# K. P. CHOWDHARY v. STATE OF MADHYA PRADESH & ORS

- **Citation:** [1966] 3 S.C.R. 919
- **Court:** Supreme Court of India
- **Decided:** 1966-03-15
- **Bench:** P.B. Gajendragadkar, C.J. K.N. Wanchoo, M. Hidayatijllah, J.C. SHAn, S.M. S1Kr1
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/k-p-chowdhary-v-state-of-madhya-pradesh-ors-3779
- **Pages:** 7

## Headnote

Con.srtitution oj lndla, 1950, A.rt. 299(1)-lmplled eontrac11, if permissible.
Madhya Pradesh Land Revenue Code, s. 155(b)-Recovery under implied contract.
The appellant gave tho high'"t
bids for two foreat contracts at an
auction. As the amount of the contract waa more than what the Division
Forest Officer coqld accept, the matter waa referred to the Chief Conservation of Forests who had the necessary authority to accept the bids. Aftsr
the cloee of the auction the appellant had signed the contract form as
required, and tho document& were aen.t to the Chief Conservator of Fortets
for unction and signature. Before the Chief Conservator of Foresta
could accept the contract, the appellant railed a dispute as to the marking
of the trees. . As that diapute waa not settled to tho satisfaction of the
appellant he refused to complete the contract. The Divisional Forest Officer
pve notice to the appellant that if he did not complete the formalities
action would bo taken under the conditions of the auction to re-auction
the contract and if there WM My deficiency it would be recovered from
him. He did not comply and ultimately he was infon»ed that the two
contracts had been cancelled and would be re-auctioned at hii risk. The
contracts were re-auctioned at which there was certain deficiency in the
amount. A letter was written to the Tehsildar for recovering this deiclent
a.mount from the appellant as arrears of land revenue as per the cond.tiom
of auction. Thereupon, the appellant filed .a writ petition challenging the
recovery of the amount -.is arrears of land revenue as the contract was not
signed or completed by him. The High Court dismissed the petition. In
appeal to this Com:t.
·
HELD: Section 155(b) of the Madhya Pradesh Land Revenue Code
does not assist the State in realising this amount as arrears of land revenue.
What was said in the earlier caecs by this Court with respect to s. 175(3)
of the Governm&nt of India Act, 1935 applies w:th equal force to Art.
299(1) of the Constitution. Two consequences follow from these d~isons.
The first is that m view of Art. 299( 1) there can be no implied contract
between the Government and another penon, tho reason being that if
1uch implied contracts between the Government and another person were
allowed, they would in effect make Art. 299(1) weleas for then a person
who had a contract with Government which waa not executed at all in the
manner provided in Art. 299( 1) could get away by saying that an implied
contract may be inferred on the. facts and circumstances of a particular
c.se. This is of coune not to say that if there ii a valid contract as enwaged by Art. 299(1), there may not be implications arisin~ out of such
a contract. The eecond consequen.co which follows from the1e decisions
ii that if the contract between the Government and another person i!I not
in full compliance with Art. 299(1) it would be no contract at all and
could not be enforced either by th• cto.oruaent or tty the other persoa as
a centract. [J24 A.DJ
920
SUPREME COURT REPORTS
[1966) 3 s.c.R.
S1at1 of &luv v. Mf1. Karam Cltand Tlrapar (1962) 2 S.C.R. 827, $1tlt BikltrtJ,/
Joipurilll v. Union of India (1962) 2 S.C.R· 880, Stall of the Wat &tilal v. M11.
B.K. Molfdal (1962) Supp. 1 S.C.R. 876, Chaturbhuj Yitha/das Ja1411t v. M<>ralrwar
Prashram (1954) S.C.R. 817, and (S) Unio11 of Jndiav. A.L. Ra/Ito Rmlt,[1964) 3 S.C.R.
164, followed.
A
In the present case there was no contract between the appellant and
tho Go\-ernment before he bid at the auction oor was there any contract B
between him and the Government after the auction was over as required
by Art. 299( 1) of the Constitution. A3 there can be no implied conlraet
between the Government and another person in view of the mandatory
provision of Art. 299( l) of the Constitution there can be no queitioo of
recoveiy of any money under an implied contract under cl. (b) of s. 155
of the Madhya Pradesh Land Revenue Code. [924 B-HJ
CIVIL APPELLATF. JURISDICTION : CIVIL

## Text

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K. P. CHOWDHARY
v.
STATE OF MADHYA PRADESH & ORS.
March 15, 1966
[P.B. GAJENDRAGADKAR, C.J. K.N. WANCHOO, M. HIDAYATIJLLAH,
J.C. SHAn AND S.M. S1KR1. JJ.]
Con.srtitution oj lndla, 1950, A.rt. 299(1)-lmplled eontrac11, if permissible.
Madhya Pradesh Land Revenue Code, s. 155(b)-Recovery under implied contract.
The appellant gave tho high'"t
bids for two foreat contracts at an
auction. As the amount of the contract waa more than what the Division
Forest Officer coqld accept, the matter waa referred to the Chief Conservation of Forests who had the necessary authority to accept the bids. Aftsr
the cloee of the auction the appellant had signed the contract form as
required, and tho document& were aen.t to the Chief Conservator of Fortets
for unction and signature. Before the Chief Conservator of Foresta
could accept the contract, the appellant railed a dispute as to the marking
of the trees. . As that diapute waa not settled to tho satisfaction of the
appellant he refused to complete the contract. The Divisional Forest Officer
pve notice to the appellant that if he did not complete the formalities
action would bo taken under the conditions of the auction to re-auction
the contract and if there WM My deficiency it would be recovered from
him. He did not comply and ultimately he was infon»ed that the two
contracts had been cancelled and would be re-auctioned at hii risk. The
contracts were re-auctioned at which there was certain deficiency in the
amount. A letter was written to the Tehsildar for recovering this deiclent
a.mount from the appellant as arrears of land revenue as per the cond.tiom
of auction. Thereupon, the appellant filed .a writ petition challenging the
recovery of the amount -.is arrears of land revenue as the contract was not
signed or completed by him. The High Court dismissed the petition. In
appeal to this Com:t.
·
HELD: Section 155(b) of the Madhya Pradesh Land Revenue Code
does not assist the State in realising this amount as arrears of land revenue.
What was said in the earlier caecs by this Court with respect to s. 175(3)
of the Governm&nt of India Act, 1935 applies w:th equal force to Art.
299(1) of the Constitution. Two consequences follow from these d~isons.
The first is that m view of Art. 299( 1) there can be no implied contract
between the Government and another penon, tho reason being that if
1uch implied contracts between the Government and another person were
allowed, they would in effect make Art. 299(1) weleas for then a person
who had a contract with Government which waa not executed at all in the
manner provided in Art. 299( 1) could get away by saying that an implied
contract may be inferred on the. facts and circumstances of a particular
c.se. This is of coune not to say that if there ii a valid contract as enwaged by Art. 299(1), there may not be implications arisin~ out of such
a contract. The eecond consequen.co which follows from the1e decisions
ii that if the contract between the Government and another person i!I not
in full compliance with Art. 299(1) it would be no contract at all and
could not be enforced either by th• cto.oruaent or tty the other persoa as
a centract. [J24 A.DJ
920
SUPREME COURT REPORTS
[1966) 3 s.c.R.
S1at1 of &luv v. Mf1. Karam Cltand Tlrapar (1962) 2 S.C.R. 827, $1tlt BikltrtJ,/
Joipurilll v. Union of India (1962) 2 S.C.R· 880, Stall of the Wat &tilal v. M11.
B.K. Molfdal (1962) Supp. 1 S.C.R. 876, Chaturbhuj Yitha/das Ja1411t v. M<>ralrwar
Prashram (1954) S.C.R. 817, and (S) Unio11 of Jndiav. A.L. Ra/Ito Rmlt,[1964) 3 S.C.R.
164, followed.
A
In the present case there was no contract between the appellant and
tho Go\-ernment before he bid at the auction oor was there any contract B
between him and the Government after the auction was over as required
by Art. 299( 1) of the Constitution. A3 there can be no implied conlraet
between the Government and another person in view of the mandatory
provision of Art. 299( l) of the Constitution there can be no queitioo of
recoveiy of any money under an implied contract under cl. (b) of s. 155
of the Madhya Pradesh Land Revenue Code. [924 B-HJ
CIVIL APPELLATF. JURISDICTION : CIVIL APPEAi. No. 669 OP C
1965.
Appeal by special leave from the judgment and order dated
October 5,
1961 of the Madhya Pradesh
High Court in M. P.
No. 153 of 1961.
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J. P. Goyal, for the appellant.
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1. N. Shroff, for the respondents.
The Judgment of the Court was delivered by
Wanchoo J. This is an appeal by special leave against the
judgment of the Madhya Pradesh High Court. The brief facts E
necessary for present purposes are these.
A notice
was issued
by the Divisional Forest Officer,
Jabalpur Division for auction
of various contracts in that division in July 1959. The conditions
of the auction specified inter a/ia (a) that no person would be allowed
to bid for any forest contract at the auction unless he had signed
the sale notice in token of his agreement to abide by the condi· F
tions thereof and deposited a sum of Rs. 500/- as earnest money
in respect of each forest contract before bidding therefore; (b)
that the Divisional Forest Officer reserved to himself the power
without assigning any reason to accept the highest or any bid,
(c) that the consideration due under a contract was to be payable
where it exceeded Rs. 3,0CX>/-, in four equal instalments, the first G
instalment being payable immediately at the close of the auction;
(d) that the successful bidder had to sign immediately at the close
of the auction the bid-sheet for the contract knocked down in bis •
favour; (e) that the sales of contracts beyond the power of sane·
tion of the Divisional Forest Officer were subject to the sanction
of the competent authority and the successful bidder was bound H
by his bid until orders were passed by the competent authority;
(f} that the contract clecd and the security bond were to be executed
by the successful bidder and his surety immediately at the close
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CHOWDHARY v. M. P. STATE (Wanchoo, 1.)
921
of the auction; (g) that if the successful bidder fails to pay the full
amount of the consideration, or the first instalment or to furnish
the security required or to complete the formalities, the earnest
money deposited by him was to be forfeited to Government and
the contract would be re-auctioned at the risk of the successful
bidder and any deficiency happening on such re-sale would be recoverable from the successful bidder as arrears of land revenue;
and (h) that the act of bidding was deemed to be a complete and
unreserved acceptance of these conditions and others which are
not material for our purposes.
The appellant bid for two contracts at the auction:and his-were
the highest bids.
As the amount of the contract money was
more than what the Divisional Forest Officer could accept,
the matter was referred to the Chief Conservator of Forests who
had the necessary authority to accept the bids. After the close of
the auction the appellant had signed the contract form and a surety
signed the security bond as required. These documents were sent
to the Chief Conservator of Forests for sanction and signature.
Before however the Chief Conservator of Forests could accept the
contract, the appellant raised a dispute as to the marking of the
trees according to the material notified at the time of the auction.
As that dispute was not settled to the satisfaction of the appellant
he refused to complete the contract or to pay the first instalment
in respect thereof. Eventually the Divisional Forest Officer gave
notice to the appellant on July 29, 1959 that if he did not complete
the formalities within a week, action would be taken under the
conditions of auction to re-auction the contract and if there was.
any deficiency it would be recovered from him and the earnest
money
would be forfeited.
He did not however pay the first
instalment due and ultimately on November 25, 1959 he was informed that the sale of the two contracts sold in the auction held
on July 20, 1959 in his favour had been cancelled by the Chief
Conservator of Forests and the amount of earnest money had been
forfeited. He was also informed that the two contracts would
be re-auctioned at his risk. Thereafter the contracts were reauctioned in January 1960. At the re-auction there was a deli-·
ciency in the two contracts together of Rs. 51,500/-. The appellant
was therefore asked to send this amount to the Divisional Forest
Officer. When he failed to do so, a letter was addressed to the
Tehsildar Jabalpur by the Divisional Forest Officer for recovering
this amount as arrears of land revenue under the conditions of
auction.
Thereupon the appellant filed a writ petition out of which the
present appeal has arisen. The case of the appellant was that the
claim of the respondent-State for recovery of the deficiency on
re-sale was not covered by either s. 82 of the Indian Forest Act
(No. 16 of 1927) or rules 28 and 29 of the Madhya Pradesh Forest
M12Sup.Cl/66-13
922
SUPREME COURT REPORTS
[1966] 3 S.C'.R.
Contract Rules or under any other provision of the law, and the
A
amount therefore could not be recovered as arrears of land revenue
as the contract was not signed or completed by him.
He therefore claimed the issue of an appropriate writ 4uashing the notice
issued to him and stopping the respondent from recovering as
arrears of land revenue the sum of Rs. 51,500/-. The State contested the case and contended that recovery of the amount could
B
be effected as arrears of land revenue under s. 82 of the Indian
Act read with rr. 28 and 29 of the Forest Contract Rules in view of
the conditions of auction, which the appellant had accepted.
The petition was heard finally by a Full Bench of the High
Court in view of a reference by a Divisional Bench. The Full
Bench seems to have held that rr. 28 and 29 of the Forest Contract
C
Rules did not apply to the case as they dealt with breaches arising
after the contract in writing had been executed. In this case the
admitted position was that the contract in writing had never been
signed by the Chief Conservator of Forests and therefore the question which fell to be considered, according to the Full Bench, was
whether the liability arising under the conditions of auction
D
could be enforced and the deficiency on re-auction recoverd as
arrears of land revenue even without the execution of a valid)(
contract in writing. On this question the Full Bench went on to
hold that this was a case of an implied contract resulting from the
appellant's accepting the conditions of auction and that such an
implied contract was not hit by Art. 299 of the Constitution as
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that applied plainly to contracts which are required to be reduced
to writing and an implied contract in its very nature was not such
a contract. Finally the full Bench held that s. 155(b) of the Madhya
Pradesh Land Revenue Code, 1959, applied to this case of implied
contract and the amount could be recovered thereunder as arrears
of land revenue. On this view the petition was dismissed. The
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High Court having refused to grant a certificate, the appell:mt-J- F
applied for and obtained special leave from this Court; and that is
how the matter has come before us.
Two questions arise for decision in this appeal. The first is
whether the High Court's view that Art. 299 of the Constitution
docs not hit an implied contract and therefore the amount could
be recovered under s. 155(b) of the Madhya Pradesh Land Revenue
Code is correct. The second is that if that view is not correct,
whether the amount can be recovered as arrears of land revenue
under any other provision of law.
It may be mentioned that Art. 299(1) of the Constitution with
which we are concerned is practically in the same terms as s. 175(3)
of the Government of India Act, 1935. This Court had occasion 1to deal with s. 175
in The State of Bihar v. Messrs. Karam •
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CHOWDHARY v. M. P. STATE (Wanchoo, J.)
923
Chand Thapar(') It held that under s. 175(3), three conditions had
to be satisfied before a binding contract against the Government could arise. These three conditions are:
(1) the contract
must be expressed to be made by the Governor or the GovernorGeneral, (ii) it must be executed m writing, and (iii) the execution should be by such persons and in such manner as the Governor
or the Governor-General might direct or authorise. This Court
further held in that case that s. 175(3) did not prescribe any particular mode in which the authority must be conferred and where
an ad hoc authority was conferred on any person, the requirement
must be held to be satisfied.
The matter was again considered by this Court in Seth Bikhrai
Jaipuria v. Union of India(2) It was again emphasised that s. 175(3)
of the Government of India Act, 1935, required that a contract, if
it was to bind the Government, had (a) to be expressed to be made
by the Governor or Governor General, (b) to be executed on behalf
of the Governor or Governor General, and (c) to be executed by
an officer duly appointed in this behalf and in such manner as the
Governor or the Governor General directed or authorised. It
was also held that the provisions of s. 175(3) were mandatory, as the
object of enacting these provisions was that the State should not
be saddled with liability for unauthorised contracts.
The matter was considered again by this Court in State of
West Bengal v. Messrs. B. K. Monda! and Sons(') It was held that
the provisions contained in s. 175(3) were mandatory. The intention of Parliament in enacting the 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(4) 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.
Lastly this court had occasion to consider the matter again
in Union of India v. A. L. Ra Ilia Ram,(5) 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.
(l) [1%2] l S.C.R. 827.
(2) [1962] 2 S.C.R. 880.
(3) [1962] Supp. l s.C.R. 876.
(4) [1954] S.C.R. 817.
( 5) [1964] 3 S.C.R. 164.
924
SUPREME COUllT REPORTS
[1966] 3 S.C.R.
What was said in these cases with respect to s. 175(3) of the
Government of India Act, 1935, applies with equal force to Art.
299 (I) of the Constitution. Two consequences follow from these
decisions. The first is that in view of Art. 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 Art. 299(1) useless, for then a person who had a contract
with Governn;ent which
was not executed at all in the manner
provided in Art. 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 Art. 299(1), there may not be implicacations arising out of such a contract. The second consequence
which follows from the'e decisions is that if the contract between
Government and another person is not in full compliance
with Art. 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 pr~sent case it is· not in dispute that there never
was a contract as required by Art. 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 Art. 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 Art. 299(1) of the Constitution. Further, in view of the mandatory terms of Art. 299(1),
no implied contract could be spelled out between the Government
and the appellant at the stage of bidding for Art. 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 enure 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 Art.
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.
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CHOWDHARY v. M. P. STATE (Wanchoo, J.)
925
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. Jn 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
lines.
We therefore allow the appeal and hold that s. 155(b) of the
Madhya Pradesh Land Revenue Code does not assist the State in
realising this amount as arrears of land revenue. We however
remand the matter to the High Court for determining after hearing
both parties whether there is any other provision of law or rules
which would permit the recovery of this amount in view of the conditions of auction. In the circumstances we order parties to bear
their own costs of this Court.
Appeal allowed.