Full Judgment Text
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PETITIONER:
STATE OF PUNJAB AND ORS.
Vs.
RESPONDENT:
OM PRAKASH BALDEV KRISHAN
DATE OF JUDGMENT23/08/1988
BENCH:
SEN, A.P. (J)
BENCH:
SEN, A.P. (J)
SHARMA, L.M. (J)
CITATION:
1990 SCC Supl. 673
ACT:
Constitution of lndia, 1950 Article 299-Contracts to be
made in the name of President/Governor-Requirement based on
public policy-Protection of general public-Cannot be waived
or dispensed with.
HEADNOTE:
The tender submitted-by the respondent firm for the
construction of a high level bridge was accepted by the
Executive Engineer and they were asked to take up the work
in hand, and also to sign the agreement which was under
preparation, within 10 days. No such agreement was, however,
signed nor had the tender of the respondent been accepted on
behalf of the Governor of Punjab, which was a mandatory
constitutional requirement.
The respondent subsequently withdrew his offer on the
ground that no binding agreement had been signed between the
parties. The Engineer-in-charge levied ia penalty on the
respondent for failure to start the work. The Superintending
Engineer then forwarded the claim for arbitration. The
respondent’s application under section 33 of the Arbitration
Act, 1940 was dismissed by the Sub-Judge who carne to the
conclusion that the Executive Engineer was authorised to
accept the tender. The High Court, in revision, held that no
contract in conformity with Article 299(1) of the
Constitution, had been entered into.
It was inter alia urged on behalf of the appellants that
a valid and binding contract might come into existence even
without a formal agreement duly signed by the parties.
Dismissing the appeal, it was,
HELD: (1) A contract entered into by the Governor must
satisfy three conditions, namely (i) it must be expressed to
be made by the Governor; (ii) it must be executed; and (iii)
the execution should be by such persons and in such manner
as the Governor might direct or authorise. [543F-G]
PG NO 536
PG NO 537
State of Bihar v. M/s. Karam Chand Thapar, [1962] 1
S.C.R. 827; and Seth Bikhraj Jaipuria v. Union of lndia,
[1962] 2 S.C.R. 880,
referred to.
[2) The provisions of section 175(3) of the Government
of India Act and the corresponding provisions of Article
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299(1) of the Constitution have not been enacted for the
sake of mere form but they have been enacted for
safeguarding the Government against unauthorised contracts.
These provisions are embodied on the ground of public
policy- on the ground of protection of general public-and
these formalities cannot be waived or dispensed with. At he
same time there cannot be any question of estoppel or
ratification in a case where there is contravention of these
provisions. [545A-C]
Union of India v. A.L. Rallia Ram, [1964] 3 S.C.R. 164
and Timber Kashmir Pvt. Ltd. v. Conservator of Forests,
Jammu and Ors., [1977] 1 S.C.R. 937.
Bihar Eastern Gangetic Fishermen Co-operative Society$;
Ltd. v. Sipahi Singh and Ors., [1978] 1 S.C.R. 375;
Mulamchand v. State of Mahdya Pradesh, [l969j 3 S.C.R. 214
and Union of India v. Mis. Hanumart Oil Mills Ltd., [1987)
Suppl. S.C.R. 84, referred to.
JUDGMENT:
CIVIL APPELLATE JURISDlCTION: Civil Appeal No. 776 of
1988.
From the Judgment and Order dated 16.7.1987 of the
Punjab and Haryana High Court in Civil Revision No. 1993 of
1986.
C. M . Nayyar for the Appellants.
Dr. Y.S. Chitale, T.V.S.N. Chari, Ms. Vrinda Grover and
Mrs. Smita Rao for the Respondent.
The judgment of the Court was delivered by
SABYASACHI MUKHARJI, J. This appeal involves a short
question and the field is more or less covered by the
constitutional provisions as well as the authorities of this
Court. The Executive Engineer (Construction Division No. 1)
PWD B & R Branch, Patiala, invited tenders for the work
called "Construction of high level bridge over Tangri Nadi
in Mile No. 1915 of Patiala-pehewa Road". The respondent to
the said invitation submitted the tender for the aforesaid
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work, which was opened on 7th October, 1975. The Executive
Engineer informed the respondent on that date, who happened
to be the lowest tenderer and before the tender could be
finally considered, that the drawings in triplicate be
submitted to the Chief Engineer PWD B and R, Suptd.
Engineer, PWD B & R and Executive Engineer Construction
Division No. 1 PWD B and R Branch, Patiala. B The tender,
however, was recalled in February, 1976 by the Executive
Engineer Construction Division No. 1. The respondent again
submitted tender on 3 lst August 1976. The Executive
Engineer informed the respondent telegraphically that the
tender submitted by him had been accepted and asked the
respondent to take up the work in hand. This was followed by
the letter dated 3lst August, 1976 from the Executive
Engineer. It was contended that the telegram as well as the
letter mentioned hereinbefore revealed that the tender of
the respondent was not accepted by the Governor of Punjab,
as it was mandatory under the Constitution in order to
amount to a valid acceptance and to create a binding
contract between the parties. The respondent. however,
withdrew the offer on 6th November. 1976. On 22nd
November, 1976 the respondent-contractor in its letter made
it clear that no agreement had been signed between the
parties. In reply to the letter dated lst December, 1976
from the Executive Engineer, the respondent vide letter
dated 6th December, 1976 reiterated and repeated that legal
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infirmity could not be met by the considerations as made by
the appellant. But on 15th April, 1980, the Executive
Engineer intimated the respondent that as he had failed to
start the work, and he became liable for action under clause
2 of the agreement. The letter further stated that the
Engineer-in-charge on behalf of the Governor of Punjab had
levied a penalty of Rs.2,55,0000. The above position,
however, was not accepted by the respondent and he advised
the appellant to settle the matter in Court. The Suptd.
Engineer PWD B & R Patiala, then forwarded the claim of Rs.
4,56,040 for arbitration and asked the firm to submit the
reply in duplicate within 30 days from the issue of the
letter. Reply was sent by the respondent to the effect
stating that no valid contract in respect of the
construction of high level bridge over river in Mile No.
19/5 of Patiala-Pehewa Road, ever came into existence
between the parties. The Arbitrator again on 2nd July, 1983
issued a letter after a lapse of one year and the same was
replied more or less in the same manner. The respondent
filed an application under section 33 of the Arbitration
Act, 1940 hereinafter called ’the Act’). The learned Sub-
Judge Ist Class, Patiala, on 4th April, 1986 dimissed the
application of the respondent with costs. It was contended
before him that there was no valid acceptance of the offer
made by the respondent herein and, therefore, there was no
valid contract. It was contended that no agreement between
PG NO 539
the parties as required by law, had been brought into
existence. Therefore, there was no question of breach of
agreement. The learned Sub-Judge commented that no oral
evidence was adduced on behalf of the respondent. The
learned Sub judge came to the conclusion that there was a
valid offer. He observed that the only point that required
consideration was whether the acceptance regarding the
allotment of work of construction of high level bridge over
river Tangri on Patiala Pehewa Road was issued on behalf of
the Governor of Punjab or not. The learned Judge came to the
conclusion after discussing various evidence that the
Executive Engineer was authorised to accept tender. He
referred to various clauses. The learned Judge noted that it
was clearly laid down in the tender itself that the tender
together with acceptance thereof would constitute a valid
and binding contract between the parties. The relevant
condition of the tender, that is, condition No. 4. 6 read as
follows:
"The tender together with letter of acceptance thereof
shall constitute a binding contract between the successful
tenderer and the department and shall form the foundation of
rights and obligations of both the parties."
The learned Sub-Judge recorded that the above tender
form was duly signed by the respondent and the appellant. On
an analysis of the evidence on records, the learned Judge
came to the conclusion that there was a valid contract and
accordingly the application under section 33 of the Act was
dismissed with costs. There was a revision to the High
Court. The High Court after discussing the relevant evidence
came to the conclusion that there was no valid contract. The
learned Judge of the High Court noted that in the acceptance
letter Ext. P. 7 and Ext. RW 1/14, the Executive Engineer
had required the respondent at the end to sign the agreement
which was under preparation within ten days. No such
agreement was ever signed. That position is undisputed.
Therefore, the High Court was of the view that no contract
in conformity with Article 299(1) of the Constitution, which
was a constitutional requirement in this case, has been
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entered into and came to the conclusion that there was no
contract between the parties. In that view of the matter the
revision was allowed and the order passed by the trial Judge
was set aside. This appeal arises from the said decision.
Shri C.M. Nayar advocate for the appellant contended
that there was a valid and subsisting contract. He
strenuously argued that there Was authority for the
PG NO 540
Executive Engineer to enter into the contract on behalf of
the Governor. He drew our attention to clause 2.76 of the
Public Works Department Code which provides as follows :
"2.76. No authority lower than an officer in charge of a
Sub-Division can accept any tender or make a contract for
public works. The different classes of deeds, contracts and
other instruments which may be executed by this Department
and the authorities empowered to execute them are detailed
in Appendix I, while the financial limits up to which these
authorities are authorised to determine the terms of deeds,
are set forth in the Book of Financial Powers."
He also referred to the Appendix I (referred in
paragraph 2.76) classifying the deeds, contracts and other
instruments. It appears that the Executive Engineer of the
buildings and roads was authorised to enter into these
contracts. He, therefore, sought to submit that by virtue of
that authority if any contract had been entered into then
that amounted to entering into contract in accordance with
Article 299(1) of the Constitution. It appears that to
understand this problem, it is necessary to deal with some
other documents. Our attention was drawn to a letter from
the Executive Engineer to the contractor, which stated,
inter alia, as follows:
"As per your modified lumpsum bids received vide your
letter No. CM/3-T/OPBK dated 24.3.76 alongwith the
Conditions mentioned in the Original Tender received vide
your letter No. CH/3-T/OPBK/3341/76 dated 26.2.76 and also
further modification of the same as mentioned in your letter
No. CM/3-T/OPBK/3503/76 dated 24.3.76 and letter No. CM/3-
T/OPBK/3930/76 dated 6.8.76, the work of construction of
High Level Bridge over Tangri Nadi in Mile No. 19/5 of
Patiala Pehewa Road is hereby allotted to you on lumpsum
basis for an amount of Rs. 25.50 Lacs (Rupees Twenty five
lacs and fifty thousands) with a time limit of 24 months
from the date of issue of this letter coupled with the
following conditions."
The said letter thereafter set out those conditions. lt
is, however, not necessary to set out these. The last two
paragraphs of the said letter are relevant and read as
follows:
PG NO 541
"The work may be taken in hand immediately after getting
the detailed structural drawing and designs duly approved by
this Department.
Please attend this office within 10 days to sign your
agreement which is under preparation."
This was signed by the Executive Engineer and the
signatures appeared as follows :
"Sd/-
30/8
Executive Engineer,
Construction Division No. 1,
P.W.D. B & R Br. Patiala.
Endst. No:
Dated :
Copy of above is forwarded to (1) Sub Divisional
Engineer, Const. Sub Division No. 5 P.W.D. B & R Br.,
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Patiala for information and necessary action. He is
requested to get the work started immediately as per
detailed terms and conditions which may be thoroughly studied.
(2) Divisional Acctt. for information & n/a.
Sd/-
Executive Engineer,
Construction Division No. 1,
P.W.D. B. & R Br., Patiala."
Dr. Chitale appearing for the respondent drew our
attention to a letter signed by the Executive Engineer which
reads as follows:
"Regd. A.D.
Endst. No. 4466 Dated 24.8.76
Copy confirmation by post is forwarded to M/s Om Parkash
Baldev Krishan, New Delhi-5 for their information and
necessary action. Their tender for lumpsum amount of rupees
thirtyone lacs and fifty thousands for construction of high
level bridge over markanda river crossing Patiala Pehewa
PG NO 542
road has been accepted. Please take the work in hand
immediately. Regular sanction follows separately.
Sd/-
Executive Engineer"
Shri R.L. Bansal, Divisional Accountant Construction,
in his deposition before the Trial Court stated that there
was no document concerning this contract which had been
issued or made in the name of the Governor of Punjab
according to the records. He also admitted in his deposition
that the letter of acceptance had not been issued in the
name of the Governor of Punjab. He reiterated that he was
entitled to issue acceptance on behalf of the Governor.
It was urged on behalf of the appellants by Shri Nayar
that a valid binding contract might come into existence even
without a formal agreement duly signed by the parties.
According to the learned advocate if one party made an offer
in writing and the same was accepted by a letter to the
first party, these two documents might be sufficient to
spell out a contract. Assuming that it is right, it is not
necessary for the purpose of this appeal in the view we have
taken to decide that the tender submitted and the letter
sent by the Engineer did not create in the facts of this
case a binding contract. The acceptance letter, at least,
must conform to the requirements of Article 299(1) of the
Constitution and since this letter was indisputably not in
the name of the Governor, this contention cannot be
accepted. The acceptance letter or any work letter sent to
the respondent had been written by the Executive Engineer on
behalf of the Governor. Therefore, it is not possible to
accept the contention that there was a valid binding
contract.
Shri Nayar further sought to urge that Article 299 was
for the Governments’ protection in order to protect it
against unauthorised contracts being entered on behalf of
the Government. In the instant case, according to Shri
Nayar, the Executive Engineer had issued the tender and had
accepted the tender, authority to accept the tender on
behalf of the Governor, is thus established. Shri Nayar
submitted that once that authority is established and it is
made clear from the evidence that the authorities have acted
on that basis, then it must be presumed that the contract
had been entered into in accordance with the provisions of
Article 299 of the Constitution. ln view of the clear
position in law, it is, however, not possible to accept this
submission.
Clause (1) of Article 299 of the Constitution provides
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as follows:
PG NO 543
"(1) 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."
In this case, the Executive Engineer has signed the
contract but nowhere in the contract it was offered and
accepted or expressed to be made in the name of the
Governor. The constitutional requirement enjoined in Clause
(1) of Article 299 of the Constitution is based on public
policy. This position has been made clear by this Court in
The State of Bihar v. M/s. Karam Chand Thapar & Brothers
Ltd., [1962] 1 S.C.R. 827. There a dispute between the
respondent and the Government of Bihar over the bills for
the amount payable to the company in respect of the
construction works carried out by it for the Government was
referred to arbitration. Section 173(3) of the Government of
India Act, 1935 provided as follows:
"Subject to the provisions of this Act with respect to
the Federal Railway authority, all contracts made in the
exercise of the executive authority of the Federation or of
a province shall be expressed to be made by the Governor-
General, or by the Governor of the Province. as the case may
be, and all such contracts and all assurances of property
made in the exercise of that authority shall be executed on
behalf of the Governor-General or Governor by such persons
and in such manner as he may direct or authorise."
This Court reiterated that under that section a contract
entered into by the Governor of a Province must satisfy
three conditions, namely, (i) it must be expressed to be
made by the Governor; (ii) it must be executed; and (iii)
the execution should be by such persons and in such manner
as the Governor might direct or authorise. These three
conditions are required to be fulfilled. This position was
reiterated by this Court again in Seth Bikhraj Jaipuria v.
Union of India, [l962] 2 S.C.R. 880. This Court explained
that three conditions as mentioned in State of Bihar v. M/S.
Karam Chand Thapar (supra) had to be fulfilled, and further
reiterated that the object of enacting these provisions was
that the State should not be saddled with liability for
unauthorised contracts and, hence, it was provided that the
contracts must show on their faces that these were made by
PG NO 544
the Governor-General and executed on his behalf in the
manner prescribed by the person authorised. It is based on
public policy. No question of waiver arises in such a
situation. If once that position is reached, and that
position is well-settled by the authorities over a long
lapse of time, no question of examining the purpose of this
requirement arises. In Union of India v. A.L. Rallia Ram,
[1964] 3 S.C.R. 164, this Court again reiterated that the
agreement under arbitration with the Government must be in
accordance with section 175(3) of the Government of lndia
Act, 1935. These principles were again reiterated by this
Court in Timber Kashmir Pvt. Ltd. etc. etc. v. Conservator
of Forests, Jammu & Ors. etc., [1977] 1 S.C.R. 937. There,
the Court was concerned with section 122(1) of the Jammu &
Kashmir Constitution which corresponded to Article 299(1) of
the Constitution of India. In that case all the three
applications filed by the respondent State for a reference
to an arbitrator under section 20 of the Jammu & Kashmir
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Arbitrator Act, were dismissed by a single Judge of the
Jammu & Kashmir High Court on the ground that the
arbitration clause was, in each case, a part of an agreement
which was not duly executed in accordance with the
provisions of section 122(1) of the Jammu & Kashmir
Constitution which corresponded to those of Article 299(1)
of the Constitution of India. But the Division Bench allowed
the appeals holding that if contracts were signed by the
Conservator of Forests in compliance with an order of the
Government, the provisions of section 122(1) of the Jammu &
Kashmir Constitution could not be said to have been
infringed. This Court held that the contract could not be
executed without the sanction. Nevertheless, if the sanction
could be either expressly or impliedly given by or on behalf
of the Government, as it could, and, if some acts of the
Government could fasten some obligations upon the
Government, the lessee could also be estopped from
questioning the terms of the grant of the sanction even
where there is no written contract executed to bind the
lessee. But, once there has been a valid execution of lessee
by duly authorised officers, the documents would be the best
evidence of sanction. In that case, the contracts were
executed on behalf of the Government of Jammu & Kashmir. The
only question with which the Court was concerned in that
case was whether the contracts executed by duly authorised
officials had been proved or not. lt was held that it was so
proved.
In Bihar Eastern Gangetic Fishermen Co-operative Society
Ltd. v. Sipahi Singh and others, [1978] 1 S.C.R. 375 where
this Court relied on a previous decision in Mulamchand v.
State of Madhya Pradesh, [1968] 3 S.C.R. 214 and reiterated
that there cannot be any question of estoppel or
PG NO 545
ratification in a case where there is contravention of the
provisions of Article 299(1) of the Constitution. The reason
is that the provisions of section 175(3) of the Government
of India Act and the corresponding provisions of Article
299(1) of the Constitution have not been enacted for the
sake of mere form but they have been enacted for
safeguarding the Government against unauthorised contracts.
The provisions are embodied in section 175(3) of the
Government of India Act and Article 299(1) of the
Constitution on the ground of public policy-on the ground of
protection of general public ..... and these formalities
cannot be waived or dispensed with. This Court again
reiterated the three conditions mentioned hereinbefore. The
same principle was again reiterated by this Court in Union
of India v. M/s. Hanuman Oil Mills Ltd., and others, [1987]
Suppl. S.C.C. 84.
In the instant case, we have referred to letter dated
31st August, 1976 which towards the end stated that the
parties to attend the office within 10 days to sign the
agreement which is under preparation. lt is common ground
that no such agreement was signed
In the aforesaid view of the matter the High Court was
right in the view it took and the submissions made on behalf
of the appellants cannot be entertained. The appeal fails
and accordingly dismissed with costs.
R.S.S. Appeal dismissed.