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Contractual Liability of the Government

 CONTRACTUAL LIABILITY OF THE GOVERNMENT

By: Robin Pandey                                                                        Date: 06/03/2022

Article 299(1) of the Constitution of India deals with the mode and manner for entering into a contract by the Government of India or by a State Government. It lays down that a contract to bind the Government must satisfy the following conditions:

 (a) The contract must be expressed to be made by the President or the Governor of the State, as the case may be.

(b) The contract must be executed on behalf of the President or the Governor, as the case may be.

(c) The contract must be executed by such person and in such manner as the President or the Governor may direct or authorise.

Thus, all contracts made in the exercise of executive authority of Union of India or the State Government to be executed in the name of and on behalf of the President of India or the Governor of the State as the case may be and by person duly authorised by him. Article 299(1) does not prescribe any particular mode in which authority may be conferred on a person to execute a contract on behalf of the President of India or Governor of a State. It is usually conferred by notification in the Official Gazette. It can also be conferred on ad hoc basis on any person (State of Bihar v. Karan Chand, 1962).

Effect of non-compliance 

The provisions of Article 299(1) are mandatory. If any contract is made in contravention of the provisions of Article 299 the contract would be invalid (State of U.P. v. Murari Lal, 1971). The contravention of this constitutional provision cannot be waived by either party. Waiver of either party from the requirements of the Article cannot confer any validity to the agreement. Thus there cannot be estoppel in such a case (State of Orissa v. M/s. Durga Enterprises, 1995)

 Where a contract is void by reason of non-compliance with Article 299(1) of the Constitution, the rights of the parties are determined according to Section 70 of the Indian Contract Act, 1872 (Laliteshwar Prasad v. Baleshwar Prasad, 1968). If the goods have been supplied or services have been rendered to the Government and provisions of Article 299(1) have not been complied with, the Government can still be made liable for the same under aforesaid Section 70, if the Government has enjoyed the benefit thereof.

No Personal Liability

 Article 299(2) of the Constitution provides that the President of India or Governor of the State or person executing any contract on his behalf is not personally liable for any liability in respect of any contract executed for the purposes of Government of India or the State Government.

While an ordinary contract can be made by express words and by the implied conduct of the parties, a Government contract should be made expressly. In the case of Seth Bhikraj Jaipuria v. Union of India, the Supreme Court had observed that from the words ‘expressed to be made’ and ‘executed’ in Article 299 it is clear that the Government contract should be made by a formal written contract. The court also held these formalities under Article 299 are of mandatory nature and they cannot be skipped by the contracting parties. If there is any contravention of these provisions then the contract will be nullified it will not be enforceable against the Government.
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