Appeal No 15 of 1968
Appeal from the judgment and decree dated August 11 1964 of the Allababad High Court in first Appeal No 11 of 1957
C B Agrawala O P Rana and R Bana for the appellants
Grover J This is an appeal by certificate from the judgment of the Allahabad High Court dacreeing the suit filed by the respondent company for recovery of a sum of Rs 21000 on account of rent or damages in respect of storage charges for 4000 Maunds of potatoes for which space had been reserved in the cold storage by the company The plaintiff respondent brought a suit against the State of Uttar Pradesh and impleaded three other defendants who were at the material time
in the service of the State
Defendant No 3 was a Horticulturist in the Department of Agriculture
He negotiated with the plaintiff for storing Government potatoes in a cold storage which belonged to the plaintiff
It was agreed that the Government potatoes would be sent for storage and the plaintiff would be entitled to charge at a certain rate per maund
It was understood that 4000 maunds of potatoes would be sent for storage
How ever no potatoes were sent although the plaintiff had reserved the requisite space in the storage which remained unoccupied during the season
It appears that defendant No 3 A P Gupta was acting on behalf of Srivastava defendant No 2 who was Deputy Director Horticulture
Both these defendants were acting upon instructions from Sri Ram Krishna defendant No 4 who was Assistant Development Commissioner Planning Lucknow
The suit was therefore filed against the State and the other three defendants to recover the storage charges amounting to Rs 21000 
3 Although all the defendants raised a common plea that there was no contract between the parties for the storage of potatoes and that the entire matter remained at the stage of negotiations the real plea taken on behalf  of the State was that no contract had been entered into in accordance with article 299 1 of the Constitution
The trial court upheld the objection of the State and dismissed the suit against it but it held the other defendants jointly liable for the storage charges
The High Court on appeal by the defendants set aside the decree against defendants Nos 2 and 4 but maintained it against defendant No 3
No appeal however was filed by the plaintiff against the State
As the judgment of the High Court proceeded mainly on the provisions of sub section 3 of section 230 of the Contract Act the whole of that section may be set out  section 230 In the absence of any contract to that effect an agent cannot personally enforce contracts entered into by him on behalf of his principal now is he personally bound by them
Such a contract shall be presumed to exist in the following cases 1 Where the contract is made by an agent for the sale or purchase of goods for a merchant resident abroad 2 Where the agent does not disclose the name of his principal 3 where the principalthough disclosedcannot be sued
According to the High Court the entire transaction had been entered into by the defendant on behalf of the Government
As the State Government was not liable by virtue of article 299 of the Constitution section 230 3 would be applicable and defendant No 3 who was apparently acting as an agent of the State Government would become personally liable under the contract
Certain observations in Chatturbhuj Vithaldas Jasani vs Moreshwar Parshrain  Others 1 appear to lend support to this view
In that case also no formal contract had been
1  4 entered into as required by article 299 1 of the Cons titution
The court observed that the Chairman of the Board of Administration had acted on behalf of the Union Government and his authority to contract in that capacity had not been questioned
Both sides acted in the belief and on the assumption that the goods were intended for Government purposes
The only flaw was that the contracts were not in proper form and because of this technical difficulty the principal could not have been sued
But that was just the kind of case that section 230 3 of the Indian Contract Act was designed to meet
The Government might not be bound by the contract but it was very difficult to say that such contracts were void and of no effect
There would be nothing to prevent ratification especially if that was for the benefit of the Government However in a subsequent decision in State of West Bengal vs Ms B K Mondal and sons 1 Gajendragadkar J delivering the majority judgment of Bench said at page 885 with reference as he then was the Constitution to the above observation The contract which is void may not be capable of ratification but since according to the Court the contract in question could have been ratified it was not void in that technical sense
That is all that was intended by the observation in question
We are not prepared to read the said observation or the final decision in the case of Chatturbhuj as supporting the proposition that notwithstand ing the failure of the parties to comply with article 299 1 the contract would not be invalid
Indeed Bose J has expressly stated that such a contract cannot be enforced against the Government and is not binding on it
 The effect of the reference to section 230 3 of the Contract Act in Chatturbhuis case2was not directly considered but in a large number of Subsequent decisions this Court has taken the view that the provisions of article 299 1 corresponding to section 175 3 of the Government of India  Act 1935 are mandatory and contain a prohibition against a contract being entered into 1 1962 Supp 1 SCR 876
2   5 except in the manner prescribed by the aforesaid provisions
We need only refer to the recent judgment in Mulamchand vs State of Madhya Pradesh 1
After referring to the earlier decisions Ramaswami J observed at page 221  The principle is 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 mandatory in character and the contravention of these provisions nullifies the contracts and makes them void
There is no question of estoppel or ratification in such a case
 It is clear that the observations in Chatturbhuj s case2 have been regarded either as not laying down the law correctly or as being confined to facts of that case
The consensus of opinion is that a contract entered into without complying with the conditions laid down in article 299 1 is void
If there is no contract in the eye of the law it is difficult to see how section 230 3 of the Contract Act would become applicable
Although the High Court did not rely on section 235 of the Contract Act the trial court bad held that the defendants had no authority to enter into a contract on behalf of the State Government but still they purported to do so
There was an implied warranty of authority which had to be presumed and the plaintiff was entitled to receive compensation for breach of that warranty under section 235 of the Contract Act
Section 235 provides that a person untruly representing himself to be the authorised agent of another and thereby inducing a third person to deal with him as such agent is liable if his alleged employer does not ratify his acts to make compensation to the other in respect of any loss or damage which he has incurred by so dealing
The High Court did not base its decision on the above section
But it seems that section 235 also can become applicable only if there is a valid contract in existence
This appears to follow from the words if his alleged employer does not ratify his acts  The contract should thus be such that it is 1  2  6 capable of ratification
In the present case where the con tract was entered into Without complying with the re quirements of article 299 1 of the Constitution the question of ratification could not arise because on the view which has already been followed such a contract is void and is not capable of ratification
However we do not wish to express any final opinion on the applicability of section 235 of the Contract Act to cases where the contract suffers from the infirmity that the requirements of article 299 1 of the Constitution have not been complied with
The reason is that before the High Court no contention appears to have been advanced on behalf of the plaintiff based on section 235 of the Contract Act nor has the plaintiff s counsel chosen to satisfy us that even if section 230 3 was not applicable the decree should be sustained on the ground that relief could be granted by virtue of section 235 of the Contract Act
The appeal thus succeeds and the judgment and decree of the courts below are hereby set aside and the suit of the plaintiff is dismissed
In the circumstances of the case the parties are left to bear their own costs throughout


Summary:
The respondent company had a cold storage
It filed a suit against the Government of Uttar Pradesh and three of its officials claming rent or damages on the allegation that under an agreement negotiated by Defendant No 3 under instructions from Defendants Nos 2 and 4 on behalf of the State Government defendant No 1 space had been reserved in its cold storage by the company for the storage of Government potatoes but no potatoes had been sent for storage
On behalf of the State Government it was pleaded that no contract was entered into in accordance with article 2991 of the Constitution
The trial court upheld the objection of the State and dismissed the suit against it but it held the other defendants liable for the storage charges
The High Court on appeal by the defendants set aside the decree against defendants Nos 2 and 4 but maintained it against defendant No 3
According to the High Court the entire transaction had been entered into by the defendant No 3 on behalf of the Government and since the State Government was not liable by virtue of article 299 of the Constitution the said defendant would be liable under section 2303 of the Contract Act
In appeal to this Court by certificate HELD  Except in Chatturbhuj s case which lent some support to the High Court s view this Court has taken the view that the provisions of article 2991 are mandatory and contain a prohibition against a contract being entered into otherwise than in the manner prescribed by the aforesaid provisions
The observations in Chaturbhuj s case have been regarded in subsequent decisions as either not laying down the law correctly or as being confined to the facts of that case
The consensus of opinion is that a contract entered into without complying with the conditions laid down in article 2991 is void
If there is no contract in the eye of the law it is difficult to see how section 2303 of the Contract Act would become applicable
5 D The appeal must accordingly be allowed
Chatturbhuj Vithaldas Jasani vs Moreshwar Parashram  Ors   not followed
State of West Bengal vs Ms B K Mondal  Sons
1962 Supp 1 SCR 876 and Mulamchand vs State o Madhya Pradesh   applied
For the reasons stated in the judgment the court did not give any final opinion on the question of applicability of section 235 of the Contract 2 Act to cases when the contract Suffers from the infirmity that the requirements of article 2991 of the Constitution have not been complied with