Case: State Of Punjab And Ors Vs. Om Prakash Baldev Krishan

The Executive Engineer (Construction Division No. 1) PWD B & R Branch, Patiala, invited tenders for the work called "Construction of high level bridge over Tangri Nadi in Mile No. 19/5 ofroad". The respondent in response to the said invitation submitted the tender for the aforesaid work, which was opened on October 7, 1975. The Executive Engineer informed the respondent on that date, who happened to be the lowest tenderer and before the tender could be finally considered, that the drawings in triplicate be submitted to the Chief Engineer PWD B & R, Superintendent Engineer, PWD B&R and Executive Engineer Construction Division No. 1 PWD B & R Branch, Patiala. The tender, however, was recalled in February 1976 by the Executive Engineer Construction Division No. 1. The respondent again submitted tender on August 31, 1976. The Executive Engineer informed the respondent telegraphically that the tender submitted by him had been accepted and asked the respondent to take up the work in hand. This was followed by the letter dated August 31, 1976 from the Executive Engineer. It was contended that the telegram as well as the letter mentioned hereinbefore revealed that the tender of the respondent was not accepted by the Governor of Punjab, as it was mandatory under the Constitution in order to amount to a valid acceptance and to create a binding contract between the parties. The respondent, however, withdrew the offer on November 6, 1976. On November 22, 1976 thein its letter made it clear that no agreement had been signed between the parties. In reply to the letter dated December 1, 1976 from the Executive Engineer, the respondent vide letter dated December 6, 1976 reiterated and repeated that legal infirmity could not be met by the considerations as made by the appellant. But on April 15, 1980, the Executive Engineer intimated the respondent that as he had failed to start the work, he became liable for action under Clause 2 of the agreement. The letter further stated that theon behalf of the Governor of Punjab had levied a penalty of Rs. 2, 55, 000. The above position, however, was not accepted by the respondent and he advised the appellant to settle the matter in court. The Superintending Engineer PWD B & R Patiala, then forwarded the claim of Rs. 4, 56, 040 for arbitration and asked the firm to submit the reply in duplicate within 30 days from the issue of the letter. Reply was sent by the respondent to the effect stating that no valid contract in respect of the construction of high level bridge over river in Mile No. 19/5 ofRoad, ever came into existence between the parties. The arbitrator again on July 2, 1983 issued a letter after a lapse of one year and the same was replied more or less in the same manner. The respondent filed an application under Section 33 of the Arbitration Act, 1940 (hereinafter called the Act). The learnedIst class, Patiala, on April 4, 1986 dismissed the application of the respondent with costs. It was contended before him that there was no valid acceptance of the offer made by the respondent herein and, therefore, there was no valid contract. It was contended that no agreement between the parties as required by law, had been brought into existence. Therefore, there was no question of breach of agreement. The learnedcommented that no oral evidence was adduced on behalf of the respondent. The learnedcame to the conclusion that there was a valid offer. He observed that the only point that required consideration was whether the acceptance regarding the allotment of work of construction of high level bridge over river Tangri onRoad was issued on behalf of the Governor of Punjab or not. The learned Judge came to the conclusion after discussing various evidence that the Executive Engineer was authorised to accept tender. He referred to various clauses. The learned Judge noted that it was clearly laid down in the tender itself that the tender together with acceptance thereof would constitute a valid and binding contract between the parties. The relevant condition of the tender, that is, condition No. 4.6 read as followsThe tender together with letter of acceptance thereof shall constitute a binding contract between the successful tenderer and the department and shall form the foundation of rights and obligation of both the parties2. The learnedrecorded that the above tender form was duly signed by the respondent and the appellant. On an analysis of the evidence on record, the learned Judge came to the conclusion that there was a valid contract and accordingly the application under Section 33 of the Act was dismissed with costs. There was a revision to the High Court. The High Court after discussing the relevant evidence came to the conclusion that there was no valid contract. The learned Judge of the High Court noted that in the acceptance letter Ex.P. 7 and Ex. RW 1/14, the Executive Engineer had required the respondent at the end to sign the agreement which was under preparation within ten days. No such agreement was ever signed. That position is undisputed. Therefore, the High Court was of the view that no contract in conformity with Article 299(1) of the Constitution, which was a constitutional requirement in this case, has not (sic) been entered into and came to the conclusion that there was no contract between the parties. In that view of the matter the revision was allowed and the order passed by the trial Judge was set aside. This appeal arises from the said decision

Reasoning:
13. This Court reiterated that under that section a contract entered into by the Governor of a Province must satisfy three conditions, namely, (i) it must be expressed to be made by the Governor; (ii) it must be executed; and (iii) the execution should be by such persons and in such manner as the Governor might direct or authorise. These three conditions are required to be fulfilled. This position was reiterated by this court again in Seth Bikhraj Jaipuria v. Union of India ((1962) 2 SCR 880 : AIR 1962 SC 113 ). This Court explained that three conditions as mentioned in State of Bihar v. M/s. Karam Chand Thapar ((1962) 1 SCR 827 : AIR 1962 SC 110 ) had to be fulfilled, and further reiterated that the object of enacting these provisions was that the State should not be saddled with liability for unauthorised contracts and, hence, it was provided that the contracts must show on their faces that these were made by theand executed on his behalf in the manner prescribed by the person authorised. It is based on public policy. No question of waiver arises in such a situation. If once that position is reached, and that position is well settled by the authorities over a long lapse of time, no question of examining the purpose of this requirement arises. In Union of India v. A. L. Rallia Ram ((1964) 3 SCR 164 : AIR 1963 SC 1685 ) this Court again reiterated that the agreement under arbitration with the government must be in accordance with Section 175(3) of the Government of India Act, 1935. These principles were again reiterated by this Court in Timber Kashmir Pvt. Ltd. v. Conservator of Forests, Jammu ((1977) 1 SCR 937 : (1976) 4 SCC 497 ). There, the court was concerned with Section 122(1) of the Jammu & Kashmir Constitution which corresponded to Article 299(1) of the Constitution of India. In that case all the three applications filed by the respondent State for a reference to an arbitrator under Section 20 of the Jammu & Kashmir Arbitration Act, were dismissed by a Single Judge of the Jammu & Kashmir Arbitration Act, were dismissed by a Single Judge of the Jammu & Kashmir High Court on the ground that the arbitration clause was, in each case, a part of an agreement which was not duly executed in accordance with the provisions of Section 122(1) of the Jammu & Kashmir Constitution which corresponded to those of Article 299(1) of the Constitution of India. But the Division Bench allowed the appeals holding that if contracts were signed by the Conservator of Forests in compliance with an order of the government, the provisions of Section 122(1) of the Jammu & Kashmir Constitution could not be said to have been infringed. This Court held that the contract could not be executed without the sanction. Nevertheless, if the sanction could be either expressly or impliedly given by or on behalf of the government, as it could, and, if some acts of the government could fasten some obligations upon the government, the lessee could also be estopped from questioning the terms of the grant of the sanction even where there is no written contract executed to bind the lessee. But, once there had been a valid execution of lessee by duly authorised officers, the documents would be the best evidence of sanction. In that case, the contracts were executed on behalf of the Government of Jammu & Kashmir. The only question with which the court was concerned in that case was whether the contracts executed by duly authorised officials had been proved or not. It was held that it was soIn Bihar Eastern Gangetic Fishermensociety Ltd. v. Sipahi Singh ((1977) 4 SCC 145 : (1978) 1 SCR 375 ) where this Court relied on a previous decision in Mulamchand v. State of Madhya Pradesh ((1968) 3 SCR 214 : AIR 1968 SC 1218 ) and reiterated that there cannot be any question of estoppel or ratification in a case where there is contravention of the provisions of Article 299(1) of the Constitution. The reason is that the provisions of Section 175(3) of the Government of India Act and the corresponding provisions of Article 299(1) of the Constitution have not been enacted for the sake of mere form but they have been enacted for safeguarding the government against unauthorised contracts. The provisions are embodied in Section 175(3) of the Government of India Act and Article 299(1) of the Constitution on the ground of public policyon the ground of protection of general public .... and these formalities cannot be waived or dispensed with. This Court again reiterated the three conditions mentioned hereinbefore. The same principle was again reiterated by this Court in Union of India v. M/s. Hanuman Oil Mills Ltd. (1987 Supp SCCIn the instant case, we have referred to the letter dated August 31, 1976 which towards the end stated that the parties were to attend the office within 10 days to sign the agreement which is under preparation. It is common ground that no such agreement wasIn the aforesaid view of the matter the High Court was right in the view it took and the submissions made on behalf of the appellants cannot be entertained.