaintiffs can be refused more so when the circumstances indicate that for want of communication of the acceptance of the bid the bidder had not only not collected any royalty but had communicated his desire not to execute the contract, as the sanction had not been given in time and two months of the contract period had already elapsed. In these circumstances the State cannot take advantage of Section 70 of the Contract Act and is liable to refund the deposit it has received from the bidder at the time of completion of the auction. In this connection reference may be made to Section 65 of the Contract Act according to which any person who has received any advantage under an agreement which is discovered to be void, is bound to restore it or to make compensation for it to the person from whom he received it. Consequently the lower courts have rightly decreed the suit for refund of the deposits made by the plaintiffs and the judgments and decrees passed by the courts below in these appeals do not call for any interference.

10. In the result all these appeals are dismissed, but in the circumstances of the case the parties are left to bear their own costs.

11. Let a copy of this judgment be placed on the record of each appeal.


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