# i\.ftssrs. Dwarka Prasad Laxmi Narain v. The State of Uttw Pradesh and Two Others

- **Citation:** [1954] 1 S.C.R. 817
- **Court:** Supreme Court of India
- **Decided:** 1952-02-14
- **Case number:** Civil Appeal No. 155 of 1953
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/i-ftssrs-dwarka-prasad-laxmi-narain-v-the-state-of-uttw-pradesh-and-two-others-276
- **Pages:** 26

## Headnote

•
•
S.C.R.
SUPREME COURT REPORTS
817
allow the licensing authority to make any reduction he
likes. On the whole we are of the opinion that clauses (7)
and (8) of the Control Order do not impose unreasonable
restrictions upon the freedom of trade enjoyed by the
petitioners and consequently the declaration of the
16th of Juiy,
1953, cannot be held to be invalid. The
result is that, in our opinion, clause 4(3) of the Control
Order as well as tbe cancellation of the petitioners'
licence should be held to be invalid and a writ in the
nature of mandamus would issue against the respondents opposite parties preventing them from enforcing
the cancellation order. The rest of the prayers of the
petitioners arc
disallowed.
\Ve make
no order
as
to costs.
Petition partly allot11ed.
Agent for the petitioners : Ga11pat Rai.
Agent for the respondents : C. P. Lal.
CHA TTURBHUJ VITHALDAS JASANI
v.
MORESHW AR P ARASHRAM AND OTHERS.
[MuKHERJEA,
V1v1""
BosE and
BHAGWATI
JJ. /
Represellfation of t!1c People Act (XLlll of 1951), s. 7(d)-A
firm entering into co11trac1s with Central Govern1ne11t for supply of
goods-A candidate seeking election for Parlianient, a partner of the
said firm on
the crucial
dates-Disqualificatio11-Co11stitution
of
India, art. 299(1)-Indian Contract Act (IX of 1872) s. 230(3)-
Contract ivith Gover111nent not in proper forn1-TVhether voidRatification-Contract for supply of goods-Subsists
till fully discharged by both sides-And payn1ent. 1nade-Person of Scheduled
Caste Mahar convertt'd to 1\fahanubhava Pa11th-FVhether convert..,·
caste statu.i altered.
A contract for the supply of goods does not tenninate \Vhcn
the
goods arc
supplied, it
continues into
being till pay1ncnt is
made and the contract is fully discharged by performance on both
sides.
O'Carroll v. Hastingt ([1905] 2 LR. 590) and
Satyendrakumal'
})as v. Chairn1an of the Municipal Com1nissioners of Dacca (I.L.R .
58 Cal. 180) relieJ upon.
The firm Moolji Sicka and Company of
was a partner had _ entered into
contracts
which the candidate
\Vith
the
Central
1954
.. i\.ftssrs. Dwarka
Prasad Laxmi
Narain
v.
The State of
Uttw Pradesh and
Two Others.
Mukhtrjea J.
1954
February 15.
1954
Chatturbhuj
Vithaldas
Jasani
v.
Moreshwar
Par ashram
and Others.
818
SUPREME COURT REPORTS
[1954]
(;overnn1ent for the supply of goods.
The contracts subsisted on
the crucial dates, Nove1nber 15,
1951, and February
14,
1952.
Novernber 15, 1951, \Vas
the last date for putting in nominations.
an<l February
14, 1952,
\Vas the
date
on which results
were
declared :
Held,
that the candidate had both a share and an interest in
the contracts for the
supply of goods to
th~ appropriate
Governn1ent on the crucial dates and was thus disqualified for being
chosen as a member of Parliament by virtue of the disqualification
set out ins. 7(d) of the
Representation of the
People Act (XLIII
of 1951).
Held further, that the contention that the contracts in question \Vere void because the l}nion Government could not be .sued
by reason of art. 299(1) of the Constitution as the contracts
were
not expressed to
be nlade by the
President was without force because this was the type of case to which s. 230(3) of the Indian
Contract Act would apply.
\\.'hen a Government officer acts in excess of authority Government is bound if it ratified the excess.
T/1e Collector of J.\1asulipatam v. Cavaly Venkata Narrainapah
(8 M.l.A. 519) relied upon.
A member of
Castes continues
conversion to the
version
imports
certain ideological
status.
the Mahar caste \vhich is one of the Scheduled
to be a member of the Mahar caste despite his
tenet.s of the
~IahanubhaYa Panth as such conlittle
beyond
an
intellectual acceptance of
tenets and does not alter the convert's
caste
Abraham v. A />raham (9 M.I.A. 199) relied upon.
C1v1L
APPELLATE
JURISDICTION : Civil Appeal No.
155 of 1953.
Appeal by
special
leave from the Judgment and
Order dated the 15th July, 1953, of the Election Tribunal, Nagpur, in Election Petition No. 3 of 1952.
B. Sen and T·

## Text

_Characters 0–39,377 of 54,454. This is a partial read: ask again with offset=39377 for what follows._

•
•
S.C.R.
SUPREME COURT REPORTS
817
allow the licensing authority to make any reduction he
likes. On the whole we are of the opinion that clauses (7)
and (8) of the Control Order do not impose unreasonable
restrictions upon the freedom of trade enjoyed by the
petitioners and consequently the declaration of the
16th of Juiy,
1953, cannot be held to be invalid. The
result is that, in our opinion, clause 4(3) of the Control
Order as well as tbe cancellation of the petitioners'
licence should be held to be invalid and a writ in the
nature of mandamus would issue against the respondents opposite parties preventing them from enforcing
the cancellation order. The rest of the prayers of the
petitioners arc
disallowed.
\Ve make
no order
as
to costs.
Petition partly allot11ed.
Agent for the petitioners : Ga11pat Rai.
Agent for the respondents : C. P. Lal.
CHA TTURBHUJ VITHALDAS JASANI
v.
MORESHW AR P ARASHRAM AND OTHERS.
[MuKHERJEA,
V1v1""
BosE and
BHAGWATI
JJ. /
Represellfation of t!1c People Act (XLlll of 1951), s. 7(d)-A
firm entering into co11trac1s with Central Govern1ne11t for supply of
goods-A candidate seeking election for Parlianient, a partner of the
said firm on
the crucial
dates-Disqualificatio11-Co11stitution
of
India, art. 299(1)-Indian Contract Act (IX of 1872) s. 230(3)-
Contract ivith Gover111nent not in proper forn1-TVhether voidRatification-Contract for supply of goods-Subsists
till fully discharged by both sides-And payn1ent. 1nade-Person of Scheduled
Caste Mahar convertt'd to 1\fahanubhava Pa11th-FVhether convert..,·
caste statu.i altered.
A contract for the supply of goods does not tenninate \Vhcn
the
goods arc
supplied, it
continues into
being till pay1ncnt is
made and the contract is fully discharged by performance on both
sides.
O'Carroll v. Hastingt ([1905] 2 LR. 590) and
Satyendrakumal'
})as v. Chairn1an of the Municipal Com1nissioners of Dacca (I.L.R .
58 Cal. 180) relieJ upon.
The firm Moolji Sicka and Company of
was a partner had _ entered into
contracts
which the candidate
\Vith
the
Central
1954
.. i\.ftssrs. Dwarka
Prasad Laxmi
Narain
v.
The State of
Uttw Pradesh and
Two Others.
Mukhtrjea J.
1954
February 15.
1954
Chatturbhuj
Vithaldas
Jasani
v.
Moreshwar
Par ashram
and Others.
818
SUPREME COURT REPORTS
[1954]
(;overnn1ent for the supply of goods.
The contracts subsisted on
the crucial dates, Nove1nber 15,
1951, and February
14,
1952.
Novernber 15, 1951, \Vas
the last date for putting in nominations.
an<l February
14, 1952,
\Vas the
date
on which results
were
declared :
Held,
that the candidate had both a share and an interest in
the contracts for the
supply of goods to
th~ appropriate
Governn1ent on the crucial dates and was thus disqualified for being
chosen as a member of Parliament by virtue of the disqualification
set out ins. 7(d) of the
Representation of the
People Act (XLIII
of 1951).
Held further, that the contention that the contracts in question \Vere void because the l}nion Government could not be .sued
by reason of art. 299(1) of the Constitution as the contracts
were
not expressed to
be nlade by the
President was without force because this was the type of case to which s. 230(3) of the Indian
Contract Act would apply.
\\.'hen a Government officer acts in excess of authority Government is bound if it ratified the excess.
T/1e Collector of J.\1asulipatam v. Cavaly Venkata Narrainapah
(8 M.l.A. 519) relied upon.
A member of
Castes continues
conversion to the
version
imports
certain ideological
status.
the Mahar caste \vhich is one of the Scheduled
to be a member of the Mahar caste despite his
tenet.s of the
~IahanubhaYa Panth as such conlittle
beyond
an
intellectual acceptance of
tenets and does not alter the convert's
caste
Abraham v. A />raham (9 M.I.A. 199) relied upon.
C1v1L
APPELLATE
JURISDICTION : Civil Appeal No.
155 of 1953.
Appeal by
special
leave from the Judgment and
Order dated the 15th July, 1953, of the Election Tribunal, Nagpur, in Election Petition No. 3 of 1952.
B. Sen and T· P. Naik for the appellant.
Veda Vyas
(S. K. Kapur with him) for respondent
No. 1.
1954.
February
15. The Judgment of th<' Court
was defo ere.cl by
BosE J.-This is an appeal
against a decision of
the
Nagpur Election
Tribunal.
The contest
before
•
the tribunal was about two seats rn the Bhandara
Parliamentary Constimency.
The elections
were held
on five days in December, 1951, and January, 1952.
•
•
•
S.C.R.
SUPREME COURT REPORTS
819
Thirteen candidates
filed
nomination papers among
them the petitioner.
Of these,
six contested the
seat
reserved for the Scheduled Castes.
One of these was
Gangaram Thaware who has since died.
The Scheduled Caste in question is the Mahar caste.
Objection was
taken
to Thaware's nomination for
the reserved seat on the ground that he was not a
Mahar.
It is admitted
that he was born a Mahar,
but later in life he joined the Mahanubhava Pantli.
This, according to the appellant, is a sect which does
not believe
in
caste, and alternativdv
that it forms
a separate caste in itself.
The contention was that
when Gangaram Thaware joined the Panth he ceased
to be a member of the Mahar caste.
The objection
succeeded and his nomination was rejected.
The nomination of another Scheduled Caste camli-
.datc was also rejected and five others were withdrawn
before
the
election, among them was the present
petitioner.
That left six candidates
of whom three
were eligible for the reserved seat.
The two who were elected were Tularam Sakhare,
for the Scheduled Caste seat,
and Chaturbhuj J asani,
for the general seat.
Jasani's election was challenged
-0n the ground that he was subject to the disqualifications set out in section 7(d) of the Representation of
the People Act (Act XLIII of 1951)
as he \Yas interested
in
a contract for
the
supply of goods to the
Central Government.
The Election Tribunal held that the rejection of
Gangaram Thaware's nomination was improper as he
continued to be a member of the Mahar caste despite
his
conversion
to
the tenets of the Mahanubhava
Panth.
It also held that Chaturbhuj J asani had a
<:ontract
with
the Central
Government, so he was
disqualified.
Accordingly it
set
aside
the whole
election.
We will deal with Chaturbhuj Jasani's
election
first.
Section 7 ( d) is in these terms:
"A person shall be dissqualified for being chosen
as, and for being, .a member etc.
*
*
*
*
1954
Chatturhhuj
Vithaldas
Jasani
v.
Moreshwar
Parashram
and Others.
Bose].
1954
Chattwbhuj
Vithaldas
Jasani
v.
Moreshwar
Parashram
and Ot/urs.
BoseJ.
820
SUPREME COURT REPORTS
[1954\
( d) if. .. .. . hy himself ...... he has
any share or
interest in a contract for the supply of goods to ..... .
the appropriate Government."
Chaturbhuj Jasani was, and still is, a partner in the
firm of Moolji Sicka & Company, and it is
said
that
at all material times the firm had a contract for the
supply of bidis to the Government for the troops.
Moolji Sicka
& Company is a firm of bidi manufacturers.
The
Central
Government
was interested
in stocking and purchasing bidis for sale to its troops
throngh its canteens.
Accordingly, it placed two of
the brands of bidis manufactured by this firm on its
approved list and entered into an arrangement with
the firm under which the firm was to sell, and the
Government was to buy from the firm, from time to
time, these two brands of bidis.
It was argued that
this amounted to a contract for
the supply of goods
within the meaning
of the section.
It was said that
the contract was embodied in four letters.
We do not
intend to analyse the~e letters in detail
here.
It is enough to say that in our opinion no
binding engagement can be spelt out of them except
to this extent: Moolji Sicka
& Company undertook
to
sell to the canteen contractors only through the
Canteen Stores and
not direct and undertook to pay
a commission on all sales.
This, in our opinion, constituted a continuing arrangement under
which the
Canteen
Stores,
i.e., the
Government,
would be
entitled to the commission on all orders placed and
accepted in accordance with the arrangement; and in
fact the Canteen Stores did obtain a sum of Rs. 7,500
in satisfaction of a claim of this kind.
This money
was paid long before the dates which are crucial here
but the settlcmcnr
illustrates
that
there
was
an
arrangement
of
that nature and that it was a contmumg one.
In our opinion, it continued in being
even after that and the mere fact that there was no
occasion
for
any claim subsequent to the settlement
•
does not indicate
that it was
no longer alive. But
except for this, the letters merely set out the terms
on which the parties were ready to do business
with
S.C.R.
SUPREME COURT REPORTS
821
each other if and when orders were placed and executed.
As soon as an order was placed and accepted a
contract
arose.
It is true
this
contract
would
be
governed bv the terms set out in the letters but until
an order
~as placed and accepted there was no contract.
Also, each separate
order
and
acceptance
constituted a different and distinct contract: see Rose
and Fran!( Co. v. J. R. Crompton & Bros. Ltd.( 1).
The crucial dates with which we are concerned are
15th November, 1951, the last date for putting in the
nominations, and 14th
February,
1952,
the date on
which the results were declared. The section runs-
"A person
shall
be disqualified
for being
chosen
as ...... n
The words which follow, "and for being'', need not
he considered as it is enough for our purposes to use
only the former.
Now the words of the section are "shall be disqualified for being chosen." The choice
is made by a
series of steps
starting
with the nomination
and
ending with
the announcement
of
the election. lt
follows that
if a disqualification attaches to a candidate at any one of these stages he cannot be chosen.
· The disqmlificatwn
alleged in this
case
is
that
Chaturbhuj Jasani had an interest in a contract, ur a
series
0£ contracts, for the supply of goods to the
Central Government.
He hail
this
interest because
the contracts
were
made
with Moolji Sicka & Company, a firm of which Jasani is one of the partners.
The fact of partnership is
admitted but the other
facts are denied.
\Ve have therefore to see whether
any contract for the supply of goods to Government
by Moolji Sicka & Company existed
at
any time on
or between the relevant dates.
Exhibit C is a tabular statement which sets out the
dealings between the parties during certain months.
It is accepted as correct by both sides.
The following
extracts from this statement show that Moolji
Sicka
& Company had an
interest
in a
series
of
contracts for the sale of bidis to the Canteen Stores
at and between the relevant dates .
. (1) [1925] A.C. 445.
1954
C/iatturbh11i
VithaldaS
Jasani
v.
Mareshwar
LParashram
artd Others.
~'.-.. :-
Bose].
1954
Chatturbhuj
Vilhaldas
Jasani
v.
Moreshwar
Parashram
and Others.
Bose].
822
SUPREME COURT REPORTS
[1954]
Date of ord<:>r
Date of invoice
Price of
Date of
by
and
goods
payCanteen Stores
Despatch
supplied
me-nt
---..
8-10-1951
18-10-1951
Rs. 1 ,684-13-9 19-12-1951
8-10-1951
19-10-1951
3,373-9-3
d.:;
17-8-1951
26-10-1951
I 2,662- 8-0
do
12-9-1951
26-10-1951
I l,426-14-6
do
I 1-10-1951
26-10-1951
8,411-14-0
do
21-10-1951
30-11-1951
IO, 125-2-9
do
9-8-1951
29-8-1951
25,812-12-0 24-12-1951
8-10-1951
18-10-195 I
4,793-4-9
do
14-n-1951
22-11-1951
l ,887-9-9
5-1-1952
17-10-1951
8-J I-I 95 l
16,554-2-0 22-1-1952
12-11-1951
20-l 1-1951
4,205-15-0
do
13-12-1951
l0-1-1952
13,97,079-7-9 12-2-1952
14-1-1952
22-1-1952
1,691-11-9
do
21-12-1951
l0-1-1952
16,983-8-0 18-2-1952
12-II-1951
22-n-1951
8,411-14-0 13-3-1952
9-1-1952
16-1-1952
5,888-4-9
do
23-1-1952
28-1-1952
8,411-14-0 20-3-1 <)52
This statew.ent reveals that various contracts aggregating Rs.
15,39,345-6-0
less some small sums for
railway
freight,
were
outstanding
at one time or
another between the two crucial dates and that payments in discharge
of
these liabilities were made at
various dates between 15th November, 1951, and 20th
March, 1952.
It also shows that
orders were placed and accepted
for
goods priced at Rs.
84,659-14-3
before
15th
November, 1951, and that payment was not made till
after that date.
Therefore, on 15th November, 1951,
goods worth Rs. 84,659-14-3 had still to be paid for.
Then between
15th
November, 1951, and 14th
February,
1952,
further orders for goods v:ilued at
Rs. 39,695-8-9 were placed and accepted and
they
were not paid for till after 14th February, 1952.
It was argued that there is nothing to show that the
goods were not supplied before 15th November, 1951,
and before 14th February, 1952.
It was said on behalf
of the appellant that these are the only dates which
are crucial, so if Moolji Sicka & Company had fully
S.C.R.
SUPREME COURT REPORTS
823
executed
their part of the contracts before the two
crucial dates the disqualification would not apply.
That raises these questions: (1) Does a person who
has fully executed
his part of a contract continue
to
have an interest in it till the goods are paid for?; and
(2) were these contracts fully executed so far as Moolji
Sicka & Company's part was concerned?
The parties
are not agreed about this, so it will now be necessary
to examine their letters in detail
to determine the
terms of the various contracts.
The correspondence discloses
that
the
Canteen
Stores and Moolij Sicka & Company dealt with each
.,. -Other from
time
to time under various arrangements
which ,!hey called "systems".
The earliest letter we have about the
transactions
between these parties is one dated 30th March, 1951.
It shows that the "system" which they called
the
"Direct Supply System" was in use at that time The
.details of the "system" are set out in an order dated
17th April, 1951.
Under
it Moolji Sicka & Company
had to send supplies
of bidis direct to
the Canteen
Stores contractors as and when ordered.
The value of
the goods
so supplied was to be recovered
from the
.contractors direct and the Canteen ·Stores were to he
informed of the sales and were to be
paid a certain
.comm1ss1on.
This led to some friction and in their letter of 30th
March.
1951,.
the
Canteen Stores
complain that
information about some of the sales
to the contractors
had been suppressed with the result that the Canteen
Stores lost their c.ommission.
Moolji
Sicka & Company replied to this on 24th April, 1951, and suggested
a slight change in the system, namely that all orders
for the goods should in future be placed through the
Canteen Stores and that there should be no dealings
with the contractors direct except to supply
them
with the goods ordered by the Canteen stores; then,
they said, there would be no complaint about their
having been kept in the dark.
This appears to have
been agreed
to because such of the subsequent orders
as arc on record were placed by the Canteen Stores.
1954
Chatturhhuj
Vithaldas
Jasani.
v.
Moreshwar
Parashram
and Others.
Bose J.
1954
Chatturhhuj
Vithaldas
:Ja.1an1
v.
More.Jltwcu
Parashram
and Other.J".
Bose].
824
SUPREME COURT REPORTS
[19541
The or<ler date<l 17th April, 1951, to which we have
referred above is a sample.
This was considered unsatisfactory and it was felt
that a change was called for.
Moolji Sicka
& Company's
letter of 24th
Ap1il, 1951,
shows
that their
complaint was that the Canteen Stores did not keep a
sufficient stock of bidis on hand. They said-
"W e feel
that
you can stock more of our bidis.
And that will mean an added profit to you; since the
rebate you get on supplies made under the Direct
Supply
System
1s
Rs. 4 only, whereas
on
supplies
made to you we have now offered a much higher
rebate .............. We have therefore to request you to
kindly stock more of our bidis."
In view of this, two representatives of Moolji Sicka
&
Company, met the
Chairman of the Board of
Administration, who was
in
charge of the Canteen
Stores Department, on 10th July, 1951. They reached
certain tentative conclusions which were reduced to
writing by
the Canteen
Stores on 11th July,
1951.
Their letter of that date shows that the Canteen Stores
proposed to abolish the Direct Supply System in the
near future
but
so
far as Moolji Sicka & Company
were concerned they said that the system could be
abolished at once
("forthwith" is
the word used)
provided Moolji Sicka
&
Company would
agree
to
supply
bidis
for
the Bombay, Calcutta and Delhi
Depots of the
Canteen Stores
under a new system
which they
called the "Consignment System''.
Under
this
the Canteen Stores were to pay as they sold. But
the new system was intended only for the Bombay
Calcutta and Delhi Depots of the Canteen Stores. The
letter goes on to say that for the Pathankot and Srinagar Depots the supplies would have to be made on
the
"Outright
Purchase
Basis".
These
proposals
were embodied
under
the heading "Future
Business
Relations".
Then there was a provision for what was
called the "Transition Period".
That said that
"Until stoch could
be placed
in our depots, it
was agreed that you would supply your bidis direct
against. our orders and on such supplies you would
allow us rebate as at present."
S.C.R.
SUPREME COURT REPORTS
825
These proposals were sent
to Moolji Sicka & Compau y for confirmation.
It will
be seen
that
the letter
makes
four
proposals :
(1) That so far as Moolji Sicka & Company
were
concerned,
"the Direct Supply
System"
should
be
terminated
at once though,
so far
as other manufacturers were concerned,
it should continue in force
for some time longer;
(2) That
in its place
the Calcutta, Bombay and
Delhi Depots were to be supplied under a new system
called the "Consignment System";
(3) That the Pathankot and Srinagar Depots were
to be supplied under another new system called the
"Outright Purchase System";
( 4) That during the "transition period" the "Direct
Supply
System"
was to continue in operation "as
at
present" even with Moolji Sicka and Company.
Moolji Sicka
& Company
replied on 16th July,
1951, saying that they were prepared to accept these
terms prqvided the Canteen Stores
confirmed certain
modifications
which
Moolji Sicka
& Company proposed.
They were as follows:
(1) Regarding the "Transition Period" they said-
"W e arc pleased
to note that vou will soon be
abolishing the Direct Supply System.
But it should be
applied to all suppliers at the same time. Till then we
should
b('. allowed to supply any orders received from
the Canteen Contractors. You should inform us of the
date on which
Direct Supply System will be discontinued."
(2) Regarding the new proposals under the heading
"Future
Business
Relations"
Moolji
Sicka
&
Company said-
"Goods sent to your depots on consignment basis
must be either returned to us or paid for fully within
three months of the date
of
supply. We understand
that
the
system of supplying goods
on consignment basis will be
discontint~d
in about six months'
time."
1951
Chatturbhuj
Vithaldas
Jasa'!li
v.
Moreshwar
Parashram
and LOtJiers.
Bose J.
Chatturblud
Vithaldas
Jasani
v.
Mareshwar
Parashram
and Others.
Bose .7·
826
SUPREME COURT REPORTS
[1954]
(3) They said-
" And for this purpose we have agreed to offer you
Rs. 7,500 in full and final settlement of all your claims
to date and upon the understanding of your acceptance
of the terms for future business."
They concluded-
"Upon
rece1vmg
your
confirmation
we
shall
instruct our Bombay office to send you the cheque for
the amount stated above."
The Rs. 7,500 was what the Canteen Stores claimed
from Moolji Sicka &
Company
as
compensation
for
breach of the agreement under which Moolji Sicka &
Company had
agreed
not
to sell
to
the Canteen
Contractors
without paying
the Canteen Stores a
comm1ss10n.
Neither side
was
able to produce exact
figures but this was the estimate made by the Canteen
Stores of the loss suffered by them by reason of that
breach.
It will be seen that the proposal about the "Consignment Svstem" which the Canteen Stores made was
that
they
would pay Moolji Sicka & Company only
when they sold
the stocks with
which Moolji Sicka &
Company were to supply them for stocking their depots
at Calcutta, Bombay and Delhi.
Moo! ji Sicka & Company were not satisfied with this and said that the
Canteen
Stores
must
either
return or pay for all
stocks supplied, within three months from the date of
supply.
The Canteen Stores replied on 19th
July, 1951, as
follows:
( l) They
accepted
suggestion that when
abolished the abolition
of bidis.
Moolji
Sicka
&
the Direct Supply
would apply to
Company's
System was
all suppliers
(2) As regards the "Consignment Account System"
they did not turn down the proposals but observed
that they were thinking of doing away witl1 that too in
favour
of
the
"Outright
Purchase
System"
and
warned Moolji Sicka & Company that in view of that
it might not be necessary to place any of Moolji Sicka
& Company's stocks in their depots.
•
S.C.R.
SUPREME COURT REPORTS
827
(3) They wanted a six months' guarantee period in
place of three months.
The letter concludes-
"Although under
the
system
of
provisioning
adopted by us, and as explained to you during our
discussions,
it may not be that we shall at any time
have any stocks surplus to our requirements or stocks
which have not been disposed of within the guarantee
period, but should there be any solitary occasions will
you please confirm that you will replace such stock with
fresh stock without any cost to us?
We await
yoar
agreement by return."
They also said, "We now await your cheque for
Rs. 7,500."
Moolji Sicka & Company replied on 26th July, 1951,
and commenced by saying-
"W e agree to all you have said in page one of
your letter under reply."
Regarding. the guarantee they said they
could not
agree to six months but would agree to three provided
the
guarantee
was
limited
to goods
found to be
defective
because
of
faults in manufacture.
They
concluded-
"We have
also to pay
letter,
dated
16th July,
Canteen
Stores
would
made.
you
Rs. 7,500
as
per our
1951," and asked how the
like
the payment to be
The Canteen Stores replied on 31st July, 1951, and
explained what they meant by the "guarantee period".
Bidis deteriorate by keeping, so the · idea was to have
a system under which they could be returned within
six
months
to
prevent
their
deterioration. They
explain that this is in the interests of the manufacturer
because ( 1) it will not bring their brands into disrepute,
for that would be the inevitable result if stale bidis
which had deteriorated were sold in the canteens and
(2) if the period is made too short, then
"the goods will not stay in our depots and in the
stalls of our canteens and contractors long enough to
sell and hence our depots will always be anxious to
1954
C!iatturbhuj
Vithaldas
Jasani
v.
Moreshwa"
Parashram
ond Others.
Bose].
i95+
Chatturbhuj
Vithaldas
JrLfani
v.
Moteshwar
Parashram
and Others.
Bose J.
828
SUPREME COURT REPORTS
[1954]
return these stocks.
The result will be obvious. Your
sales will be lower."
They continue-
"W e therefore consider that the period of six
months should be the least before the expiry of which
goods may be taken back by you and replaced ......... .
The period of three months within which you expect
us to return your stocks, should we find them not moving.
will be too short."
Tky conclude by saying that they hope Moolji
Sicka & Company will agree to the six months.
Now it will be seen that all this correspondence
related
to
the proposals
about
the
"Consignment
System"
which were first mooted on 11th July, 1951.
Moolji Sicka & Company complained
on
24th
April
1951, that the Canteen Stores were not keeping large
enough stocks of their bidis and they asked the Canteen
Stores to stop the Direct Supply System and purchase
stocks
direct.
The Canteen
Stores were naturally
reluctant to keep large stocks on hand because bidis
deteriorate and become unsaleable in course of time.
Therefore they
proposed
the "pay as we sell" system,
that is, they would keep stocks of bidis and pay for
whatever they sold.
But the problem of unsold stocks
deteriorating still
remained.
\Vho was
to be
responsible?
The obvious answer
was that the manufacturers should take
back the
unsold
stocks
before
they were
too
far gone and in their place send fresh
consignments for sale
on the
"pay as we sell" basis.
We say
"obvious" because the manufacturers
could
use the stale tobacco by re-curing and blending it, or
could use it for other purposes provided it was not toQ ·
far gone.
The proposal therefore was that the Canteen
Stores were to keep stocks of Moolji Sicka & Company's bidis in their depots and canteens, pay for what
they sold and return all
unsold
stocks within six
months. Moolji
Sicka & Company were then to replace
them with fresh stocks which would he paid for
when
sold.
This was agree< I to in the· main but the point at
which they were at issue was the six months. Moolji
Sicka & Company
proposed three months
w hilc
the
•
"
:S.C.R.
SUPREME COURT REPORTS
829
Canteen Stores wanted
six months.
We think the
argument used
in the letter
of 31st
July, 1951, that
"the result will be obvious.
Your sales will be lower'"
.can only have reference to
an arrangement of this
kind, otherwise no question of the sales being lower
could arise.
In the case of an outright sale, the
sale
would be complete when the order was executed, and
·except for bidis found to be defective due to manufacture.
Moolji Sicka
& Company would have no further con-
<:ern with
them.
The sentences "the goods may be
taken
back
by you and replaced" and "should w~
find
them not moving"
can only refer to these p: uposals about
the
"Consignment System".
In any
<ease, it certainly includes this system.
Moolji Sicka & Company's reply is dated 9th August,
1951.
They say-
"We are in receipt of your letter No. 7B/29/-17/
1299, dated 31st July, 1951, and are pleased to extend
the guarantee period from three. to six months.
\Ve
are sure this will now enable
you to keep adequate
·stocks of our bidis.
Awaiting your esteemed orders."
This is an acceptance of the interpretation of the
"guarantee period" as given by the Canteen Stores in
their letter of 31st
July, 1951.
The
words "now"
and "adequate"
relate to the dispme which started
on 24th April,
1951, when
Moolji Sicka & Company
<:mnplained that the Canteen Stores were not keeping
adequate
stocks of
their bidis in their depots. The
subsequent correspondence was aimed
at finding out
ways and means to meet this objection
and at the
same time satisfy both sides.
It all ended by Moolii
Sicka & Company accepting the terms set out in the
ktter
of
31st
July,
1951.
We are accordingly of
opinion that Moolji
Sicka & Company accepted the
"Consigmnent System" on 9th
August,
1951. That
imported a "pay as we sell" arrangement with an
obligation
to take
back stocks unsold within six
months
and
replace
them
with fresh
stock which
would he paid
for
when sold.
In the "transition
period" the Direct Supply System was also to continue.
That meant that there would be two systems in force
for a
time
in
certain
depots:
the
"Consignment
1954
Chatturbhuj
Vithaldas
Jamni
v.
Moreshwar
Parashram
and Others.
Bose].
1954
Chatturbhuj
Vithaldas
Jasani
v.
Moreshwar
Parashram
and Others.
Bose J.
830
SUPREME COURT REPORTS
[19541
System" regarding stocks ordered for the stocking upof
the
Calcutta, Bombay and Delhi depots
of
the
Canteen Stores
and the "Direct Supply System" till
such time as the depots were stocked.
The
third
system of "Outright Purchase"
was limited for the
time being to the Pathankot and Srinagar depots.
Both the "Direct
Supply" and the "Consignment"
systems were abolished
together on 1st
November,
1951
(see
the
Canteen
Stores' letter dated
24th
November, 1951).
But the
obligation to
take back
unsold stocks within the six months' period continued
to attach to all contracts for consignment to the Calcutta,
Bombay and Delhi depots made between 9th
August,
1951, and 31st
October,
1951.
The tabular
statement shows
that the following contracts for consignment to one or other of these three depots were
made during that period.
The date of the invoice is
the date of the execution of the order and thus of the
acceptance of the proposal contained in the order.
Date of Invoice
Depot.
Price of goods
Date of
& DLspatch.
supplid.
payment
1- l 0-195 l
Bombay.
Rs. 5,056-2-0
15-11-1951
13-10-1951
do
13,536-4-6
do
18-10-1951
Delhi
I ,684-13-9
19-12-1951
19-10-1951
Calcutta
3,373-9-3
do
18-10-1951
Bombay
4,793-4-9
24-12-1951
The value of these orders comes to Rs. 28,444-2-3.
The obligations
under these
sc veral
contracts
continl!ed from !st April, 1952 to 18th April, 1952.
It was argued
that assuming
that to be the case,
then there were
no
longer any
contracts
for the
"supply of goods"
in existence but only an obligation
arising
under the guarantee clause. We are unable to accept such a narrow construction.
This term
of
the
contract,
whatever
the
parties may have
chosen to call it, was a term in a contract for the supply
of goods.
When a contract consists of a number of
terms and conditions, each condition does not form
a separate contract but is an item in the one ·c"P.tract
of which it is a part.
The consideration for
~~ch
•
S.C.R.
SUPREME COURT REPORTS
831
condition in a case like this is the consideration for
the contract taken as a whole.
It is not split up into
several
consider:,tions
apportioned between
each term
separately.
But quite apart from
that,
the obligation, even under this term, was to supply fresh stocks
for these
three
depots in exchange for the stocks
which
were
returned
and so even when regarded
from that
narrow
angle it would be a contract for
the supply of goods.
It is true they are replacements
but a contract to replace goods is still
one for the
supply of the goods which are sent as
replacements.
But even if all that be disregarded and it be assumed that Moolii Sicka & Company had fully performed
their part of the contract by placing the goods on
rails before 15th November, 1951, we are of opinion
that the contracts
were not at an end until the
vendors were paid
and
the contracts were fully discharged.
The words of
the sections are "if .... he has
any share or int.-rest in a contract for the supply of
goods
to ...... the appropriate
Government."
There
can be no doubt that these
various transactions were
contracts and
there can equally be
no doubt that
they were
contracts for
the
supply of
the goods.
Whether they
were
contracts
for the supply
of
goods to the Government is a matter which we shall
deal with presently. But we have no doubt that they
were contracts for the supply of goods. The question
then is, does a contract
for the supply of goods
terminate when the goods are supplied or does it continue in being till p~yment is made and the ~ontract
is fully discharged by performance on both sides? We
are of opinion that it continues in being till it is fully
discharged by performance on both sides.
It was contended, on the strength of certain observations
in
some
English cases, that
the moment a
contract is fully executed on one side
and all that
remains is
to receive payment from the other, then
the contract
terminates and a new relationship of
debtor and creditor takes
its place.
With the utmost respect . we are
unable
to agree. There
is
always a possibility
of
the liability
being disputed
before actual payment is made and the vendor may
2-96 S. C. India/59
19M
C!.allurb'iuj
Vlt a/dos
J .. sani
, ..
Mf)rtS'.1.Q(ll
Paras!JfanJ
ind' Ot.i.trS·
Bo" J'
1954
Chatturb '1lfi
Vit .aldas
Jw.ani
v.
Mares'.war
Ptiias ,ram
and Ot,,ns.
f!ose J~
'
832
SUPREME COURT REPORTS
[ 195~ J
have to bring an action to establish his claim to payment.
The existence of the debt depends on the contract
and cannot be established without showing that
payment
was a term of the contract.
It is true the
contractor might abandon the
contract and sue on
quantum mem1t but if the other side contested and
relied
on
the terms
of the contract, the
decision
would have to rest on that basis.
In any case, as we
are not bound by the dicta and authority of those cases,
even assuming they go that far, we prefer to hold that
a contract continues in being till it is fully discharged
by
both
sides: see
the observations of Gibson J. in
O'Carroll
v.
Hastings(').
To use the language of
O'Brien L.C.J. in that case at page 599, these contracts have not been "merged, abandoned, rescinded,
extinguished
or satisfied; and if any demur was made
as to payment before payment was actually made, he
could have
sued
upon the contract specially; or if
he sued for work done at the request of the defendants
the
contract would have been a part
of his
necessary
proofs."
We agree with the learned Lord
Chief Justice in thinking that "it is far-fetched
to
contend that a man is not concerned in the contract or
security by which he can enforce
payment."
The
same
view was taken by Costello J. in an Indian
case in Satyendral(umar Das v.
Chairman of the Municipal Commissioners of Dacca(').
Counsel for the appellant relied strongly on certain
English
cases.
They
were
all examined
and distinguished in the above decisions. They either turned
on special facts or on the words
of a statute which
are not the same as ours. The leading case appears to
be Royse v. Birley(').
But the decision turned on the
language of the English statute which the learned
Judges construed to mean that the contract must be
executory on the contractor's part before the English
Act can apply.
Tranton v. Astor(') follows the earlier
ruling.
The statute with which Darling J. was dealing
(t) (1905) 2 I. R. 590 at 608.
(2) I.L.R. 58, Cal. from P· 193 on,\•ar<ls.
(3) L. R. 4 C. P. 296.
(4) 33 T.L.R. 383.
'
S.C.R.
SUPREME COURT REPORTS
833
in Co>.: v. Truscott(
1
)
is nearer the language of our Act.
He hesitatingly proceeded on
the debtor and . creditor
basis.
We need
not
go further than this because, as
we have said, if these decisions cannot be distinguished,
then we must with respect differ. We hold therefore
that these contracts which Moolji Sicka
& Company
had entered into with the Government subsisted on
15th November,
1951,
and on 14th February,
1952,
and that as Chatturbhuj Jasani, the appellant, was a
partner in the firm he also had both a share and an
interest in them on the crucial dates.
That brings
us to article 299(1)
of me Constitution.
It states:-
"All contracts made in the exercise of the executive power of the Union or of a State shall be expressed
to be made by the President. ..... and all such contracts ...
made in the exercise of that power shall be executed
on behalf of the President ... by such persons and in
'uch manner as he may direct or authorise."
The contention was that as these contracts were
not expressed
to
be made by the President they are
void.
Cases were
cited to us under the Government
of India Acts of 1919 and 1935.
Certain sections in
these Acts were said to be similar to article 299. We
do not think that they are, but in any case the rulings
under section 30(2) of the Government of India
Act,
1915, as amended bv the Government of India Act of
1919 disclose a diff~rence of opinion. Thus, Krishnaji
Nilkant v. Secretary of State(') ruled that comracrs with
the Secretary of State must be by a deed executed
011
behalf of the Secretary of State for India and in his
name.
They cannot be made
by correspondence or
orally.
Secretary ot State v. Bhagwandas(') and Devi
Prasad Sri Krishna Prasad Ltd. v. Secretary of State(')
held they could be made by correspondence. Secretary
of State v.
O.T. Sarin &
Company(') took an intermediate view
and held that though contracts in the
prescribed form could not
be enforced by either side,
(1) 21 T.L.R. 319.
(>) A.LR. 1937 Born. 449, 451.
(3) A.LR. 1938 Born. 168.
I08
(4) A.LR. i941 A\\. 377.
(5) I.L.R. 11Lah. 375.
195+
C/,alturbhtd
Vithaldas
Jasani
.,,
Mores11war
Paras/,ram
and Other:..
Bose].
1954
Chatturb,'1uj
Vit'ialdas
]asani
-,,
J.\{oreshwar
Par ashram
nr.d Others.
834
SUPREME COURT REPORTS
[1954 ~
a claim for compensation under section 70 of the Indian
Contract Act would lie. Province of Bengal v. S. L.
Puri(') took a strict view and held that even
letter~
headed "Government of India" did not comply with
the rule in section 175 (3) of the Government of India
Act, 1935.
The Federal Court was called upon to construe section 40 (1) of the Ninth Schedule of the Government
of India Act, 1935.
It held that the directions m n
were only directory and not mandatory, and the same
view was
taken
of
article
166 (1) of the
present
Constitution by this
court in Dattatreya Moreshtuar
Pangarkar v. State of Bombay(').
None of these provisions is quite the same as article
299.
For example, in article 166, as also in section
40(1) of the Government of India Act of 1935, there is
a clause which says that "orders" and "instruments"
and
"other proceedings" "made"
and
"expressed" in
the
name
of the Governor or Governor-General in
Cou'ilcil
and "authenticated" in the manner prescribed
shall not be called in question on the ground that it is
not
an
"order" or "instrument"
etc.
"made"
or
"executed" by the Governor or Governor-General in
Council.
It was held that the provisions had to be read
as a whole and when that was done it became evident
that
the
intention of the legislature and the Constitution was to dispense with proof of the due "making"
and "execution" when the form prescribed was followed
but not to invalidate orders and instruments otherwise
valid.
Article 299( 1) does not contain a similar clause,
so we are unable to apply the same reasoning here.
In our opinion, this is a type of contract to which
section 230(3) of the Indian Contract Act would apply.
This view obviates the inconvenience and injustice to
innocent persons
which the
Federal Court felt in
f. K. Gas Plant Manufacturing Co., Ltd. v. The KingEmperor(3) and at the same time protects Government.
We feel that some reasonable meaning must
(1) ;;1 C.W.N. 753·
(2) [1952] S.C.R. 612 at 63,, 633.
(3) [1947] F.C.R. 141 at 156, 157
S.C.R.
SUPREME COURT REPORTS
835
be attached to article 299 ( 1).
We do not think the
provisions were inserted
for the sake of mere form.
We
feel they are there to safeguard Government
against unauthorised contracts.
If in fact a contract
is unauthorised or in excess of authority it is right that
Government
should be safeguarded.
On the other
hand, an officer entering into a contract on behalf of
Government can
always safeguard himself by having
recourse to the proper form.
In between is a large
class
of contracts, probably
by far the greatest in
numbers, which, though authorised, are for one reason
or other not in proper form.
It is only right that an
innocent contracting party should not suffer because
of this and if there is no other defect or objection we
have no doubt Government will always accept the responsibility.
If
not, its interests
are
safeguarded
as we think the Constitution intended that they should
be.
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 section 230(3) of the Indian Contract Act
is
designed
to meet.