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Kotah Match Factory Kotah Vs. State of Rajasthan - Court Judgment

LegalCrystal Citation
SubjectContract;Constitution
CourtRajasthan High Court
Decided On
Case NumberFirst Appeal No. 92 of 1958
Judge
Reported inAIR1970Raj118; 1969()WLN75
ActsConstitution of India - Article 295 299 and 299(1); Code of Civil Procedure (CPC) , 1908 - Sections 96; Evidence Act, 123; Contract Act, 1872 - Sections 2 and 70
AppellantKotah Match Factory Kotah
RespondentState of Rajasthan
Appellant Advocate D.P. Gupta, Adv.
Respondent Advocate B.C. Chatterji, Adv.
DispositionAppeal dismissed
Cases ReferredNagubai Ammal v. B. Shama Rao
Excerpt:
constitution of india - article 299(1)--whether an implied contract can be spelled out.;in view of the mandatory provisions of article 299(1) of the constitution no implied contract can be spelled out between the government and the appellant, for article 299 in effect rules out implied contracts between the. government and another person. the document consists of nothing more than an office note indicating that certain discussion took place between the then minister for industries and commerce and shri bhanwarlal sethi. this discussion was reduced to writing. record of such minutes does not finally suggest that a valid agreement had been arrived at between the two parties in accordance with the provisions of article 299 of the constitution nor does it suggest that the state categorically.....mehta, j. 1. kotah match factory brought an action for the recovery of rupees 1,19,000 against the state of rajasthan, on january 18, 1954, in the court of learned senior civil judge, jaipur city. the plaint averments were that the plaintiff was a partnership firm and carried on business of manufacturing matches at kotah. on december 23, 1935, the former kotah state agreed to give a refund of a part of the excise duty paid on the stocks of matches produced by the plaintiff and consumed within the state territory for a period of 20 years. subsequently on march 10, 1941, the said state entered the excise pool with the then british government of india. thereafter on april 21, 1941, the said state ordered to pay rs. 14,000/-, per annum to the plaintiff for future years. on august 31, 1942,.....
Judgment:

Mehta, J.

1. Kotah Match Factory brought an action for the recovery of Rupees 1,19,000 against the State of Rajasthan, on January 18, 1954, in the court of learned Senior Civil Judge, Jaipur City. The plaint averments were that the plaintiff was a partnership firm and carried on business of manufacturing matches at Kotah. On December 23, 1935, the former Kotah State agreed to give a refund of a part of the excise duty paid on the stocks of matches produced by the plaintiff and consumed within the State territory for a period of 20 years. Subsequently on March 10, 1941, the said State entered the excise pool with the then British Government of India. Thereafter on April 21, 1941, the said State ordered to pay Rs. 14,000/-, per annum to the plaintiff for future years. On August 31, 1942, that order was modified and it was decided by the said State to refund half the excise duty paid, Later on the above State offered to the plaintiff that from August 16, 1944. Rs. 10,000/-, per annum would be paid for the remaining future period. The plaintiff did not accept this offer. On the other hand, it claimed a sum of Rupees 2,21,049/6/-, together with interest thereon, being half the amount of Rs. 4,42,098/ 12/-, paid as excise duty by the plaintiff between October 1, 1940, and December 31, 1947, in accordance with the order, dated August 31, 1942.

Eventually, on November 18, 1950, it was agreed between the plaintiff and the successor State of Kotah, i.e., the State of Rajasthan, that a sum of Rs. 10,000/-, per annum would be paid by the State to the plaintiff with effect from the date on which the last payment was made (i.e., September SO, 1940), till September 30, 1950. In accordance with the terms of the agreement a sum of Rs. 1,00,000/- became due and payable to the plaintiff by the defendant. On May 21, 1953, the plaintiff served a notice on the State of Rajasthan in accordance with the terms of Section 80, Civil Procedure Code as the defendant failed to make payment despite the notice, the plaintiff is entitled to claim interest @ 6% per annum as damages and that amount came to Rupees 19,000/-. Thus, the money outstanding in favour of the plaintiff against the defendant came to Rs. 1,00,000/-, as principal and Rs. 19,000/-, on account of interest. The cause of action accrued on November 18, 1950. The plaintiff, in the end, prayed that a decree for Rs. 1,19,000/- together with future interest @ 6% per annum in addition to costs of the suit be passed in its favour.

2. In its written statement, dated September 23, 1954, the State Government denied the existence of any agreement for giving a refund of the part of the excise duty paid by the plaintiff. The agreement allowing concession to the plaintiff was executed on August 17, 1937. The main provisions of the agreement were:--

(1) That a monopoly for manufacturing matches was granted till September 30, 1955;

(2) That duty was payable on the products of the factory as follows:--

(a) on export of matches outside Kotah State 3 pies per gross, and

(b) on imports from the factory to Kotah State one rupee, one anna and pies six per gross;

(3) That out of the duty, a rebate was payable to the factory at the end of each year at the rate of annas 12 per gross till September 30, 1938, and after that at the rate of annas 8 per gross.

It was admitted in the written statement that the former Kotah State joined the Government of India match-pool with effect from March 10, 1941. His Highness Maharaja of Kotah agreed to give to the plaintiff a subsidy of Rs. 5000/-, annually for a period not exceeding five years, which was later on (i. s., on April 21, 1941) raised to Rs. 14,000, per annum. This order was further modified on August 31, 1942, and the former Kotah State ordered to refund half the excise duty paid by the plaintiff in 1941-42. Later on, the terms were again changed with the approval of the plaintiff. On August 16, 1944, it was decided by mutual consent that the agreement, D/- 17th August, 1937, be cancelled with effect from March 14, 1941, and as consideration or compensation thereof, the following payments or provisions should be made:--

(i) an amount equivalent to the rebate that would have been payable to the factory according Clause 8 of the agreement, dated August 17, 1937, since the date on which the last payment was made and upto 16th August, 1944;

(ii) the balance of compensation or consideration would be paid by instalment of Rs. 10,000/-, per annum during the time when the fresh grant to be made to the factory remained in force. The State would be entitled to make deduction from this amount @ Rs. 40/-, per day for the number of days that the factory remained closed without permission or without adequate cause to the satisfaction of His Highness's Government; and

(iii) a fresh grant should be made to the factory.

The plaintiff, however backed out of this agreement and continued making representations to the defendant after the merger of Kotah State with the United State of Rajas-than. It was also averted in the written statement that no agreement was made, as alleged by the plaintiff on November 18, 1950, to pay a sum @ Rs. 10,000/- per year, from the date on which the last payment was made till September, 1950, The State of Rajasthan neither took any decision in the matter on November 18, 1950, nor was any such decision conveyed to the plaintiff. No agreement, as alleged in the plaint, was executed by the State of Rajasthan in favour of the plaintiff. The defendant further pleaded in para No. 3 of the written statement that some discussion, no doubt, took place between the representatives of the plaintiff and the Minister of Industries and Commerce on November 18, 1950, and some advice was tendered by the Minister concerned, but the same cannot be said to be a decision or an agreement with the State of Rajasthan.

In para No. 4 of the written statement, the defendant contended that an amount of Rs. 1,00,000 or any other sum is not payable by the defendant to the plaintiff. The defendant also denied any cause of action alleged to have been accrued in favour of the plaintiff on November 18, 1950, as no Government order was passed, nor was any valid commitment made by the State. The plaintiffs suit according to the defendant is also not within time. The plaintiff's claim includes the amount of the pre-merger period also and on account of a change in sovereign, the defendant State of Rajasthan is not bound by any agreement which the former Kotah State might have made, as the same was never recognised by the present government. After coming into force of the Constitution of India, excise duties on goods manufactured in India were included in the Union list and the State of Rajasthan could not have validly entered into any agreement with the plaintiff. In the end, it was prayed by the defendant that the plaintiff's suit should be dismissed in the absence of any alleged agreement, dated November 18, 1950.

3. On March 23, 1955, learned Senior Civil Judge, Jaipur City, framed appropriate issues. The plaintiff examined three witnesses, namely, Rajendra Kumar P. W. 1, Subhudra Kumar P. W. 2, and Bhanwarlal Sethi, P. W. 3. In its defence, the State Government produced one witness, Shri Mathura Nath, D. W. 1. By its judgment, dated May 22, 1958 the trial Court dismissed the plaintiff's suit with costs. The finding of the trial Court is that the plaintiff has not proved that an agreement had been arrived at between the parties in conformity with the provisions of Article 299 of the Constitution. The plaintiff based its claim on the agreement, dated November 18, 1950, and not on the previous liability of the Kotah State and, therefore, Article 6 of the covenant does not give right to a citizen to enforce it in a Court of law. As Article 6 of the covenant is an agreement between high contracting parties, a citizen cannot take advantage of it. Under Section 73 of the Contract Act, statutory recognition is given to the general rule that in the event of a contract the party which suffers by a breach thereof is entitled to recover from the party breaking the contract compensation for any loss or damages caused thereby to him, but that is not the plaintiffs case and, therefore, the plaintiff is not entitled to get interest.

4. Aggrieved against the above verdict, the plaintiff has taken the present appeal. Contentions of learned counsel for the appellant are:--

(1) That the trial Court went wrong in holding that there was no contract between the parties arrived at on November 18, 1950;

(2) that the State Government gave recognition to the past liability incurred by the erstwhile Kotah State and, therefore, State Government is liable to compensate the appellant on that account;

(3) that the trial Court wrongly held that the document, dated November 18, 1950, in possession of the defendant, is protected from disclosure in accordance with Section 123, Indian Evidence Act; and

(4) that the plaintiff is entitled to claim benefit under Section 70 of the Contract Act and that the State Government is bound to make compensation under that section.

As for the first point, regarding the existence of contract alleged to have been arrived at between the parties on November 18, 1950, the plaintiff has examined, three witnesses, namely, P. W. 1, Rajendra Kumar s/o. Bhanwar Lal Sethi, P. W. 2, Subhudra Kumar and P.W. 3, Bhanwarlal Sethi. The defendant examined D. W. 1 Shri Mathura Nath. P. W. 1 Rajendra Kumar has stated in the examination-in-chief that his father Bhanwarlal Sethi had had a talk with the Minister for Industries and Commerce, Shri

Sidh Raj Dhadha and Shri Bhanwarlal Sharma, Deputy Secretary Industries, on 18th November, 1950, in connection with the rebate to be paid to the Kotah Match Factory. A decision was taken that the Kotah Match Factory was entitled to receive rebate from the years 1940 to 1950 at the rate of Rs. 10,000/-, per year. This agreement in writing had taken place on the same day and both Shri Sidh Raj Dhadha and Shri Bhanwarlal Sethi put signatures on the agreement. It was further decided that for future a new agreement should be reduced to writing in the changed circumstances between the Kotah Match Factory and the Government for the period 1950 onwards and a rebate at the rate of Rs. 10,000/- per year be allowed from 1950 to 1955, subject to the factory producing minimum output. In his cross-examination, the witness has categorically said that no document was executed on November 18, 1950, in the form of an agreement.

The document simply contained a reference of the discussion between B. L. Sethi and the Minister for Industries and Commerce, and the Deputy Secretary. The witness also stated in the cross-examination that he does not remember whether or not Secretary Industries and Commerce or the Deputy Secretary of the Department put his signature on the agreement. He further deposed that after November 18, 1950, no request was made to the Government in writing for supplying a copy of the said agreement to the plaintiff. The witness then said that when his father put his signature on the agreement, Shri Sidh Raj Dhadha was not present. The Deputy Secretary brought a paper signed by Shri Sidh Raj Dhadha, but Shri Dhadha did not sign it in his or his father's presence. The other paper on which the signature of his father was obtained was a carbon copy of the agreement, dated November 18, 1950, bearing the signature of Shri Sidh Raj Dhadha. The Deputy Secretary did not obtain the signature of Shri Dhadha on the carbon copy. From the evidence of P. W. 1 Rajendra Kumar, it is plain that no formal agreement was made between the parties on November 18, 1950. Only minutes of discussion were recorded. Had any such agreement been made, the representatives of the plaintiff would have immediately obtained a copy thereof or would have not kept quiet for a number of years without obtaining its copy.

5. P. W. 2 Subhudra Kumar has stated that signatures of Shri Sidh Raj Dhadha and Shri Bhanwarlal Sethi were obtained on the decision which had taken place as a result of the discussion between both the parties. The witness has, however, unequivocally stated that he cannot say whether the discussions which had occurred were reduced to Writing in the form of proceedings or in the form of an agreement. The witness has further testified that Shri Sidh Raj Dhadha did not sign any agreement in his presence.

He also does not know whether or not the agreement was written on a foolscap paper. He does not remember how many lines the agreement embodied. Thus, P. W. 2 Subhudra Kumar fails to give any positive evidence in regard to the agreement.

6. P. W. 3 Bhanwarlal Sethi, who is alleged to have conducted negotiation with the Minister in the matter in controversy, has stated that he had had some talks on his own behalf with the Minister and that he had no letter of authority on behalf of the Kotah Match Factory to hold such talks. The witness has further said that Shri Bhanwarlal Sharma, Deputy Secretary, Industries and Commerce, took down notes of the talks which had taken place in the matter. Signatures of the parties were not obtained on the notes. Both the witnesses and Shri Sidhraj Dhadha put their signatures on the matter which was got typed by Shri Dhadha. The witness has also said that Shri Sidhraj Dhadha did not sign any of the papers in his presence. No document was written on behalf of the Rajpramukh and no letter in writing was addressed for the issue of a copy of the said document. From the evidence of Shri Bhanwarlal Sethi also it is not evident that an agreement was duly executed on November 18, 1950, between the two parties.

7. The defendant examined Shri Mathura Nath, D. W. 1. He was Deputy Secretary, Industries Government of Rajasthan, Jaipur. He has stated that Shri B. L. Sharma had worked as Deputy Secretary, Industries in the year 1950. He has looked into all the relevant records. He could not come across any agreement alleged to have been arrived at between the parties. He could only find certain notes about the talks which had taken place between the parties. These notes were dated November 18, 1950. The witness has further deposed that the State has got no other document of November 18, 1950, except these notes and that neither any agreement was recorded on November 18, 1950, nor was the signature of Shri Bhanwar Lal Sethi obtained on any such document that day.

8. The above evidence does not show that the plaintiff has succeeded in proving the existence of an agreement alleged to have been arrived at between the two parties on November 18, 1950. To prove this fact the best evidence would have been that of Shri Sidh Raj Dhadha, Ex-Minister, Industries and Commerce, but, for the reason best known to the plaintiff, he has not been examined.

9. It will not be out of place to mention here that under Rule 34 of the Rules of Business, framed under Article 166 of the Constitution of India, it is provided that the Finance Department shall be consulted before the issue of orders upon all proposals, which affect the finances of the State and in particular proposals involving an expenditure for which no provision has been made in the Appropriation Act, Rule 35 of the said Rules lays down that the views of the Finance Department shall be brought on the permanent record of the Department to which the case belongs and shall form part of the case. In this case it is nowhere found that the proposal of granting rebate to the plaintiff, involving appreciable financial commitment, was referred to the Finance Department. Unless that was done, it cannot be said that the proposal reached the final stage of maturity.

10. Article 299(1) of the Constitution is in the terms following:--

'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 Rajpramukh) 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.' (Note: The words 'or the Rajpramukh' were omitted by the Constitution (Seventh Amendment) Act, 1956).

The provisions of Article 299 are mandatory in character and contravention of these provisions would nullify the contract and would make them void and unenforceable. No State Government can be sued by a private individual where there is the breach of the provisions of Article 299 of the Constitution: see Bhikraj Jaipuria v. Union of India, AIR 1962 SC 113, It was stated in that case that under Section 175(3) of the Government of India Act, 1935, which is corresponding to the provisions of Article 299 of the Constitution of India, the contracts had (a) to be expressed to be made by the Governor (or Rajpramukh) or Governor-General; (b) to be executed on behalf of the Governor (or Rajpramukh) or Governor-General, and (c) to be executed by an officer duly appointed in this behalf and in such manner as the Governor (or Rajpramukh) or Governor-General directed or authorised. It was also held that the provisions of Section 175(3) of the Government of India Act, 1935, were mandatory as the object of enacting these provisions was that the State should not be saddled with liability for unauthorised contracts. The evidence in that case showed that no contract was expressed to be made by the Governor-General and was not executed on his behalf. It was, therefore, held that the contract was not binding on the Union of India and the Dominion of India cannot be sued by the private individual for compensation for breach of contract.

The same principle was reiterated by their Lordships of the Supreme Court in State of West Bengal v. B. K. Mondal and Sons, AIR 1962 SC 779. It was held in that case that the provisions contained in Section 175(3) of the Government of India Act, 1935, corresponding to Article 299 of the Constitution, were mandatory in nature. The intention of Parliament in enacting Section 175(3) was that the State should riot be burdened with liability based on unauthorised contracts, The provisions were made in the public interest and so the word 'shall' used therein must be held to make it obligatory and not directory. Further, the decision in Chatturbhuj Vithaldas Jassani v. Moreshwar Parashram, AIR 1954 SC 236 was explained in that case and it was held that it should be confined to its own facts in the context of the Representation of the People Act. Their Lordships of the Supreme Court had had the occasion to consider the matter again in Union of India v. A. L. Rallia Ram, AIR 1963 SC 1685, and it was held on that case that so long as all the requirements of Section 175(3) of the Government of India Act were fulfilled and were clear from the correspondence, Section 175(3), did not necessarily require the execution of any formal document.

Again, in a later decision in P. B. Chowdhry v. State of Madhya Pradesh, AIR 1967 SC 203 it was observed that in view of Article 299(1) of the Constitution there could be no implied contract between the Government and any other person, the reason being that if such an implied contract were allowed, that would in effect make Article 299(1) useless, for then a person, who had a contract with Government, which was not executed at all in the manner provided in Article 299 of the Constitution could get away by saying that an implied contract might be inferred by the facts and circumstances of a particular case. Their Lordships further pointed out that if the contract between the Government and another 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 the other person as a contract, In a, recent decision, reported in Mulchand v. State of Madhya Pradesh. AIR 1968 SC 1218, his Lordship Ramaswami, J., speaking for the Court, held that the provisions of Section 175(3) of the Government of India Act 1935, or the corresponding provisions of Article 299(1) of the Constitution of India are characterised as mandatory and their contravention would nullify the contracts and make them void and that there is no question of any estoppel or ratification in such a case.

11. What was said in these cases with respect to Section 175(3), Government of India Act, 1935, or the corresponding Article 299(1) of the Constitution of India was that the provisions of Section 175(3) and Article 299(1) were enacted nor for the sake of mere form, but for safeguarding the interest of Government against unauthorised contracts. They are based on the ground of public policy and for the protection of the general public and these formalities cannot be waived or dispensed with.

12. In the light of the above discussion, the position in the present case is that there was no contract between the appellant and the Government as required by Article 299 of the Constitution of India. In view of the mandatory provisions of Article 299(1) of the Constitution, no implied contract can be spelled out between the Government and the appellant, for Article 299 in effect rules out implied contracts between the Government and another person. Where, as here, there is no contract, express or implied, between the Government and the appellant in accordance with the mandatory provisions of Article 299(1) of the Constitution, there can be no question of recovery of any money or damages from the Government. The view, therefore, taken by the trial Court that the suit money was not recoverable from the defendant cannot be said to be incorrect.

13. This brings us to the next point, raised on behalf of the appellant, namely, whether the State Government gave recognition to the liability incurred by the Kotah State. Learned counsel for the appellant submits that it did so. In support of his contention he cited Amar Chand Butail v. Union of India, AIR 1964 SC 1658, as also Article 295 of the Constitution. It is true that recognition of the claim made against the former Indian States by the successor State or the Union can be proved by the claimants either by express acknowledgment or recognition or may even be established on relevant facts and the circumstances which may lead to the inference of such recognition. Recognition of such a claim can be either express or implied and in the latter class of cases the inference as to recognition may be drawn legitimately from the facts and the circumstances which may reasonably support such an inference. It is hardly necessary to deal with the point elaborately. Here, it is not the plaintiff's case that the successor State recognized the appellant's claim against the erstwhile Kotah State.

The plaintiff approached the Civil Court with a definite case that a fresh agreement had been arrived at between the two parties on the basis of an agreement, dated November 18, 1950, and it was agreed between the two parties that a sum of Rupees 10,000/-, per annum would be paid by the State of Rajasthan to the plaintiff from the date on which the last payment was made: vide para 3 of the plaint. In para 8 of the plaint the plaintiff has made it further clear that the cause of action accrued on November 18, 1950. The plaintiff has not come forward with a positive assertion that his claim is based upon the recognition by the Rajasthan State of the past liability of the erstwhile Kotah State. The plaintiff cannot now turn round and set up a new case and take the opposite party by surprise.

Such a claim was never asserted in the plaint, nor was the opposite party given an opportunity to refute it, No issue on the point was framed by the trial Court. The appellant, therefore, cannot be allowed to raise his claim upon a plea which was never put forward by him in the course of trial. In Amarchand Butail's case, AIR 1964 SC 1658 (supra), there was a certain claim outstanding against Himachal Pradesh. The Chief Conservator of Forests, who was also the Secretary to the Forest Department, Government of Himachal Pradesh, referred in detail to the history of the transaction between the appellant and the erstwhile State of Jubbal and he in clear and precise terms admitted the liability to pay the amount claimed by the appellant. The Chief Conservator of Forests further stated in his letter addressed to the Accountant-General that the only course left was to pay to the appellant the amount mentioned therein. He ended his letter by saying that he would be obliged if the payment of the said amount was authorised within the financial year 1951. Their Lordships of the Supreme Court held that there could be no doubt that the letter amounted to a complete recognition and acknowledgment on behalf of the Government of Himachal Pradesh to pay to the appellant the amount due to him from the Jubbal State. In the instant case there is nothing on the record to suggest that the State Government recognized or acknowledged its liability to pay to the appellant the amount due from the former Kotah State.

14. We now switch over to the third point, referred to by learned counsel for the appellant, namely that the trial Court fell in error by conferring upon the respondent right to claim privilege in respect of the document, dated November 18, 1950. The document was inspected by the trial Court on February 3, 1955, on an objection having been made by the plaintiff for its non-production and for defendant's claiming protection under Section 123 of the Evidence Act. The only objection that was made was that the affidavit did not show that it was filed by the Deputy Secretary with the permission of the head of the department, as envisaged by Section 123, Evidence Act. No objection was made on behalf of the appellant that the affidavit ought to have been filed by the Minister Incharge of the Industries and Commerce or by the secretary to the Government, Industries and Commerce Department, The contention of the appellant is that the affidavit submitted to the trial Court by the Deputy Secretary ought to have been under the signature of the Minister or the Secretary Incharge of the Department. Such an objection he ought to have taken in the course of the trial during the relevant time. His fresh objection as to the claim of privilege on the basis of this procedural defect is not now entertainable.

The document which embodies the minutes of the discussion and which indicates the advice given by the Minister is certainly protected under Section 123 of the Evidence Act and if such a document is not produced and protection under Section 123. Evidence Act, is claimed, the Court cannot compel the State to produce it. At the time when the Evidence Act was enacted the 'Affairs of the State' might have had a narrow conception. 'Affairs of the State' then might have related to the matters of political or administrative character relating, for instance, to the national defence, public peace, security and good neighbourly relations. But on account of the changed conception of the functions of the State, the State in pursuit of its welfare activities undertakes to an increasing extent activities, which were in the past treated as purely commercial matters undertaken by the State are apt to claim the privilege relating to the 'affairs of the State' in accordance with Section 123 of the Evidence Act; vide the State of Punjab v. Sodhi Sukhdev Singh AIR 1961 SC 493.

15. On the merits also we feel no doubt in rejecting this contention. Since it was necessary for us to consider whether or not the claim of the privilege had been rightly given by the trial Court, we directed learned counsel for the respondent to produce the said document before us for our inspection. Accordingly the document in question, as is available, has been produced before us. Having seen the document produced before us, we are satisfied that the claim for privilege made by the respondent was justified and may be characterised as bona fide. The document consists of nothing more than an office note indicating that certain discussion took place between the then Minister for Industries and Commerce and Shri Bhanwarlal Sethi. This discussion was reduced to writing. Recording of such minutes does not finally suggest that a valid agreement had been arrived at between the two parties in accordance with the provisions of Article 299 of the Constitution, nor does it suggests that the State categorically recognized the liability of the former Kotah State. In that view of the matter, non-production of the document in question does not materially affect the merits of the plaintiffs' case.

16. Learned counsel for the appellant, in the end, vehemently argued that if it was held that a valid contract had not been arrived at between the appellant and the State, the former is entitled to claim compensation or damages under Section 70 of the Contract Act. Section 70 of the Contract Act is in the terms following:--

'Where a person lawfully does anything for another person, or delivers anything to him, not intending to do so gratuitously, and such other person enjoys the benefit thereof, the latter is bound to make compensation to the former in respect of, or to restore, the thing so done or delivered.' From the language of Section 70, it is apparent that where a claim for compensation is made by one person against another under Section 70, Contract Act, it is not on the basis of any subsisting contract, between the parties. It is on the basis of fact that something was done by the party for another and the said work so done was accepted by the other party voluntarily. With respect to the claim made against the Government of a State under Section 70, Contract Act, it may be that in many cases work done or the goods delivered are the result of request made by some officer or the other on behalf of the State Government. In such a case the request so made may be ineffective or invalid for the reason that the officer making the request was not authorised under Article 299, or if the said officer was authorised to make the said request, the request becomes inoperative as it was not followed by a contract executed in the manner prescribed by Article 299 of the Constitution. In either case the thing has been done without a contract and that brings in Section 70, Contract Act: see AIR 1962 SC 779. For invoking the provisions of Section 70 of the Contract Act the first condition is that a person has lawfully done something for another or has delivered something to him. The second condition is that in doing the said thing or in delivering the said thing, he must not have intended to act gratuitously. The third condition is that the person for whom something has been done or to whom something has been delivered must enjoy the benefit thereof. If all these conditions are satisfied, Section 70, Contract Act, would set in and it imposes upon the party concerned liability to make compensation or to restore the thing so done or delivered notwithstanding the fact that the contract had not been made as required by Article 299 of the Constitution. A claim for compensation under Section 70, Contract Act, is not founded upon any contract or tort but upon a third category of law, i.e., a quasi-contract or restitution: vide AIR 1968 SC 1218 (supra).

In the present case the plaintiff did not raise the plea for compensation under Section 70 of the Contract Act in its plaint, nor was any issue framed, nor were the parties given an opportunity to lead any evidence on the point. A person who seeks restitution has a duty to prove that he did something for another person or delivered something to that person and that thereby he did not intend to act gratuitously, and that the other person had enjoyed the benefit thereof. The case of the appellant is only with respect to rebate or the refund of certain money in the excise duty, based upon an agreement dated November 18, 1950. Learned counsel for the appellant adverted to Nagubai Ammal v. B. Shama Rao, AIR 1956 SC 593.

In that case it was observed that evidence let in no issue on which the parties actually went to trial should not be made the foundation for decision of another and different issue, which was not present to the minds of the parties and on which they had no opportunity of adducing evidence, But that rule has no application to a case where parties go to trial with knowledge that a particular question is in issue, though not specific issue has been framed thereon and adduced evidence relating thereto.

The Supreme Court case has got no bearing on the facts of the present case. In the Supreme Court case the parties had full knowledge that the question of lis pendens was raised in the pleadings and that the defendant went to trial with full knowledge that the question of lis pendens was in issue and had an ample opportunity to adduce evidence thereon. Here, the parties had not gone to the trial on the question of compensation under Section 70 of the Contract Act. If the contention of the appellant is allowed to prevail at this stage, it would amount to taking the opposite party by surprise. The above authority, therefore, is or no assistance to the appellant. Thus, the last contention of the appellant is also devoid of substance.

17. For these reasons, we hold that there is no merit in this appeal, which is accordingly dismissed with costs.


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