Case: Laliteshwar Prasad Sahi Vs. Bateshwar Prasad And Others

Sikri, J.1. This is an appeal by certificate granted by the High Court of Patna, directed against the judgment of the said High Court reversing the decision of the Election Tribunal, Muzaffarpur. This appeal arises out of the election of the respondent, Shri Bateshwar Prasad, to the Bihar Legislative Assembly from Lal Ganj North Constituency. The appellant was one of the candidates. He filed an election petition No. 133 of 1962, alleging inter alia that the election of respondent No. 1, Shri Bateshwar Prasad, was void as he was disqualified under S. 7 (d) of the Representation of the People Act, 1951, hereinafter referred to as the Act. His complaint was that respondent No. 1 had entered into various contracts with the Government and that these contracts were subsisting on January 14 1962, the date fixed for filing nomination papers. The Election Tribunal, after reviewing both oral and documentary evidence, held that the respondent had entered into contracts to do Mosaic flooring work in the Rajendra Surgical Block of Patna Medical Hospital and that these were subsisting on the date of the nomination, viz., January 14, 1962. The Election Tribunal further held that by virtue of Cl. 3 (c) of the conditions embodied in the agreement, Ex. D, it was not at all necessary for the Public Works Department to have entered into a contract with the respondents company, called the Patna Flooring company. In the result, the Election Tribunal declared the election of Respondent No. 1 to the Bihar Legislative Assembly from the Lal Ganj North Constituency as void, but refused the prayer of the petitioner before it to be declared elected.2. Both sides appealed to the High Court but we are only concerned with the election appeal No. 11 of 1963, filed by Bateshwar Prasad, the returned candidate. Before the High Court three points were taken:(1) The appellant was not a contractor under the State Government for the mosaic work to be done in the Rajendra Surgical Block, but that at all relevant times, he was a sub-contractor under one G. P. Saxena, who was a contractor under the State Government for the purpose:(2) Assuming that there was contract within the meaning of Section 7 (d) of the Representation of the People Act, 1951 (Act 43 of 1951), sometime, there was no subsisting contract when the appellant had filed his nomination paper in 1962 and thereafter.(3) Assuming again that there was a contract between the appellant and the State Government sometime, the contract alleged was void, in view of Article 299 (1) of the Constitution of India, so that the Tribunal could not have held that the appellant was disqualified to be chosen as a candidate.3. The High Court reviewed the entire evidence and came to the conclusion on point No. 1 above that the appellant was not a contractor under the State Government but continued to be a sub-contractor under Saxena for mosaic work. It also differed from the Election Tribunal on the interpretation of Cl. 3 (c) of Ex. D. On the second point, the High Court felt that in view of its decision of the first point, the question was of mere academic interest and there might be substance in the argument of the learned counsel for the respondent that this question ought not to be allowed to be raised at this stage. Regarding the third point, the High Court held that Chaturbhujs case (Chatturbhuj Vithaldas Jasani v. Moreshwar Parashram; 1954 SCR 817 : (AIR 1954 SC 236 )) was distinguishable because in the instant case the State Government has not accepted the performance of the contract by the appellant. It further held that since the decision in Chatturbhujs case, 1954 SCR 817 : (AIR 1954 SC 236 ), the law had been amended by the amendment of S. 7 and the effect of the amendment was"that the candidate shall be disqualified for being chosen as a member only if there still exists, in substance, at the relevant time, a valid and binding contract between him and the appropriate Government."The High Court further observed that"It is difficult to accept the contention of the learned counsel for the respondent that a transaction may be void under the Contract Act, but its actual existence may still be a disqualification under present Section 7(d)."In conclusion, the High Court held that Bateshwar Prasad had not incurred a disqualification under S. 7 (d) of the Act, and accordingly set aside the judgment and order of the Election Tribunal.4. Mr. Purshottam, the learned counsel for the appellant, has urged before us that the High Court was wrong in holding that the amendment had made any change in the law on the question whether the contract which is void under Art. 299 of the Constitution is or is not a contract within S.7 (d) of the Act. He says that the reasoning of the decision of this Court in Chatturbhujs case, 1954 SCR 817 : (AIR 1954 SC 236 ). Still holds the field. He then says that the High Court came to a wrong conclusion of the question of fact in this case, namely, whether the contracts subsisted or not at the relevant date, and that this Court should reverse the finding even though it is a finding of fact. Mr. Sarjoo Prasad, the learned counsel for the respondent, controverts this point and he urges that this Court should not go into the question of fact. On the question of law, he says that the present S. 7 (d) is quite different from the old S. 7 (d) and that the Supreme Court decision cannot be applied to the wording of the present section.5. Coming to the law point, it is necessary to set out the old and the new statutory provisions, and these are as under:"7. A person shall be disqualified for being chosen as, and for being, a member of either House of Parliament or of the Legislative Assembly or legislative Council of a State ...............(d) if, whether by himself or by any person or body of persons in trust for him or for his benefit or on his account, he has any share of interest in a contract for the supply of goods to, or for the execution of any works or the performance of any services undertaken by the appropriate Government;"As amended"7. A person shall be disqualified for being chosen as, and for being, a member of either House of parliament or of the Legislative Assembly or Legislative Council of a State ............(d) if there subsists a contract entered into in the course of his trade or business by him with the appropriate Government for the supply of goods to, or for the execution of any works undertaken by, that Government;".6. Comparing the old section and the new section, there is no doubt that there has been a change in the wording. One change is quite clear and that is that the contract now must have been entered in the course of his trade or business by a person with the appropriate Government. Previously it need not have been a contract in the course of trade or business. The words were much wider and included any contract entered into for his benefit or on his own account or a contract in which he had any share or interest. To this extent the Legislature has clearly narrowed the area of this disqualification. But is Mr. Sarjoo Prasad right in contending that the change has gone further and that it only embraces executory contracts but not executed contracts? In our opinion, the Legislature has made no change in this respect for under the old provision it was also necessary for a contract to have subsisted at the relevant time. This Court had in Chatturbhujs case, 1954 SCR 817 : (AIR 1954 SC 236 ), included both executed and executory contracts within the provision of S. 7 (d) and had refused to follow the English rulings to the contrary. We cannot go into the question whether this was rightly done or not for we are bound by that decision Accordingly, following Chatturbhujs case. 1954 SCR 817 : (AIR 1954 SC 236 ), we hold that a contract for the supply of goods or for the execution of any works or the performance of any services undertaken does not cease to subsist only because the goods had been supplied or work had been executed or services performed. It continues to subsist till payment is made and the contract is fully discharged by performance on both sides.7. But whether chatturbhujs case, 1954 SCR 817 : (AIR 1954 SC 236 ), applies when a void contract has not been accepted or ratified by the Government, we will consider presently. Mr. Purshottam next contends that the respondent entered into two contracts and they were subsisting at the date of the nomination as the respondent had not been paid for his work and as a matter of fact a suit is pending against the Government for recovery of the money. He has taken us through the documentary evidence and it is now necessary to deal with it. The documentary evidence may be conveniently divided into two groups. The first group relates to documents bearing on the formation of the alleged contract. It appears that one G. P. Saxena had entered into a contract, Ex. D, for the construction of a surgical block in the Patna Medical College compound, Patna, and this contract was entered into in 1951, and the respondent was working as a sub-contractor under him. It further appears that there were some disputes between Saxena and the Public Works Department and he was not completing the work in time or to their satisfaction Consequently, the Sub-Divisional Officer enquired from the Patna Flooring Company whether they would be willing to complete the work. Patna Flooring Company, on April 17, 1955, wrote to the Executive Engineer, through the Sub-Divisional Officer, and give their quotations and terms and conditions. It may be noted here that these terms were different from the terms under which Saxena had taken the contract. This is an important fact and it is necessary to bear this in mind. On April 25, 1965, the Sub-Divisional Officer for-warded this letter to the Executive Engineer with the remarks that "the contractor is being asked to start work immediately as per your orders" The Executive Engineer noted on this letter as follows: "It is hoped necessary notice has been given by you to the defaulting contractors" The S. D. O noted that"the contractor had already been served with a notice and a copy to your office vide T. O. No. 497 dt. 20-4-55 The P. F. C. has been ordered to start work and a copy of that submitted to you vide T. O. No. 504, dt. 20-4-55."On April 20, 1955, the Sub-Divisional Officer wrote to the Patna Flooring Company to"Start immediately the remaining mosaic floor and dado work in the R. S. Block and finish the work completely within a fortnight as promised by you."He endorsed a copy of this letter to the Executive Engineer. He also sent a notice to Saxena informing him that as he had failed to do (in spite of repeated asking) the remaining mosaic work of floor and dado in Surgical Block, the remaining work was being got done by other agency and the cost would be recovered from him. He endorsed a copy of this to the Executive Engineer noting that the remaining work was being done by the Patna Flooring Company, as instructed by him. On May 13, 1955, the Executive Engineer warned Patna Flooring Company to finish the work within the stipulated time and that no extension of time would be granted if the work would be left unfinished. On May 23, 1955, the Sub-Divisional Officer again wrote to Patna Flooring Company saying that necessary instructions regarding slope etc had already been given at the site, that there was no cause for delay in work and asked them to push up the progress of the work as it was a top priority work. It appears that by May 25, 1955, 90 per cent of the work had been done and the Patna Flooring Company wrote to the Sub-Divisional Officer requesting that the S. O. Incharge of the said work be ordered to submit an account bill for making payment to them at an early date.8. Mr. Purshottam contends that on a perusal of the correspondence contained in this group it is quite clear that an oral contract for the construction of work was entered into between the Executive Engineer and the Patna Flooring Company and that the High Court had erred in holding that no such contract ever came into being. He points out that under Cl. 3 (c) of the Contract, Ex. D, the Executive Engineer was entitled to ask the Patna Flooring Company to do the work. Clause 3 (c) reads as follows:"Clause 3.- In any case in which under any clauses of this contract the contractor shall have rendered himself liable to pay compensation amounting to the whole of his security deposit in the hands of Government (Which whether paid in one sum or deducted by instalments) the Executive Engineer on behalf of the Governor of Bihar, shall have power to adopt any of the following courses, as he may deem best suited to the interests of Government.(c) To measure up the work of the contractor, and to take such part of the work of the contract as shall be unexecuted out of his hands, and to give it to another contractor to complete, in which case any expenses which may be incurred in excess of the sum which would have been paid to the original contractor if the whole work had been executed by him (of the amount of which excess the certificate in writing of the Executive Engineer shall be final and conclusive) shall be borne and paid by the original contractor and may be deducted from any money due to him by Government under the contract or otherwise, or from his security deposit or the proceeds of sale thereof, or a sufficient part thereof."We are inclined to agree with Mr. Purshottam that the correspondence in this group clearly discloses an agreement for the execution of work between the Executive Engineer and the Patna Flooring Company, and the Election Tribunal was quite right in coming to this conclusion. But we may say that the Election Tribunal was not right in holding that Cl. 3 (c) got rid of Art. 299 of the Constitution. Any work which is given in exercise of the powers under Cl. 3 (c) has also to comply with the provisions of Art. 299 of the Constitution. What the effect of this is we will consider later.9. Mr. Sarjoo Prasad, however, says that assuming that a contract was entered into, the contract did not subsist at the time of the nomination because the Government had refused to ratify the contract given under Cl. 3 (c) and that Chatturbhujs case, 1954 SCR 817 at p. 835: (AIR 1954 SC 236 at p. 243), does not lay down that a contract which has not been ratified by the Government is a contract within S. 7 (d) of the Act. It seems to us that there is a great deal of force in the contention of the learned counsel. It is true that this Court has held in a number of cases, the latest being New Marine Coal Co. (Bengal) Private Ltd. v. Union of India, AIR 1954 SC 152, that a contract entered into with the Government in contravention of S. 175 (3) of the Government of India Act, 1935, or Art. 299 of the Constitution is void and unenforceable. But in State of West Bengal v. B. K. Mondal, AIR 1962 SC 779 , this Court distinguished Chatturbhujs case, 1954 SCR 817 : (AIR 1954 SC 236 at p. 243) on the ground that in the latter case"this Court was dealing with the narrow question as to whether the impugned contract for the supply of goods would cease to attract the provisions of S. 7 (d) of the Representation of the People Act on the ground that it did not comply with the provisions of Art. 299 (1), and this Court held that notwithstanding the fact that the contract could not be enforced against the Government it was a contract which fell within the mischief of S. 7 (d)."This Court further observed that"all that this Court meant by the said observation (of Bose, J. in Chatturbhujs case, 1954 SCR 817 , at p. 835: (AIR 1954 SC 236 at p. 243), quoted below) was that the contract made in contravention of Art. 299 (1) could be ratified by the Government if it was for its benefit and as such it could not take the case of the contractor outside the purview of S. 7 (d). 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."But the question arises whether Chattrubhujs case, 1954 SCR 817 : (AIR 1954 SC 236 ). Can be extended to cover a case where the contract has in fact not been ratified. Bose, J. had observed in Chatturbhujs case, 1954 SCR 817 at p. 835: (AIR 1954 SC 236 at p. 243), as follows:"In the present case, there can be no doubt that the Chairman of the Board of Administration acted on behalf of the Union Government and his authority to contract in that capacity was not questioned. There can equally be no doubt that both sides acted in the belief and on the assumption, which was also the fact, that the goods were intended for Government purposes, namely, amenities for the troops. The only flaw is that the contracts were not in proper form and so, because of this purely technical defect, the principal could not have been sued. But that is just the kind of case that S. 230 (3) of the Indian Contract Act is designed to meet. It only meant that the principal cannot be sued: but we take it there would be nothing to prevent ratification, especially if that was for the benefit of Government. There is authority for the view that when a Government officer acts in excess of authority government is bound if it ratifies the excess; see Collector of Masulipatam v. Cavaly Venkata Narrainapah, 8 Moo Ind App 529 at p. 554 (PC)."10. It seems to us that the decision in. Chatturbhujs case, 1954 SCR 817 : (AIR 1954 SC 236 ), cannot be extended to cover a case where the Government has in fact not ratified the contract. If we were to hold that this type of transaction is covered then we would be giving no effect to the word "contract" in S. 7(d) and we would be substituting the word "agreement" for it. The Legislature has not chosen to use the word "agreement" but has used the word "contract" Therefore, a mere agreement entered into in contravention of Art. 299 and in fact not ratified cannot be called a "contract" within S. 7 (d) of the Representation of the People Act.11. The question then arises whether the Government did or did not ratify the oral contract entered into between the Executive Engineer and the Patna Flooring Company. In this connection, Mr. Sarjoo Prasad, relies on a number of documents. The first document he refers to is Ex. A-2, dated July 12, 1955, The Sub-Divisional Officer wrote to the Patna Flooring Company as follows:"It is disappointing to note that in spite of my repeated askings you have not submitted your final bill for the mosaic work uptill now. I have been personally explaining to you the whole position and you promised to submit final correct bill on Friday the 8th July, 1955, so that I may ask the contractor Shri G. P. Saxena to pay you off finally and settle your accounts immediately."It appears that something happened between May 25, 1955 and July 12, 1955. According to the respondent, what happened was that Saxena approached the Superintending Engineer and the Superintending Engineer ordered that Saxena would continue to be the contractor as before and no contract would be given to any firm. The respondent stated this in his evidence as R. W. 32. It is objected that this is hearsay and this part of the statement is not admissible. There is some force in this contention and we omit this part of the statement from consideration. But apart from this oral evidence it is quite clear from this letter that something happened, otherwise it was not necessary to use the words "personally explaining to you the whole position" in this letter, and it is not understandable why the Patna Flooring Company was being asked to submit the bill to Saxena. This inference is strengthened by subsequent correspondence. By letter. Dated July 13, 1955. Ex A-3, the S. D. O. acknowledged the receipt of the bill and said that he had sent it to Saxena for making settlement. Exhibit A-17, dated July 20, 1955, is significant. The Sub-Divisional Officer requested Saxena to issue orders to his contractors"to mend and rectify all the cuttings and damages properly and nicely so that the building is in a fit condition of handing over on 1st August, 1955."On July 23, 1955, Saxena endorsed it to the Patna Flooring Company for information and necessary action and with the request to rectify the defects pointed out to the Patna Flooring Company and complete the remaining portions of works and give final polishes thereto by the schedule date. It is not understandable why Saxena was endorsing this for action to Patna Flooring Company unless the Government had chosen not to ratify the contract with the Patna Flooring Company and was still treating him as a contractor. It is also significant that it has not been alleged or proved that any similar letter was written to Patna Flooring Company direct by the S. D. O. On July 21, 1955, a"statement showing upto 21st day of July, 1955, correct amount for the mosaic work done by M/s. Patna Flooring Co. in the Rajendra Surgical Block, Patna Medical College and Hospital Patna - Transactions between Shri G. P. Saxena, Prop. M/s. G. P. Saxena and Co. and M/s. Patna Flooring Co."was made out and this statement of account shows"Bill No. BP / 1833 /45/55, dated 13th July, 1955, through the S. D. O. No. III, Subdivision, Construction Division, Patna - bill for Rs. 14,000-9-0"and Saxena agreed to settle this bill, and a copy of that statement was forwarded to the Executive Engineer for record with reference to the discussion which was held between Saxena and Prasad in his presence and the presence of the S. D. O.This statement shows that the Government Officer was acknowledging that the liability for work done by the Patna Flooring Company would be that of Saxena. If a direct contract between the Patna Flooring Company and the Government still subsisted, all this arrangement seems to be uncalled for.12. Mr. Sarjoo Prasad further points out an important fact that when Saxena submitted the bill to the Government, he not only charged for the work done by the Patna Flooring Company but he charged it at the rates contained in his own contract and not in the quotations, dated April 14, 1955, given by the Patna Flooring company. We agree with him that this is a very significant fact and shows that as far as the Government was concerned, the original contract stood and the Government had not chosen to treat Patna Flooring Company as a contractor, but only as a sub-contractor working under Saxena.13. Mr. Purshottam laid a great deal of stress on the pleadings in the money suit No. 53 of 1959. There is not doubt that the plaint in the money suit filed by the Patna Flooring Company shows that Bateshwar Prasad, plaintiff, was trying to make out that there was a direct contract entered into between the P. W. D. and plaintiff, but even so, the plaint does not make them solely responsible. We have also come to a finding that there was admittedly a contract in the beginning. The fact that the plaint does not allege any subsequent non-acceptance or refusal to ratify by the Government would not estop the respondent from proving in this case that on the material on record it is clear that the Government had not ratified the contract with the respondent, but confirmed the original contract with Saxena. The written statement filed by the Government in the money suit cannot be used to destroy the inference which clearly arises from the documents referred to above. It is doubtful whether the written statement can be taken into consideration at all.

Decision reasoning: 0[ds]In our opinion, the Legislature has made no change in this respect for under the old provision it was also necessary for a contract to have subsisted at the relevant time. This Court had in Chatturbhujs case, 1954 SCR 817  : (AIR 1954 SC 236  ), included both executed and executory contracts within the provision of S. 7 (d) and had refused to follow the English rulings to the contrary. We cannot go into the question whether this was rightly done or not for we are bound by that decision Accordingly, following Chatturbhujs case. 1954 SCR 817  : (AIR 1954 SC 236  ), we hold that a contract for the supply of goods or for the execution of any works or the performance of any services undertaken does not cease to subsist only because the goods had been supplied or work had been executed or services performed. It continues to subsist till payment is made and the contract is fully discharged by performance on bothare inclined to agree with Mr. Purshottam that the correspondence in this group clearly discloses an agreement for the execution of work between the Executive Engineer and the Patna Flooring Company, and the Election Tribunal was quite right in coming to this conclusion. But we may say that the Election Tribunal was not right in holding that Cl. 3 (c) got rid of Art. 299 of the Constitution. Any work which is given in exercise of the powers under Cl. 3 (c) has also to comply with the provisions of Art. 299 of the Constitution.It seems to us that the decision in. Chatturbhujs case, 1954 SCR 817  : (AIR 1954 SC 236  ), cannot be extended to cover a case where the Government has in fact not ratified the contract. If we were to hold that this type of transaction is covered then we would be giving no effect to the word "contract" in S. 7(d) and we would be substituting the word "agreement" for it. The Legislature has not chosen to use the word "agreement" but has used the word "contract" Therefore, a mere agreement entered into in contravention of Art. 299 and in fact not ratified cannot be called a "contract" within S. 7 (d) of the Representation of the Peopleis not doubt that the plaint in the money suit filed by the Patna Flooring Company shows that Bateshwar Prasad, plaintiff, was trying to make out that there was a direct contract entered into between the P. W. D. and plaintiff, but even so, the plaint does not make them solely responsible. We have also come to a finding that there was admittedly a contract in the beginning. The fact that the plaint does not allege any subsequent non-acceptance or refusal to ratify by the Government would not estop the respondent from proving in this case that on the material on record it is clear that the Government had not ratified the contract with the respondent, but confirmed the original contract with Saxena. The written statement filed by the Government in the money suit cannot be used to destroy the inference which clearly arises from the documents referred to above. It is doubtful whether the written statement can be taken into consideration at all.