Case: K. P. Chowdhary Vs. State Of Madhya Pradesh &amp; Ors

provision was that the State should not be burdened with liability based on unauthorised contracts. The provision was made in public interest and so the word "shall" used therein must be held to make it obligatory and not directory. Further the case of Chaturbhuj Vithaldas Jasani v. Moreshwar Prashram, 1954 SCR 817 : (AIR l954 SC 236), was explained in that decision and it was held that it should be confined to its own facts in the context of the Representation of the People Act. Finally it was held in that case that S. 70 of the Indian Contract Act (No. 9 of 1872) could be invoked against the Government if the person invoking it could show that he had acted lawfully and had not intended to act gratuitously and the State had enjoyed the benefit. 9. Lastly this Court had occasion to consider the matter again in Union of India v. A. L. Rallia Ram, 1964-3 SCR 164 : (AIR 1963 SC 1685 ), and it was held that so long as all the requirements of S. 175 (3) of the Government of India Act were fulfilled and were clear from the correspondence, S. 175 (3) did not necessarily require the execution of any formal document. 10. What was said in these cases with respect to S. 175 (3) of the Government of India Act, 1935, applies with equal force to Article 299 (1) of the Constitution. Two consequences follow from these decisions. The first is that in view of Article 299 (1) there can be no implied contract between the Government and another person, the reason being that if such implied contracts between the Government and another person were allowed, they would in effect make Article 299 (1) useless, for then a person who had a contract with Government which was not executed at all in the manner provided in Article 299 (1) could get away by saying that an implied contract may be inferred on the facts and circumstances of a particular case. This is of course not to say that if there is a valid contract as envisaged by Article 299 (1), there may not be implications arising out of such a contract. The second consequence which follows from these decisions is that if the contract between Government and another person is not in full compliance with Article 299 (1) it would be no contract at all and could not be enforced either by the Government or by the other person as a contract. In the present case it is not in dispute that there never was a contract as required by Article 299 (1) of the Constitution. Nor can the fact that the appellant bid at the auction and signed the bid-sheet at the close thereof or signed the declaration necessary before he could bid at the auction amount to a contract between him and the Government satisfying all the conditions of Article 299 (1). 11. The position therefore is that there was no contract between the appellant and the Government before he bid at the auction, nor was there any contract between him and the Government after the auction was over as required by Article 299 (l) of the Constitution. Further in view of the mandatory terms of Article 299 (1) no implied contract could be spelled out between the Government and the appellant at the stage of bidding for Article 299 in effect rules out all implied contracts between Government and another person. The view taken by the High Court that S. 155 (b) of the Madhya Pradesh Land Revenue Code which provides for recovery of money as arrears of land revenue would therefore ensure in favour of the Government and enable it to recover the deficiency cannot be sustained. That clause provides for recovery of all moneys falling due to the State Government under any grant, lease or contract and says that they shall be recoverable in the same manner as arrears of land revenue. The High Court was of the view that the word "contract in this clause includes an implied contract. But if there can be no implied contract between the Government and another person in view of the mandatory provision of Article 299 (1) of the Constitution there can be no question of recovery of any money under an implied contract under Cl. (b) of S. 155.The view therefore taken by the High Court that this amount could be recovered under S. 155 (b) is not correct. 12. This brings us to the second question, namely, whether the amount can be recovered under any other provision of law as arrears of land revenue. In this connection learned counsel for the State has referred us to S. 82 and S. 85 of the Indian Forest Act. The question whether the amount can be recovered either under S. 82 or under S. 85 of the Indian Forest Act read with the rules framed thereunder has not been investigated by the High Court. The view of the High Court that Rr. 28 and 29 of the Forest Contract Rules apply after a contract in writing has been executed appears to be correct. But the question whether the State can still recover the amount as arrears of land revenue by virtue of the conditions of auction, even though Rr. 28 and 29 do not apply has not been investigated. This question will require investigation before the petition can be finally disposed of. The appellant had claimed in para 17 of the petition that the claim of the State for recovery of the deficiency on re-sale was not covered under any other provision of law so as to make it recoverable as arrears of land revenue. That question has still to be investigated and it would be for the State to show whether the amount can be recovered under any provision of law or rules relating to forest contracts. So the matter will have to be remanded for further investigation on these dines. 13.

Court's decision (1 = petition accepted / positive for appellant, 0 = rejected / negative): 1

Reasoning from the judgment:
1[ds]10. What was said in these cases with respect to S. 175 (3) ofthe Government of India Act, 1935, applies with equal force to Article 299 (1) of the Constitution. Two consequences follow from these decisions. The first is that in view of Article 299 (1) there can be no implied contract between the Government and another person, the reason being that if such implied contracts between the Government and another person were allowed, they would in effect make Article 299 (1) useless, for then a person who had a contract with Government which was not executed at all in the manner provided in Article 299 (1) could get away by saying that an implied contract may be inferred on the facts and circumstances of a particular case. This is of course not to say that if there is a valid contract as envisaged by Article 299 (1), there may not be implications arising out of such a contract. The second consequence which follows from these decisions is that if the contract between Government and another person is not in full compliance with Article 299 (1) it would be no contract at all and could not be enforced either by the Government or by the other person as a contract. In the present case it is not in dispute that there never was a contract as required by Article 299 (1) of the Constitution. Nor can the fact that the appellant bid at the auction and signed the bid-sheet at the close thereof or signed the declaration necessary before he could bid at the auction amount to a contract between him and the Government satisfying all the conditions of Article 299 (1).The position therefore is that there was no contract between the appellant and the Government before he bid at the auction, nor was there any contract between him and the Government after the auction was over as required by Article 299 (l) of the Constitution. Further in view of the mandatory terms of Article 299 (1) no implied contract could be spelled out between the Government and the appellant at the stage of bidding for Article 299 in effect rules out all implied contracts between Government and another person. The view taken by the High Court that S. 155 (b) of the Madhya Pradesh Land Revenue Code which provides for recovery of money as arrears of land revenue would therefore ensure in favour of the Government and enable it to recover the deficiency cannot be sustained. That clause provides for recovery of all moneys falling due to the State Government under any grant, lease or contract and says that they shall be recoverable in the same manner as arrears of land revenue. The High Court was of the view that the word "contract in this clause includes an implied contract. But if there can be no implied contract between the Government and another person in view of the mandatory provision of Article 299 (1) of the Constitution there can be no question of recovery of any money under an implied contract under Cl. (b) of S. 155.The view therefore taken by the High Court that this amount could be recovered under S. 155 (b) is not correctThe question whether the amount can be recovered either under S. 82 or under S. 85 of the Indian Forest Act read with the rules framed thereunder has not been investigated by the High Court. The view of the High Court that Rr. 28 and 29 of the Forest Contract Rules apply after a contract in writing has been executed appears to be correct. But the question whether the State can still recover the amount as arrears of land revenue by virtue of the conditions of auction, even though Rr. 28 and 29 do not apply has not been investigated. This question will require investigation before the petition can be finally disposed of. The appellant had claimed in para 17 of the petition that the claim of the State for recovery of the deficiency on re-sale was not covered under any other provision of law so as to make it recoverable as arrears of land revenue. That question has still to be investigated and it would be for the State to show whether the amount can be recovered under any provision of law or rules relating to forest contracts. So the matter will have to be remanded for further investigation on these dines.