Case: Pannalal Vs. Dy. Commissioner, Bhandara &amp; Another Etc

that the Dispensary Fund Committees have denied that Mr. Tiwari had entered into contracts on their behalf or that the Committees did not pass any resolution authorizing the Deputy Commissioner to enter into agreement. We consider that the evidence of Mr. Tiwari is in consonance with circumstances of this case. This position is also clear from the evidence of Dr. Kalay, Civil Surgeon, Bhandara to the effect that the Deputy Commissioner is the administrative head of all the departments of the district, and in his capacity as such is the person looking after the affairs of these hospitals as well, and that the Dispensary Fund Committee becomes the owner of the hospital after it is constructed and handed over........... We are unable to agree with the High Court that no reliance can be placed on Mr. Tiwaris statement on the ground that he was interested in safeguarding the interest of the Government by saying that he did not enter into the agreements on behalf of the Government. The interest of the Government is very well safeguarded as the contracts do not purport to have been entered into on behalf of the Government. Nor has the Deputy Commissioner been authorised under Section 175 of the Government of India Act to enter into contracts of this character on behalf of the Government. The High Court itself has remarked that it is conceivable that the Deputy Commissioner took the entire responsibility on his own shoulder and went on with the work in an informal way. It would be fair to hold that Mr. Tiwari entered into the contracts on behalf of the Dispensary Fund Committees. As regards the Municipal Committee of Gondia, statutes usually lay down the formalities to be observed in entering into contracts on their behalf and there is nothing to show that these formalities were observed. The contract may not, therefore, be binding on it qua contract.5. But even apart from contract we have no hesitation in holding that in all the three cases liability under Section 70 of the Contract Act clearly arises. We do not understand why the High Court thinks that the Dispensary Fund Committees cannot be regarded as the owners or beneficiaries of the buildings of the hospitals. And more curiously the High Court has said that it is the public that are the beneficiaries. The buildings on construction belong to the Dispensary Fund Committees and the Municipal Committee and they have received benefit in so far as they are the owners.6. It is hardly necessary to refer to the authorities in support of this position. But we may refer to the decision of this Court in State of West Bengal v. B. K. Mondal, 1962 Supp (1) SCR 876 = (AIR 1962 SC 779 ). There a contract to put up certain godowns for the use of the Civil Supplies Department of the State of Bengal was held unenforceable. The godowns were accepted and used by the department concerned. It was held that merely because the contract was illegal it does not follow that the contractor has done something which is not lawful.This Court pointed out that the real basis of the liability under Section 70 is the fact that the person for whom the work has been done, has accepted the work and has received the benefit thereunder, and that what Section 70 prevents is unjust enrichment and it applies as much to individuals as to corporations and Government. There is no doubt that in this case the Dispensary Fund Committees have accepted the buildings and they have also been accepted by the State of Maharashtra when they took over the hospitals with their buildings which the appellant had constructed. Thus, the Dispensary Fund Committee in two cases and the Municipal Committee of Gondia in the third have received the benefit and the State of Maharashtra, having taken over the two hospitals became liable to pay the suit amount as successors in interest of the Dispensary Fund Committees.7. It is true, as the learned Judges of the High Court pointed out that real basis for a claim under Section 70 is not the terms of the contract but the quantum of the benefit actually derived. In the absence of any other material the contract between the parties provides a useful basis for calculating that benefit. It has not been alleged on behalf of the defendants that the rates agreed upon and later enhanced were not fair rates or that anybody else would have undertaken the work cheaper. The only reasonable way of arriving at the value of the benefit derived by the Government is on the basis of the rates agreed upon (including future increases in rates by PWD) and that would be a fair indication of the value of the work.We may in this connection refer to the decision of this Court in Piloo Sidhwa v. Municipal Corpn. (1970) 3 SCR 415 = (AIR 1970 SC 1201 ) where the market price was taken as a proper indication of compensation under Section 70 and interest also was awarded.8. Mr. Phadke appearing on behalf of the appellant did not want any relief against defendants other than the State of Maharashtra in Appeals Nos. 1072/67 and 1073/67 and the Municipal Committee of Gondia in Appeal No. 1071/67. The amount mentioned by us earlier would have had to carry interest at the rate of 6 per cent from the date of plaint but Mr. Phadke appearing on behalf of the appellant has stated that he would be satisfied with a decree for Rs. 8,214/- in Civil Suit No. 1-B i.e. Appeal No. 1072/67, for Rs. 19,298/- in Appeal No. 1073/67, and Rs. 12,765 in Appeal No. 1071/67. There will be decrees accordingly. These amounts are far less than what the appellant is entitled to as indicated above, and he would, therefore, get his full costs in all the Courts. They would, of course carry interest at 6 per cent from this date till date of realisation.

Decision (1 = appeal accepted, 0 = rejected): 1

Explanation:
1[ds]5. But even apart from contract we have no hesitation in holding that in all the three cases liability under Section 70 of the Contract Act clearly arises. We do not understand why the High Court thinks that the Dispensary Fund Committees cannot be regarded as the owners or beneficiaries of the buildings of the hospitals. And more curiously the High Court has said that it is the public that are the beneficiaries. The buildings on construction belong to the Dispensary Fund Committees and the Municipal Committee and they have received benefit in so far as they are theis no doubt that in this case the Dispensary Fund Committees have accepted the buildings and they have also been accepted by the State of Maharashtra when they took over the hospitals with their buildings which the appellant had constructed. Thus, the Dispensary Fund Committee in two cases and the Municipal Committee of Gondia in the third have received the benefit and the State of Maharashtra, having taken over the two hospitals became liable to pay the suit amount as successors in interest of the Dispensary Fundhas not been alleged on behalf of the defendants that the rates agreed upon and later enhanced were not fair rates or that anybody else would have undertaken the work cheaper. The only reasonable way of arriving at the value of the benefit derived by the Government is on the basis of the rates agreed upon (including future increases in rates by PWD) and that would be a fair indication of the value of the work.We may in this connection refer to the decision of this Court in Piloo Sidhwa v. Municipal Corpn. (1970) 3 SCR 415   = (AIR 1970 SC 1201  ) where the market price was taken as a proper indication of compensation under Section 70 and interest also was awarded.8. Mr. Phadke appearing on behalf of the appellant did not want any relief against defendants other than the State of Maharashtra in Appeals Nos. 1072/67 and 1073/67 and the Municipal Committee of Gondia in Appeal No. 1071/67. The amount mentioned by us earlier would have had to carry interest at the rate of 6 per cent from the date of plaint but Mr. Phadke appearing on behalf of the appellant has stated that he would be satisfied with a decree for Rs. 8,214/l Suit No.i.e. Appeal No. 1072/67, for Rs. 19,298/in Appeal No. 1073/67, and Rs. 12,765 in Appeal No. 1071/67. There will be decrees accordingly. These amounts are far less than what the appellant is entitled to as indicated above, and he would, therefore, get his full costs in all the Courts. They would, of course carry interest at 6 per cent from this date till date of realisation.