Case: Union of India &amp; Others Vs. N.K. Private Limited &amp; Another

on behalf of the Respondents is that since Railway Board is a Department of the Government, the Secretary to the Department is authorised to enter into a contract under the above provision. This submission in our view, is equally misconceived because reading the above requirement carefully it will appear that the persons there mentioned should be Secretary, Special Secretary etc. to the Central Government in the appropriate Ministry or Department and not that the Sectary to any Department or office of the Government of India is empowered thereunder. It is however contended that the Secretary to the Railway Board is a Joint Secretary to the Government of India and as such under the above provision the acceptance letter should be considered to have been executed on behalf of the President. Even this submission lacks validity because as pointed out on behalf of the appellant, at the relevant time the Secretary to the Railway Board did not have any status as Secretary to the Central Government. The status of a Joint Secretary was only conferred on him by a notification by the Government of India in the Ministry of Railways for the first time on 15-9-1969 with effect from that date. An affidavit of the Deputy Secretary to the Railway Board (Ministry of Railways) has been filed before us setting out the above fact and enclosing the said notification. Then again it was urged that the members of the Railway Board were Secretaries to the Central Government and hence the Board on whose behalf the Secretary communicated the acceptance could enter into a binding contract. This submission also is without force because there is no material before us to conclude that the Board was so authorised. In these circumstances, even if the correspondence shows that the formalities necessary for a concluded contract have been satisfied and the parties were ad idem by the time the letter of acceptance of the 15th July 1968 was written, about which we do not wish to express any opinion, there is no valid or binding contract because the letter of acceptance, on the evidence before us, is not by a person authorised to execute the contracts for and on behalf of the President of India.12. On the evening before the day the judgment in the case was due to be delivered an application dated 7-2-1972 was filed enclosing an affidavit of R.N. Mubayi who was Director, Railway Stores, between 18-12-1965 to 30-9-1969 as also an affidavit of R.B. Lal, Managing Director of the Respondent No.1 to take them in evidence and consider the facts stated therein before judgment is delivered, and if necessary, to call for the file and give a re-hearing. The affidavit of Mubayi states that only after he recorded on the relevant file and issued instructions to his Deputy Director, Shri P.C. Oak to convey the acceptance of the offer of Messrs. N. K. Private Limited, that the acceptance was conveyed by Shri P.C. Oak to the said company. The affidavit of R.B. Lal says that though the affidavit filed by P. Lal, Deputy Secretary, Railway Board stating that the Secretary, Railway Board, did not have the status of Secretary, Special Secretary, Additional Secretary, Joint Secretary or Deputy Secretary to the Government of India in the Ministry of Railway, he has not denied that the Secretary did not have the status of a Director. It is further submitted in that affidavit that the Secretary of the Board had the status of a Director at the relevant time and as mentioned in Part XLI of the Notification of the Ministry of Law. a Director is authorised to accept offers.13. Apart from the question whether we should admit additional evidence at this stage in this case and though we had rejected an earlier submission to call for the files, having regard to the facts stated by R. N. Mubayi, Director of Railway Stores during the relevant period that it was he who had asked P. C. Oak to accept the offer and had so endorsed it on the file, as also the affidavit of R.B. Lal that the Secretary to the Board was the Director of Railway Stores, we withheld the judgment and called for the file to satisfy ourselves. The file has been submitted to us by the appellants along with an affidavit of R. Srinivasan, Joint Director, Railway Board in which it is categorically averred that at the relevant time, namely, 15-7-1968, the Secretary Railway Board did not have the status of the Director under Part XLI of the Notification of the Ministry, of law or at all. A perusal of the relevant file relating to the letter of acceptance would show that on 15-7-1968, Shri Oak made the following endorsement: "Reference to Boards orders at page 38/N, draft letter accepting Messrs. N. K. (P) Ltd., offer is being issued today. D.R.S. may kindly see before issue," and this endorsement was merely signed by R. N. Mubayi. We are not here referring to the other proceedings on the file as to whether the execution of a formal contract was a condition precedent and as one of the terms of the contract but even the above endorsement does not show that the letter of acceptance of 15-7-1968 was issued on the orders and directions of Mubayi as alleged by him in the affidavit. What it in fact shows is that it is the Board that issued the orders of acceptance and that the acceptance letter was only to be seen by him. Even draft letter issued does not contain his initials or his signature in token of his having seen or approved it. The letter of acceptance not having been issued on the orders of the Director, Railway Stores, there was no concluded contract as on that date, by a person authorised to enter into a contract. There is also nothing to show that the Secretary to the Board was the Director, Railway Board as further alleged in the affidavit of R.B. Lal.

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

Explanation:
1[ds]It also reiterated its stand earlier taken that the letter dated 15-7-1968 written by Oak on behalf of the Secretary, Railway Board, was not a letter of acceptance of the offer of the Respondents so as to amount to a concluded contract binding on the Union of India nor could it be construed as such in view of the mandatory provisions of Article 299 of the Constitution of India. The contention was that unless and until a formal instrument of contract was executed in the manner required by Art.299 of the Constitution and by the relevant notifications, there would not be a contract binding on the Union of India and at any rate no such agreement was entered into as it was alleged that though interviews had taken place at various times between the plaintiffs and the several officers of the Railway Board, no agreement had been reached on vital terms and conditions.We do not for the present consider it necessary to go into the question whether and to what extent the requirements of Article 299 have been complied with in this case. What we have to first ascertain is whether apart from the contention relating to Article 299, a concluded contract has come into existence as alleged by the Respondents. Before us detailed arguments were addressed on behalf of the appellants to show that notwithstanding the letter of acceptance of 15th July 1968, no concluded contract had in fact come into existence and though that letter accepted certain terms, there were other essential terms of the contract which had to be agreed to and were the subject-matter of further negotiations between the parties; that it was the intention of the parties that all those terms were to be embodied in a formal contract to be executed which contract alone was to be binding between the parties; and that in any case the letter of acceptance and the subsequent letters were not by the Director Railway Stores but by the Secretary to the Railway Board who was not a person authorised to enter into the agreement between the President of India represented by the Ministry of Railways and the Respondents. On the other hand, the stand taken by the Respondents was that all the essential terms of the contract were agreed to and the contract was concluded on 15th July 1968, though at the instance of the Director, Railway Stores further terms with respect to the execution of the contract were the subject-matter of negotiations between the parties and in any case these did not pertain to the essential terms and could not on that account detract from the binding nature of a concluded contract. It was also contended that the letter of acceptance by P. C. Oak though signed on behalf of the Secretary, Railway Board was in fact on behalf of the said Board which was authorised to enter into such a contract. It is in our view unnecessary to consider the several contentions as to whether all the essential terms of the contract had been agreed to or that the contract was concluded by the acceptance letter of 15th July, 1968 or whether the parties intended it to be a term of the contract that a formal contract should be entered into between them in order to bind the parties. In this case, we are of the view that the Secretary to the Railway Board, on whose behalf the offer of the Respondents was accepted, was not the person authorised to enter into a contract on behalf of the President of India. As can be seen from the various documents already extracted that the tender notice invited offers to be addressed to the President of India through the Director of Railway Stores, Railway Board. Under the general conditions the seller was defined to mean the President of India acting through the Director, Railway Stores and in the default clause it was provided that where the buyer fails to execute the contract, the seller shall have power under the hand of the Director, Railway Stores, Railway Board, to declare the contract at an end. In the letter written by Oak on 25-5-1968, as earlier noticed, it was pointed out to the Respondents that their offer was not addressed to the President of India as required under clause 1 (3) of the Instructions to the Tenderers and, therefore, the Respondents were required to confirm that their offer can be deemed to have been addressed to the President and is open for acceptance on behalf of the President and their reply should be addressed to the President of India, through the Director of Railway Stores, Railway Board, Even the draft contract dated 27-8-1968 in terms of which the Respondents were insisting on a final contract to be issued to them by the appellants was to be executed by the Respondents as buyers on the one part and the President of India acting through the Director, Railway Stores, Ministry of Railways (Railway Board) as the sellers, on the other. There is little doubt that the only person authorised to enter into the contract on behalf of the President is the Director. Railway Stores. It is true that the notification of the Ministry of Law issued in exercise of the powers under clause 1 of Article 299 of the Constitution shows that the President directed the authorities named therein to execute on his behalf the contracts and assurances of property specified therein. But notwithstanding this, the President is fully empowered to direct the execution of any specified contract or class of contracts on ad hoc basis by authorities other than those specified in the said notification. This Court had in Bhikraj Jaipuria v. Union of India, (1962) 2 SCR 880 =(AIR 1962 SC 113 )earlier held that the authority to execute contracts may be conferred on a person not only by rules expressly framed and by formal notifications issued in this behalf but may also be specifically conferred. In this case the letter of acceptance dated 15-7-1968 was on behalf of the Secretary, railway Board, who is not authorised to enter into a contract on behalf of the President.10. It is contended that clause 43 of Part XVIII and Part XII empower the Secretary, Railway Board to enter into such contracts. Clause 43 of Part XVIII provides that all deeds and instruments other than those specified in that part may be executed by the Secretary or the Joint Secretary or the deputy Secretary or the Under Secretary in the Railway Board or a Director, Joint Director, Deputy Director or Assistant Director in the Railway Board. It is submitted that as nothing has been specified in Part XVIII relating to the contracts of the type we are considering, the Secretary, Railway Board is authorised to enter into a contract on behalf of the President. This submission is untenable because clause 9 specifically provides for the contracts connected with the sale of scrap, ashes, coal, dust, empty containers and stores. The tender, it will be observed, is for rails which are scarp as well as rerollable and relayable but it is urged that relayable rails are not stores nor can they be considered as scrap and as these are not covered by clause 9, the Secretary, Railway Board is fully empowered by the President to enter into a contract on his behalf. We cannot accept this argument because in our view relayable rails are part of the stores. It may be that some of these rails which are part of the stores may be considered to be in a condition which the authorities concerned think should be disposed of. The contracts relating to the goods of the nature specified in the tender notice are, therefore, dealt with by clause I as such clause 43 will have no application. Part XLI empowers the Secretaries to the Central Government in the appropriate Ministries or Departments to execute any contract or assurance of property relating to any matter whatsoever and is in theseanything herein before contained any contract or assurance of property relating to any matter whatsoever may be executed by the Secretary or the Special Secretary or the Additional Secretary or a Joint secretary or a Director or where there is no Additional Secretary or a Joint Secretary or a Director, a Deputy Secretary to the Central Government in the appropriate Ministry or Department and in the case of.......The contention on behalf of the Respondents is that since Railway Board is a Department of the Government, the Secretary to the Department is authorised to enter into a contract under the above provision. This submission in our view, is equally misconceived because reading the above requirement carefully it will appear that the persons there mentioned should be Secretary, Special Secretary etc. to the Central Government in the appropriate Ministry or Department and not that the Sectary to any Department or office of the Government of India is empowered thereunder. It is however contended that the Secretary to the Railway Board is a Joint Secretary to the Government of India and as such under the above provision the acceptance letter should be considered to have been executed on behalf of the President. Even this submission lacks validity because as pointed out on behalf of the appellant, at the relevant time the Secretary to the Railway Board did not have any status as Secretary to the Central Government. The status of a Joint Secretary was only conferred on him by a notification by the Government of India in the Ministry of Railways for the first time on 15-9-1969 with effect from that date. An affidavit of the Deputy Secretary to the Railway Board (Ministry of Railways) has been filed before us setting out the above fact and enclosing the said notification. Then again it was urged that the members of the Railway Board were Secretaries to the Central Government and hence the Board on whose behalf the Secretary communicated the acceptance could enter into a binding contract. This submission also is without force because there is no material before us to conclude that the Board was so authorised. In these circumstances, even if the correspondence shows that the formalities necessary for a concluded contract have been satisfied and the parties were ad idem by the time the letter of acceptance of the 15th July 1968 was written, about which we do not wish to express any opinion, there is no valid or binding contract because the letter of acceptance, on the evidence before us, is not by a person authorised to execute the contracts for and on behalf of the President of India.12. On the evening before the day the judgment in the case was due to be delivered an application dated 7-2-1972 was filed enclosing an affidavit of R.N. Mubayi who was Director, Railway Stores, between 18-12-1965 to 30-9-1969 as also an affidavit of R.B. Lal, Managing Director of the Respondent No.1 to take them in evidence and consider the facts stated therein before judgment is delivered, and if necessary, to call for the file and give a re-hearing. The affidavit of Mubayi states that only after he recorded on the relevant file and issued instructions to his Deputy Director, Shri P.C. Oak to convey the acceptance of the offer of Messrs. N. K. Private Limited, that the acceptance was conveyed by Shri P.C. Oak to the said company. The affidavit of R.B. Lal says that though the affidavit filed by P. Lal, Deputy Secretary, Railway Board stating that the Secretary, Railway Board, did not have the status of Secretary, Special Secretary, Additional Secretary, Joint Secretary or Deputy Secretary to the Government of India in the Ministry of Railway, he has not denied that the Secretary did not have the status of a Director. It is further submitted in that affidavit that the Secretary of the Board had the status of a Director at the relevant time and as mentioned in Part XLI of the Notification of the Ministry of Law. a Director is authorised to accept offers.13. Apart from the question whether we should admit additional evidence at this stage in this case and though we had rejected an earlier submission to call for the files, having regard to the facts stated by R. N. Mubayi, Director of Railway Stores during the relevant period that it was he who had asked P. C. Oak to accept the offer and had so endorsed it on the file, as also the affidavit of R.B. Lal that the Secretary to the Board was the Director of Railway Stores, we withheld the judgment and called for the file to satisfy ourselves. The file has been submitted to us by the appellants along with an affidavit of R. Srinivasan, Joint Director, Railway Board in which it is categorically averred that at the relevant time, namely, 15-7-1968, the Secretary Railway Board did not have the status of the Director under Part XLI of the Notification of the Ministry, of law or at all. A perusal of the relevant file relating to the letter of acceptance would show that on 15-7-1968, Shri Oak made the following endorsement: "Reference to Boards orders at page 38/N, draft letter accepting Messrs. N. K. (P) Ltd., offer is being issued today. D.R.S. may kindly see before issue," and this endorsement was merely signed by R. N. Mubayi. We are not here referring to the other proceedings on the file as to whether the execution of a formal contract was a condition precedent and as one of the terms of the contract but even the above endorsement does not show that the letter of acceptance of 15-7-1968 was issued on the orders and directions of Mubayi as alleged by him in the affidavit. What it in fact shows is that it is the Board that issued the orders of acceptance and that the acceptance letter was only to be seen by him. Even draft letter issued does not contain his initials or his signature in token of his having seen or approved it. The letter of acceptance not having been issued on the orders of the Director, Railway Stores, there was no concluded contract as on that date, by a person authorised to enter into a contract. There is also nothing to show that the Secretary to the Board was the Director, Railway Board as further alleged in the affidavit of R.B. Lal.