Skip to content


Corporation of Madras Vs. M. Kothandapani Naidu - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtChennai High Court
Decided On
Case NumberCity Civil Court Appeal Nos. 66 and 67 of 1951
Judge
Reported inAIR1955Mad82
ActsMadras City Municipal Act, 1919 - Sections 81 and 81(3); Madras District Municipalities Act, 1920 - Sections 68, 69 and 69(2); Contract Act, 1872 - Sections 65; Code of Civil Procedure (CPC) , 1908
AppellantCorporation of Madras
RespondentM. Kothandapani Naidu
Appellant AdvocateJohn and Row
Respondent AdvocateV. Rajagopala Mudaliar, Adv.
Cases ReferredBarrs v. Aberdeen
Excerpt:
- - 1541-13-6 as the value of the provisions which he had supplied to the corporation as well, as a refund of a sum of rs. 1. whether a contract, not in conformity with the requirements of sub-sections (1) and (2) of section 81, city municipal act and sections 68 and 69, madras district municipalities act, is not binding against the municipality alone or whether it is not binding against the party contracting with the municipality as well. 5. the reasoning on the basis of which the learned judge thought fit to make the reference may be set out in his own words :the entire body of case-law that has been cited by the learned counsel on both sides leaves the question of the enforceability of the contract not in conformity with the requirements of section 81, city municipal act or sections.....rajagopala ayyangak, j.1. these two appeals have been referred to a full bench for the determination of three questions framed by basheer ahmed sayeed j. on the ground that there was a conflict of decisions on the points covered by them.2. before setting out these questions, it might perhaps be more convenient to narrate the facts giving rise to these appeals, because on them would depend as to how far it is necessary for us to decide the questions which have been formulated by the learned judge. one kothandapani naidu who is the respondent in these two appeals filed two suits o. s. no. 651 of 1949 and o. s. no. 717 of 1949 on the file of the city civil court, madras, against the corporation of madras who is the appellant in these appeals. in the first suit o. s. no. 651 of 1949 he made a.....
Judgment:

Rajagopala Ayyangak, J.

1. These two appeals have been referred to a Full Bench for the determination of three questions framed by Basheer Ahmed Sayeed J. on the ground that there was a conflict of decisions on the points covered by them.

2. Before setting out these questions, it might perhaps be more convenient to narrate the facts giving rise to these appeals, because on them would depend as to how far it is necessary for us to decide the questions which have been formulated by the learned Judge. One Kothandapani Naidu who is the respondent in these two appeals filed two suits O. S. No. 651 of 1949 and O. S. No. 717 of 1949 on the file of the City Civil Court, Madras, against the Corporation of Madras who is the appellant in these appeals. In the first suit O. S. No. 651 of 1949 he made a claim for a decree in his favour for a sum of Rs. 980 being the value of green grass supplied to the Corporation between 1-11-1948 and 31-3-1949 and for the refund to him of a sum of Rs. 270 which had been deposited by him with the Corporation as security for the supply of the said grass. The plaintiff also claimed some amount by way of interest on the value of the grass, but as the claim in regard to this was given up at an early stage of the proceedings, it is unnecessary to refer to this. The total effective sum claimed by the plaintiff in this suit was about Rs. 1250.

The Corporation filed a written statement and defended the suit. It was admitted that the grass had been supplied under the contract and that the plaintiff had fulfilled the terms thereof and was entitled to this sum of Rs. 1250. But it was claimed that in respect of another contract the plaintiff had committed a breach, as a result of which the Corporation had sustained a loss of Rs. 2216 and odd and they claimed to set off the amount due to the plaintiff in this suit against the loss which had been caused to them in the other contract. The claim in regard to O. S. No. 717 of 1949 is the other contract that was referred to in the defence to O. S. No. 651 of 1949.

The plaintiff claimed in O. S. No. 717 of 1949 the payment to him of Rs. 1541-13-6 as the value of the provisions which he had supplied to the Corporation as well, as a refund of a sum of Rs. 300 which he had deposited with the Corporation as security for the due performance of the contract. The contract in pursuance of which these goods were supplied related to the supply of diet articles to the Corporation mid-day meals centres for the period 1-10-1948 to 31-3-1949. After the date of the tender and acceptance, there, were disputes between the Corporation and the contractor as to the items which he was bound to supply with the result that no formal contract was executed, so as to conform to the requirements of S. 81 of the Madras City Municipal Act.

The plaintiff claimed the sum of Rs. 1541 on the ground of a sale of goods, constituted by his delivery of them to and their acceptance by the Corporation. The defence of the defendant-Corporation was that the plaintiff was guilty 'of a breach of this contract, in that he did not deliver all the articles contracted to be supplied by him, as a result of which they sustained the loss of Rs. 2216-8-11 which has been mentioned earlier and after adjusting the amount due to the plaintiff in respect of the supply of grass which was the subject-matter of O. S. No. 651 of 1949, they claimed to adjust the balance- from the amount due for the claim in O. S. No. 717 of 1949 and expressed their willingness to have a decree passed against them for the balance of RS. 589-7-1.

3. The two suits, being thus linked up with each other by reason of the common defence put forward by the Corporation, were tried together by the learned Judge of the City Civil Court. At the trial two questions were formulated as arising for decision in the case: (i) whether the defendant was entitled to adjust or appropriate the amounts In its hands to the credit of the plaintiff towards the loss or damage sustained by it consequent on the breach of contract on the part of the plaintiff and (11) whether the defendant was entitled to forfeit the advance amount of Rs. 300 paid by the plaintiff for the due performance of the second contract.

The City Civil Judge held that inasmuch as the second contract which was alleged to have been broken by the plaintiff by not supplying the goods thereunder was void and unenforceable by the Corporation, it could not give rise to a claim for damages for breach. On this finding, he repelled the defence of the Corporation to set off the loss of Rs. 2216-8-11 towards the claims due to the plaintiff. The learned Judge disallowed the claim of the plaintiff to the advance of Rs. 30.0 paid for the due performance of the second contract and there has been no appeal from this portion of the decree by the plaintiff. The question, which arises therefore, for consideration on these facts is whether the Corporation can claim to enforce the terms or covenants in a contract which does not conform to the requirements laid down by Section 81 of the City Municipal Act, 4 of 1919.

4. The Corporation of Madras filed appeals to this Court from the two decrees and the cases came on before Basheer Ahmed Sayeed J. The learned Judge dealt with the facts in detail and also certain questions of law raised by the learned counsel for the Corporation and formulated three questions for decision by a Full Bench:

'1. Whether a contract, not in conformity with the requirements of Sub-sections (1) and (2) of Section 81, City Municipal Act and Sections 68 and 69, Madras District Municipalities Act, is not binding against the municipality alone or whether it is not binding against the party contracting with the municipality as well.

2. Whether a contract, not in conformity with Ss. 68 and 69, Madras District Municipalities Act and Sub-sections (1) and (2) of Section 81, City Municipal Act is absolutely void and not enforceable against either of the parties to the same.

3. Whether any of the parties to ft contract not in accordance with Sections 68 and 69, Madras District Municipalities Ace and Sub-sections (1) and (2) of Section 81, Madras City Municipal Act will be entitled to recover compensation under Sections 65, 70 and 72, Contract Act.'

After formulating these questions, the learned Judge directed the papers to be placed before the learned Chief Justice for his orders and the matter has now been placed before us for our decision.

5. The reasoning on the basis of which the learned Judge thought fit to make the reference may be set out in his own words : 'The entire body of case-law that has been cited by the learned counsel on both sides leaves the question of the enforceability of the contract not in conformity with the requirements of Section 81, City Municipal Act or Sections 68(2) and 88, District Municipalities Act, against parties other than the statutory bodies like the Municipalities and District Boards, in a state of considerable doubt and uncertainty. The reasons that have been adduced in all the decisions as to why Sub-clause (3) of Section 81, City Municipal Art or Sections 68 and 69, District Municipalities Act, should be interpreted so as to make those provisions applicable not only to the Municipalities but also to other parties contracting with the Municipalities have not been clear nor convincing. It is also not discussed at any length in any of the decisions as to why the express provision of the law in such clear terms as Sub-clause (3) of Section 81 should be so interpreted as to defeat the very object and purpose underlying that provision, namely, that the larger interests of the rate payers should be protected against recalcitrant or rapacious contractors whose conduct might put these statutory bodies in loss and jeopardy.

'In this view I am of the opinion that the entire question as to what would be the proper interpretation of the terms of Sub-clause (3) of Section 81, Madras City Municipal Act, and Sections 68 and 69, Madras District Municipalities Act should be considered afresh by a Full Bench of our High Court and the conflict of decisions in our High Court as well as the conflict that is noticeable between our High Court and the other High Courts like Bombay, Allahabad and Lucknow should be resolved once for all.'

And then he propounded the three question a set out above.

6. Before dealing with the points raised, we might state that the third point that has been formulated does not really arise on the pleadings in the present appeals. That question raises for consideration whether a decree could be passed in favour of a party to a contract which does not conform to the requirements of Section 81, City Municipal Act, but who has supplied goods in pursuance thereof, for recovery of their value, not on the basis of a contract, but apart from It on the principle of 'quantum meruit' or 'quantum valebat' or the principle of compensation embodied in Section 65, Contract Act. In respect of this there is some conflict of authority, though this Court has almost uniformly taken a view favour able to the entertain ability of such a claim.

It will, however, be noticed from the narration of the pleadings which we have set out above that the Corporation of Madras in the present cases never disputed their liability to pay the price of the goods supplied to them. In the absence of any plea denying their liability, we do not think that it would be proper to permit the Corporation to raise a defence of this type at the stage of the appeal. The decision of this Court in -- 'Municipal Council, Tiruvarur v. Kannuswami Pillai', AIR 1930 Mad 600 (A) lays down that notwithstanding the informality in the contract, a claim on the basis of 'quantum meruit' or the like could always be entertained. We should not be understood as doubting the correctness of this decision, but the point really does not arise for consideration in the present case, in view of the pleadings and the issues that were framed; so, it is unnecessary to answer the third question which has been formulated and we do not purpose to deal with it.

7. In regard to questions (1) and (2), we might mention that they really raise the same point, though expressed in different language. Section 81, City Municipal Act 4 of 1919 is in these terms:

'81(1) Every contract entered into by the Commissioner on behalf of the Corporation shall be entered into in such manner and form as would bind him if it were made on his own behalf, and may in like manner and form be varied or discharged;

Provided that--

(a) the common seal of the Corporation shall be affixed to every contract which, if made between private persons, would require to be under seal; and

(b) every contract for the execution of any work or the supply of any materials or goods which will involve an expenditure exceeding one thousand rupees shall be in writing and shall be sealed with the common seal of the Corporation and shall specify--

(i) the work to be done or the materials or goods to be supplied, as the case may be,

(ii) the price to be paid for such work, materials or goods, and

(iii) in the case of a contract for work, the time within which the work of specified portions thereof shall be completed.

(2) The common seal of the Corporation shall remain in the custody of the Commissioner and shall hot be affixed to any contract or other Instrument except in the presence of the Commissioner or of two members of the Standing Committee, and the Commissioner or the said two members shall sign the contract or instrument in token that the same was sealed in his or their presence.

(3) No contract executed otherwise than as provided in this section shall be binding on the Corporation.'

8. The controversy centres round the exact signification of Sub-clause (3) of this section. The sub-clause is expressed in the negative and declares that a contact not complying, with the formalities set out in Sub-sections (1) and (2) shall not be binding on the Corporation. The contention of the learned counsel for the Corporation is that as it is stated to be not binding only against the Corporation, it must be taken to be binding on the other party. In other words, the section ought to be read as 'no contract executed otherwise than as provided in this section shall be binding on the Corporation, but it shall be binding on the other party to the contract'. The argument of the learned counsel for reaching this conclusion was based upon two grounds:

9. 1. This provision is Intended for the protection of the rate-payers and not as a protection to the other contracting party. This reason, therefore, ought to restrict its operation and confine its benefits to the public authority. For this purpose, reliance was placed upon the decision of the House of Lords in -- 'Young and Co. v. Royal Leamington Spa Corporation (1883) 8 AC 517 (B). The Corporation of Leamington had entered into a contract with one Power for execution of certain works for supplying the district with water. Power failed to complete his contract and it was put an end to. The Council, in their capacity or urban authority, by resolution not under seal, authorised their engineer to enter into a contract for completing the works left uncompleted by Power, This engineer employed the plaintiff who completed this unfinished portion of the contract and brought the action for the recovery of the sums due to him as balance of the executed works.

The defence of the Corporation was based upon the contract not being in writing and sealed with the common seal of the authority as required by Sub-section (1) of Section 174, Public Health Act, 1875, which enacts that

'every contract made by an urban authority whereof the value or amount exceeds 50 shall be in writing and sealed with the common seal of such authority.'

The Queen's Bench Division gave judgment for the defendants on their plea based upon the section being mandatory and that on its non-compliance, no claim could be made even on the basis of executed consideration. That was affirmed, by the Court of Appeal as also by the House of Lords. The only question before the House was whether this provision was directory or mandatory and then Lordships held it was mandatory and that in its absence, no claim on the basis of the contract could be entertained. Lord Bramwell after agreeing with Lord Blackburn who delivered the leading Judgment added:

'The legislature has made provisions for the protection of rate payers, shareholders, and others, who must act through the agency of a representative body, by requiring the observance of certain solemnities and formalities which involved deliberation and reflection. That is the importance of the seal. It is idle to say there is no magic in a wafer. It continually happens that carelessness and indifference on the one side, and the greed of gain on the other, causes a disregard of these safeguards, and improvident engagements are entered into. Whether that has been so in this case I have no notion; but certainly the ratepayers of Leamington may well be astonished at the amount claimed of them. The decision may be hard in this case on the plaintiffs, who may not have known the law. They and others must be taught it, which can only be done by its enforcement.'

10. It will be seen that the decision so far as 'it goes has a bearing only upon the third question formulated for our consideration, but not on questions 1 and 2. The ratio of the decision is the negation of the contract when the formalities have not been compiled with. It certainly cannot be used for the purpose of saying that there is a contract enforceable by the Corporation, but that there is no contract enforceable by the other contracting party. As we are not dealing with the third point which has been referred to us as not arising on the pleadings, it is unnecessary to deal further with, this case, except to say that so far as it goes, it is against the contention of the appellant.

11. 2. The next argument put forward by the learned counsel for the appellant was the variation in the language in Section 81(3), Madras City Municipal Act 4 of 1919, as compared with Section 174, Public Health Act, which has beer, set out earlier. It was argued that whereas the Public Health Act merely laid down the formality to be observed by a Corporation before entering into a contract, did not proceed to lay down what would be the effect where the formalities were not observed, the Madras Legislature has considered this question and has enacted Sub-section (3) of Section 81 and similar provisions in the Madras District Municipalities Act to make it clear what the effect of this want of formality is.

We do not consider that Sub-section (3) of similar provisions in the other Municipal Acts evidences a different intention from that contemplated by Section 174 of the Public Health Act of 1875. In the first place, we might mention, as we have already indicated, that this provision does not say in express terms that the contract shall be binding upon the other contracting party and to construe it in the manner suggested by the learned counsel for the Corporation, would in effect be to introduce words into the provision which are not there. Secondly, the provision in identical language has been in existence in Indian enactments from very early times and has been the subject-matter of interpretation by the Courts and notwithstanding that this provision has been construed as laying down that the contract is void and not enforceable by either party, i.e., either by the Corporation or by the other contracting party and the Legislature has repealed and re-enacted these several enactments, yet it has not changed the language. That itself is an indication of the legislative acceptance of the interpretation placed by the Courts on the words used in the statute.

12. It might be convenient at this stage to refer to the decisions which have uniformly held that the contracts by Municipalities not conforming to the requirements of the statute are not enforceable at the instance of either party, i.e., by the Municipality or by other contracting party. The first case to which reference might be made is a decision of the Bombay High Court in -- Ahmedabad Municipality v. Sulemanji', 27 Bom 618 (C). The proceedings arose out of a suit by the Municipality for damages for breach of an executory contract. The defendant made a tender to supply firewood to the. Municipality which was accepted, but the contract did not comply with the formalities of the Bombay 'District Municipalities Act. The defendant refused to supply the goods and the suit was filed for the excess which the Municipality had to pay to other contractors over and above the amount at which the defendant agreed to supply this firewood.

The Subordinate Judge who tried the suit found that the defendant had broken the contract and he awarded to the plaintiff the amount claimed as damages for the breach of the contract. This decree was reversed by the District Judge and the matter came up in second appeal to the High Court at the instance of the plaintiff-Municipality. Jenkins C. J. dismissing the appeal said:

'We affirm the decree of the lower appellate Court on the ground that as this suit is brought by the Municipality for breach of an executory contract, it is open to the defendant to show that it is not binding on him inasmuch as it is not binding on the plaintiff. It is not binding on the plaintiff because the formalities prescribed by Section 30 of the Bombay District Municipalities Act Amendment Act, 1884, have not been complied with.'

13. This decision was followed by a Bench of this Court in -- 'Raman Chetti v. Municipal Council of Kumbakonam', 30 Mad 290 (D). The suit out of which the proceedings arose was by the Municipal Council of Kumbakonam to recover damages from a toll contractor who had purchased at public auction the right of collecting tolls for three years. Though the defendant entered into possession and was collecting tolls, he did not execute a written agreement which was required by the provisions of Section 45, District Municipalities Act of 1884, the language of which was identical with Section 81(3), City Municipal Act, 1919. Disputes arose between the plaintiff and the defendant and after 17 months of enjoyment, the defendant was put out of possession and a re-sale of the remainder of the term resulted in a loss to the plaintiff-Municipality and the suit was filed to recover this loss.

The plea of the defendant was that there being no contract fulfilling the requirements of Section 46, the suit by the Municipal Council was unsustainable. The Subordinate Judge held that the agreement, though not binding on the Municipality, was binding on the defendant--exactly the contention which is now put forward on behalf of the Corporation--and gave a decree for the plaintiff-Municipality. The judgment of this Court was delivered by Subramania Aiyar and Miller JJ. who dealt with the appeal and allowed it for this reason:

'The agreement between the Municipal Council and the appellant, was, with reference to the amount involved, one which should have been effected in the manner, prescribed in that section, and its provisions not having been complied with, the agreement is not valid. The view of the Subordinate Judge that it does not bind the Municipal Council but does bind the other party is erroneous..... .On the ground that the contract is invalid, the decree of the lower Court must be set aside and the suit dismissed.'

14. This decision was rendered in 1907 and the next occasion when a similar question arose in this Court was in 1912 when the decision in --'Madura Municipal Council v. Veeranna Kone', 16 Ind Cas 890 (E) was given. The suit was by the Madurai Municipality to recover a sum of Rs. 264 as damages from the defendant, the circumstances being almost identical with those in -- 30 Mad 290 (D)', already referred to. The Judgment of Sir Ralph Benson Offg. C. J. and Sundara Aiyar J. is very short and may, therefore, be set out in full.

'This case is on all fours with -- 30 Mad 290 (D)', ,with which we agree. We must, therefore, hold that the contract between the Municipality and the defendant, not being in accordance with the provisions of Section 45 of Act 4 of 1884, the suit is not maintainable, and that the defendants' enjoyment of the benefit of the contract for three months does not affect the applicability of the section.'

15. A similar question was considered by this Court by Krishnan J. In -- 'Srirangam Municipal Council v. Bodi, Alft 1924 Mad 162 (P). This was also a suit by the Municipal Council for the balance of money due under a contract by which the right of collecting tolls for a year was leased to the defendant. The contract was not in the form required by Section 45 of the District Municipalities Act. The Court of Small Causes, Tiruchirapalli dismissed the suit and the matter came up before this Court in a small cause revision. The respondent did not appear before the Court and the learned Judge held that though no claim could be made on the basis of the written contract, a decree should have been given on the footing of executed consideration, the defendant having been found to have enjoyed the right of collecting the tolls for the whole year. He referred to certain English authorities to which it is now not necessary to refer to and as regards the decision in -- 30 Mad 290 (D)', he held that It did not really deal with this question and gave a decree for the Municipality.

This is the only case in which a suit by a Municipality has been decreed where there is no contract as required by the section and every one of the other cases, those which have already been referred and those which will be referred to hereafter, lays down propositions contrary to what found acceptance by the learned Judge in this case. We consider that this decision is erroneous and that there is no reason to hold that -- 30 Mad 290 (D)' is either irrelevant or wrong.

16. The next decision in order of date is that of the Calcutta High Court in -- 'Mahomed Ebrahim Molla v. Commrs. for the Port of Chittagong : AIR1927Cal465 . The language of Section 29 of the Chittagong Port Act which was considered by a' Division Bench was in terms almost identical with Section 81, City Municipal Act. The appeal before the High Court arose out of a suit by the Port Commissioners to recover a sum of Rs. 27,000, and odd as hire of a towing vessel from the defendant. The contract was required to be in writing and to be signed by the Chairman and Vice-Chairman and two other Commissioners and sealed under the common seal of the Commissioners. But these formalities were not complied with. It was contended on behalf of the Port Commissioners that the provision was one intended for their benefit and that it will be open to them to file a suit. Dealing with the terms of Section 29, Chatterjee Ag. C. J. delivering the Judgment of the Bench said:

'In the present case the Chittagong Port Act expressly provides that the agreement must be in writing and signed by the Chairman or Vice-Chairman and two other Commissioners, and sealed by the common seal of the Commissioners, and that an agreement not so executed shall not be binding upon the Commissioners. Having regard to the express provisions of the statute, we think that non-compliance with the provisions of Section 29 renders the agreement not binding upon the Commissioners.

It may be said, however, that the law only lays down that the agreement shall not be binding upon the Commissioners and that although it may not be binding upon the Commissioners, having regard to the express words of the statute, there is no reason why it should not be binding so far as private person is concerned who is not governed by any such provision of the law.'

The learned Judge then referred to -- 30 Mad 290 (D)' and -- 27 Bom 618 (C)', and reached the conclusion that the agreement was not binding upon either party.

17. The next occasion when this Court hadto consider this question was in 1929 when --AIR 1930 Mad 600 (A)' was decided. This wasan appeal against a decree of the SubordinateJudge of Tiruvarur for the recovery of the balanceof the lease amount due from a contractor whohad purchased in auction the right to collecttolls in the Municipality for the year 1922-23. Thecontract was not executed in accordance withthe formalities set out in Section 69 of the DistrictMunicipalities Act, 1920, whose language was in'pari materia' with that of Section 81, City MunicipalAct. The suit was dismissed by the learnedSubordinate Judge holding that the suit was notsustainable in the absence of a written contractas required by Section 69. Dealing with the scope ofSection 69(2) which is identical with Section 81(3), CityMunicipal Act. Pakenham Walsh J. delivering thejudgment of the Bench said: 'The important question in this case is, whether the contract is null and void and the suitunsustainable because the terms of Section 69 of theDistrict Municipalities Act were not compliedwith. The matter has come up several timesbefore the Courts in England and India. InIndia we are governed by the District Municipalities Act, and as the decisions in India on the particular point in question the practically all in favour of the view taken by the learned Subordinate Judge, and as the matter has been very often discussed in various Judgments, we do not think it necessary to enter into a very lengthy examination of the authorities here.' The learned Judge then referred to all the decisions which we have referred to above and as also certain other decisions to which it is unnecessary to refer at this stage. After referring to the English decisions, the learned Judge continued:

'It has been clearly laid down in a number of cases, of which the leading cases are -- (1883) 8 AC 517 (B)' and -- 'Hunt v. Wimbledon Local Board', (1878) 4 CPD 48 (H), that, where a Corporation enters into a contract under a statute and the terms of the statute are not observed, the contract cannot be enforced against the Corporation. But no English case has been quoted in which it was held that this was not mutual and that the Corporation could on their side enforce such a contract......The learned Advocate for the appellant argues that in India the position is peculiar, and that, while a body contracting under a statute cannot enforce an unexecuted contract when all the terms of the statute are not complied with, yet, when the contract has been wholly executed, the position is that, while they can urge this as a defence in a suit brought against themselves on the contract, it cannot be urged as a defence to a suit brought by them on the contract. For this he relies on the difference in the wording between Section 174, Clause 5 of the Public Health Act and Section 69(2) of the District Municipalities Act. while the former runs,

Every contract entered into by an urban authority in conformity with the provision of this section, and duly executed by the other parties thereto, shall be binding on the authority by whom the same is executed ...'

Section 69-B, District Municipalities Act puts the matter negatively. It says, 'A contract executed or made otherwise than in conformity with the provisions of this and the last preceding section shall not be binding on the Municipal Council.' 'It is argued that we should infer from this difference in language that a contract executed otherwise than in conformity with the provisions of the District Municipalities Act, while it will not bind the Municipality, will bind the other party to the contract. It is certainly somewhat remarkable that this negative language should have been employed in the Act; but on the other hand, it has been pointed out that though the Act was revised after the decision in -- 30 Mad 290 (D)' and -- 16 Ind Gas 890 (E)', had been given, no change was made in the section. If the meaning sought to be attached to It on behalf of the appellant is correct, these decisions are opposed to such interpretation. In view of the fact that all the decided cases on the point excepting AIR 1924 Mad 162 (P)' are opposed to such an interpretation, we do not think that this argument can be accepted. It is difficult to see if the argument be accepted how an executorycontract would differ from one executed.'

'Another argument adduced is that theseformalities are only necessary in the Interestsof the rate payers and that it is not open toany one else to take advantage of them. Thecase of -- Trend v. Denneti, (1858) 4 CB 576 (I) is quoted for this purpose. What was held in this case was what has been so frequently decided--that want of formality inmaking a contract is a defence to a suit broughtagainst the Corporation. The remark of Cockburn C. J. which is relied on

'I think the Local Board had no power tocontract so as to bind the rates, unless theydid so in the manner pointed out by thestatute',

cannot be held to imply that they can enter into contracts enforceable by themselves but not enforceable by the other party. We therefore agree with the finding of the learned Subordinate Judge that the contract is not enforceable.'

18. The last case to which reference has to be made is a decision of this Court reported In --'Madura Municipality v. Alagirisami Naidu AIR 1939 Mad 957 (J). That also was a suit by the Municipality for the recovery of the balance of a sum alleged to be due from the defendant who had taken in auction the right of removing rubbish and night soil belonging to the Municipality. The contract in question did not conform to the requirements of Section 68, District Municipalities Act. The defendant had enjoyed the benefit of this contract but refused to pay the balance due under it. The learned Judges held that there was no valid contract between the parties and that in this regard there was no distinction between contracts which were executory and executed and in neither case was it binding upon either party as a contract. They, however, gave a decree to the plaintiff on the principle embodied in Section 65, Contract Act, which raises different considerations altogether from the ones which arise on questions 1 and 2 in this reference. (19) It would thus be seen that

1. There is no case in England in which a suit on the contract has been held to be maintainable by an urban authority to whom the provisions of Section 174 of the Public Health Act of 1875 applied on the ground that the provision was inserted for the benefit of the urban authority.

2. There is no case in India either, apart from the decision in -- AIR 1924 Mad 162 (P)', to which reference has already been made, which holds that the suit on the basis of the contract is maintainable by the Municipality. As would be seen from the discussion of the cases set out above, all of them were mostly, suits by the Municipality and in all of them the claim to relief on the basis of the contract was negatived, notwithstanding that Section 45, District' Municipalities Act, 1884, and Section 69, District Municipalities Act of 1920 only provided for the contract not being enforceable against the Municipality.

3. The fact that notwithstanding the decisions in -- 30 Mad 290 (D)' and -- 16 Ind Gas 890 (E)', the Legislature repealed and reenacted Act 4 of 1884 in Act 5 of 1920 in identical language is a clear indication of the recognition by the Legislature of the correctness of the Interpretation put uniformly by the Courts on these sections of the Municipal Acts.

It might be noticed that the City Municipal Act of 1904 was repealed and re-enacted in 1919 and the very language which found a place in the earlier enactment was repeated in the later one. In this connection, reference may be made to a decision of the House of Lords in -- 'Barrs v. Aberdeen stream Trawling and Pishing Co.', 1933 AC 402 (K). In his speech Viscount Buck-master says:

'It has long been a well established principle to be applied in the consideration of Acts of Parliament that where a word of doubtful meaning has received a clear judicial interpretation, the subsequent statute which Incorporates the same word or the same phrase in a similar context, must be construed so that the word or phrase is Interpreted according to the meaning that has previously been assigned to it.' This presumption must apply 'a fortiori' to cases of repeal and re-enactment of an Act.

4. Even on the construction of Section 81(3), apart from its legislative history and the uniform decisions of the Courts in India, we are of opinion that the view adopted In these cases is the right one.

The matter might be considered from two aspects: (1) Let us assume that the Sub-section (3) were not there, On the language of Sub-sections (1) and (2) It would be clear that the statute had laid down a particular formality and procedure to be observed before the contract can be valid as such. The only question that could then arise would be whether the provisions laying down these formalities are directory or mandatory. If they are directory, then it would follow that notwithstanding the informality, it could be enforced by either party at least in cases where the consideration had been executed so that no question of the contract as such being enforceable by one party, but not by the other could possibly arise. If on the other hand, it were held to be mandatory, and there are good reasons for so holding, as explained by Lord Blackburn in -- (1883) 8 AC 517 (B)' as the provision is designed for the benefit and protection of the ratepayers and shareholders of the Corporation, the effect of non-compliance with the formality would be that in the absence of a contract as required by the section, there would be no valid or enforceable contract between the parties.

It would then follow that even in such a situation, the contract as such could not be enforced by either. (1883) 8 AC 517 (B)' was a case where it was sought to be enforced against the Corporation and the plaintiff failed. A similar result would naturally follow, If it was the Corporation and not the other contracting party that was the plaintiff and as we have pointed out above, there is no English decision where a suit by the Corporation on the basis of a contract which does not comply with the statutory formalities has been held maintainable at the Instance of the Corporation. There could, therefore, be no distinction between suits by Corporations and suits against Corporations, If Sub-clause (3) were not there. The question is whether the enactment of Sub-clause (3) makes any difference to this legal result. In our opinion, it does not. The sub-clause is, in our opinion, merely intended to express and enforce the legal result which flows from Sub-clauses (1) and (2), viz., that it is not binding on the Corporation. If under the terms of Sub-clauses (1) and (2) it is not binding on the other party as well, that result is not intended to be effaced or varied by the provision referring to the Corporation in Sub-clause (3).

20. We are further of the opinion that any other construction would lead to anomalous results. For instance, if a contractor should file a suit on such contract against the Municipality for damages for Its breach and the Municipality a counter-claim, claiming a larger sum or a counter-claim is made in a suit by a Municipal Corporation, it cannot be that relief would be available to the one party but not to the other. For, there could not at the same time be a contract of which there could be a breach at the instance of the municipal body, but which does not exist for the purpose of the claim against the Corporation for breach thereof.

21. On an Independent analysis of the provisions, we have reached the same conclusion as in the several decisions referred to earlier and which, in our opinion, is the only possible interpretation of Section 81(3), City Municipal Act of 1919 and Section 69, District Municipalities Act of 1920, viz., that a contract which does not conform to the requirements of the sections is unenforceable as such by either party, the Municipality or the contractor. The decisions on the point have been uniform and the construction put by them on the statutory provisions is correct.

22. It follows that in the present case the Corporation of Madras would not be entitled to claim the set off for the sum of Rs. 2216 claimed by them in the suits.


Save Judgments// Add Notes // Store Search Result sets // Organizer Client Files //