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State of Madras Represented by Collector of Coimbatore Vs. SaifudIn Abdul Hussain, Proprietor and Partner of Industrial Engineering Stores - Court Judgment

LegalCrystal Citation
SubjectConstitution
CourtChennai High Court
Decided On
Case NumberSecond Appeal No. 1466 of 1959
Judge
Reported inAIR1963Mad140
ActsConstitution of India - Article 229; Government of India Act, 1935 - Sections 175(3); Contract Act, 1872 - Sections 197 and 199
AppellantState of Madras Represented by Collector of Coimbatore
RespondentSaifudIn Abdul Hussain, Proprietor and Partner of Industrial Engineering Stores
Appellant AdvocateGovt. Pleader, Adv.
Respondent AdvocateP. Srinivasa Iyengar, Adv.
DispositionAppeal allowed
Cases ReferredBhikraj v. Union of India
Excerpt:
.....on behalf of the state or on behalf of the person making the contract. this consideration by itself would be sufficient to imply a prohibition against a contract being effectively made otherwise than in the manner..........appears, is enacted in the public interest, and invests public servants withauthority to bind the state by contractual obligations incurred for the purposes of the state. it is in the interest of the public that the question whether a binding contract has been made between the state and a private individual should not be left open to dispute and litigation; and that is why the legislature appears to have made a provision that the contract must be in writing and must on its face show that ft is executed for and on behalf of the head of the state and in the manner prescribed. the whole aim and object of the legislature in conferring powers upon the head of the state would be defeated if in the case of a contract which is in form ambiguous, disputes are permitted to be raised whether the.....
Judgment:

Kailasam, J.

1. This second appeal is preferred by the State of Madras, who was the defendant in the suit. The suit was filed by the plaintiff for recovery of amounts due under certain bills for the goods supplied to the Assistant Agricultural Engineer (Research) Coimbatore. On an order Ex. A.14, dated 9-3-1953 from the Assistant Agricultural Engineer's Office the plaintiff supplied goods which were received by D. W. 2, the electrician of the office of the Assistant Agricultural Engineer. 23 bills were prepared for the supply of goods under the order Ex. A-14. Several of the bills were not paid and this suit was filed for the recovery of a sum of Rs. 2279-5-0 with interest and costs from the Government.

2. The State of Madras represented by the Collector of Coimbatore averred that the order in question was signed by the Store Keeper, who was not authorised to place any order on behalf of the Government. According to the Financial Code, the proper authority, who could incur contingent charges, is the head of the department and the Assistant Agricultural Engineer could incur expenses to the extent of Rs. 100 only.

3. During the trial the Government conceded the claim for a sum of Rs. 121-14-0 evidenced by a bill No. 959 the duplicate of which is marked as Ex. A.43, as there was sanction for this order. The trial court gave a decree for this amount of Rs. 121-14-0 and dismissed the suit regarding the rest of the claim.

4. On appeal the lower appellate court reversed the decision of the trial court and gave a decree to the plaintiff as prayed for.

5. There is no dispute about the facts in the case. The plaintiff was supplying goods to the Assistant Agricultural Engineer's Office, Coimbatore from time to time. The indents for the supply ofgoods were sent by the office of the Assistant Agricultural Engineer. These indents were sometimes signed by the Assistant Agricultural Engineer and sometimes by the Store keeper. The indents invariably bore the office seal of the Assistant Agricultural Engineer. The indent out of which this suit arises is Ex. A.M. Some of the prior indents Ex. A.1 to A.13 were signed by the Assistant Agricultural Engineer himself and some by the store keeper. All these indents were paid for by the Government. The indent Ex. A.14 was signed by the Store keeper for Assistant Agricultural Engineer. The indent covered various articles of the value of Rs. 2300.

All these goods were supplied under delivery notes Exs. A.15 to A.21 and were received by D. W. 2, the electrician. The goods for which payment was refused were not entered in the Government receipt book or in the stock book. The goods were taken away by the store keeper and misappropriated. When an enquiry was started against him, he committed suicide. It is admitted that according to the Financial Code the Assistant Agricultural Engineer would incur expenses upto Rs. 100 for stores, and only the head of the department, the principal of the Agricultural College, could purchase goods upto Rs. 1000 and for incurring expenses over Rs. 1000 the sanction of the Government was necessary. The goods supplied under the order Ex. A.14 were of the value of aboutRs. 2300 and 23 bills for less than Rs. 100 were prepared for goods supplied under this order.

6. The question arises whether the State is bound to pay the plaintiff for the goods supplied under Ex. A.14. Article 299 of the Constitution of India reads that all contracts made in the exerciseof the executive power of a State shall be expressed to be made by the Governor of the State, and all such contracts and all assurances of property made in the exercise of that power shall be executed on behalf of the Governor by such persons and in such manner as he may direct or authorise. In pursuance of the powers conferred under this Article, the Government have framed rules. As pointed cut already, the Governor has authorised the heads of departments to enter into contracts for amounts not exceeding Rs. 1000 and the Assistant Agricultural Engineer for an amount not exceeding Rs. 100. Moreover, as already observed, this order Ex. A.14 was signed by the Store keeper and not by the Assistant Agricultural Engineer himself, though it is stated to be for 'Assistant Agricultural Engineer.' Therefore there can be no doubt that the order placed as such was not according to the rules.

But the plaintiff contended that as a matter of course he was supplying goods on orders placed by the Assistant Agricultural Engineer or by the Store keeper and that by the conduct of the Assistant Agricultural Engineer he was led to believe that the Assistant Agricultural Engineer and the store keeper were authorised to place orders and that he would be paid by the Government He pleaded that the goods were in fact delivered to D. W. 2. According to him, the Government had also ratified the contract by paying some of the bills for the supply of goods under Ex. A.14, and having ratified the order under Ex. A.14 the Government was not entitled to withhold payments of certain items alone. P. W. 1, the assistant in the shop of the plaintiff, stated that he did not enquire whether Ramaswami, the store keeper, had the authority to sign on behalf of the Assistant Agricultural Engineer and that he did not know whether for purchases for more than Rs. 100 the sanction pf the head of the department was necessary.

He also stated that he prepared several bills for Ex. A.14, according to the oral instructions of the store keeper, though the delivery chalan was single, and that those bills did not exceed Rs. 100, it is very likely that the plaintiff expected that the order under Ex. A.14 also would be paid for as in the previous cases, Exs. A.1 to A.13. But he did not enquire whether the store keeper had any authority. On the other hand, when the store keeper instructed him to prepare 23 bills for goods supplied under one order form Ex. A.14, it would have been apparent to him that Assistant Agricultural Engineer could not sanction for an amount more than Rs. 100 and that 23 bills were prepared for one supply for the purpose of getting over the rules.

7. It has been laid down as early as 1861 in Collector of Masulipatam v. Cavaly Venkata Narainapah, 8 Moo Ind App 529 (PC), that the acts of a Government Officer bind the Government only when he is acting in the discharge of a certain duty within the limits of his authority, or if ha exceeds that authority when the Government in fact, or in law, directly, or by implication, ratifies the excess.

8. The following passage occurs at page 379 in Storey's Law of Agency:

'But, in cases of public agents, the Government, or other public authority, is not bound, unless it manifestly appears that the agent is acting within the scope of his authority, or he is held out as having authority to do the act, or is employed, in his capacity as a public agent, to make the declaration or representation for the Government. Indeed this rule seems indispensable, in order to guard the public against losses and injuries arising from the fraud or mistake, or rashness and indiscretion of their agents--and there is no hardship in requiring from private persons, dealing with public officers, the duty of enquiry as to their real or apparent power and authority to bind the Government.'

In a very recent decision of the Supreme Court in Bhikraj v. Union of India, : [1962]2SCR880 , their Lordships while dealing with Section 175(3) of the Government of India Act, 1935, which more or less corresponds to Article 299 of the Constitution observed as follows:

'It is clear that the Parliament intended in enacting the provision contained in Section 175(3) that the State should not be saddled with liability for unauthorised contracts and with that object provided that the contracts must show on their face that they are made on behalf of the State, i.e., by the Head of the State and executed on his behalf and in the manner prescribed by the person authorised. The provision, it appears, is enacted in the public interest, and invests public servants withauthority to bind the State by contractual obligations incurred for the purposes of the State.

It is in the interest of the public that the question whether a binding contract has been made between the State and a private individual should not be left open to dispute and litigation; and that is why the Legislature appears to have made a provision that the contract must be in writing and must on its face show that ft is executed for and on behalf of the head of the State and in the manner prescribed. The whole aim and object of the legislature in conferring powers upon the head of the State would be defeated if in the case of a contract which is in form ambiguous, disputes are permitted to be raised whether the contract was intended to be made for and on behalf of the State or on behalf of the person making the contract. This consideration by itself would be sufficient to imply a prohibition against a contract being effectively made otherwise than in the manner prescribed. It is true that in some cases, hardship may result to a person not conversant with the law who enters into a contract in a form other than the one prescribed by law. It also happens that the Government contracts are sometimes made in disregard of the forms prescribed; but that would not in our judgment be a ground for holding that departure from a provision which is mandatory and at the same time salutary may be permitted.'

Their Lordships further observed at page 122 as follows:

'But a person who seeks to contract with the Government must be deemed to be fully aware of statutory requirements as to the form in which the contract is to be made. In any event, inadvertence of an officer of the State executing a contract in manner violative of the express statutory provision, the other contracting party acquiescing in such violation out of ignorance or negligence will not justify the court in not giving effect to the intention of the legislature, the provision having been made in the interest of the public.'

In the case before Supreme Court the contract was entered into by the Divisional Superintendent of the Eastern Railway, who it was found was specially authorised to enter into the contract but contract was not expressed to be made by the Governor General and was not executed in the name of the Governor General. As there was non-compliance in the prescribed form the Supreme Court held that the contract was not enforceable against the Government. On the facts of the case before me it is seen that the Assistant Agricultural Engineer had no authority to place orders for goods for the value of more than Rs. 100 and this particular order in question was signed by the store keeper who had no authority to place any order. Though the plaintiff might have been induced to expect payment, as the previous orders Exs. A.1 to A.13 were paid for, he did not satisfy himself about the authority of the Assistant Agricultural Engineer. On the other hand he would have felt that the Assistant Agricultural Engineer had no authority to place orders for more than Rs. 100 because he was asked to prepare 23 bills for goods supplied under one order form. On these facts it cannot even be stated that the plaintiff was honestly misled. Inthe circumstances it cannot be held that the defendant is liable to pay for the order placed under Ex. A.14.

9. The next contention raised by the learnedcounsel for the respondent was that the contract hadbeen ratified under Sections 197 and 199 of the IndianContract Act. The learned counsel submitted thatregarding the goods supplied under Ex. A.14 someof the bills were paid and therefore it should beinferred that the contract entered into by the Storekeeper of the Assistant Agricultural Engineer hadbeen ratified. As already observed, the stand ofthe Government even in the written statement isthat no part of the contract was ratified and thatpayments were made towards certain bills becausethose goods were found in the stores. Though thecontract was not enforceable against the Government, the Government in fairness thought that theyshould pay for the goods actually received by them.This conduct would not amount to ratification ofthe contract. The Government cannot be madeliable for the receipt of the goods by D. W. 2 whostates that he was doing the work to oblige thestore keeper and that the taking delivery of thegoods was not his normal work. The goods werenot entered into the stores register and the stockbook which proves that the goods were not received on behalf of the Government. In the circumstances the State of Madras cannot be made liablefor the goods supplied under Ex. A.14. The secondappeal is therefore allowed with costs. The decreeof the trial court is restored. Leave refused.


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