# STATE OF UTTAR PRADESH &"ANR v. MURARijLAL & BROTHERS LTD

- **Citation:** [1972] 1 S.C.R. 1
- **Court:** Supreme Court of India
- **Decided:** 1971-08-03
- **Case number:** Civil Apeal No. 15 of 1968
- **Bench:** K. s. HEGDE, A. N. Grover
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/state-of-uttar-pradesh-anr-v-murarijlal-brothers-ltd-5345
- **Pages:** 6

## Headnote

Constitution of India, Art. 299(1)-Contract Act, 1872. s. 230(3)-
Purported contract between Government and private party not complying
withrequirements of Art. 299(1)-Whether enforceable-Liability of
agent of Government.
The respondent company had a cold storage. It filed a suit
against the Government of Uttar Pradesh and three of its officials claiming rent or damages on the allegation that under an agreement negotiated by Defendant No. 3 under instructions from Defendants Nos. 2
and 4 on behalf of the State Government {defendant No. 1) space had
been reserved in its cold storage by the company for the storage of
Government potatoes but no potatoes had been sent for storage. o,.
behalf of the State Government it was pleaded that no contract was
entered into in accordance with Art. 299(1) of the Constitution.
The trial court upheld the objection of the State and dismissed the
suit against it, but it held the other defendants liable for the storage
charges. The High Court on appeal by the defendants set aside the
decree against defendants Nos. 2 and 4 but maintained it against
defendant No. 3. According to the High Court the entire transaction
had been entered into by the defendant No. 3 on behalf of the Govern-·
ment and since the State Government was not liable by virtue of Art.
299 of the Constitution the said defendant would be liable under s.
230(3) of the Contract Act. In appeal to this Court by certificate,
HELD : Except in Chatturbhuj's case which lent some support
to the High Court's view, this Court has taken the view that the provisions of Art. 299(1) are mandatory and contain a prohibition against
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a contract being entered into otherwise than in the manner prescribed
by the aforesaid provisions. The obsevations in Chaturbhuj's case
have been regarded in subsequent decisions as either not laying down
the law correctly or as being confined to the facts of that case. The
consensus of opinion is that a contract entered into without complying
with the conditions laid down in Art. 299(1) is void. If there is no
contract in the eye of the law it is difficult to see how s. 230(3) of the
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Contract Act would become applicable. [5 DJ
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The appeal must accordingly be allowed.
Chatturbhuj Vithaldas Jasani v.
Moreshwar Pamsliram & Ors.
[1954] S.C.R. 817, not followed.
State of West Benga/v. M/s. B. K. Monda/ & Sons. [1962] Supp.
I S.C.R. 876, and Mulamchand '" State of Madhya Pradesh, [1968] 3
S.C.R. 214, applied.
[For the reasons stated in the judgment the court did not give any
final opinion on the question of applicability of s. 235 of the Contract
SUPREME COURT REPORTS
[1972] l S.C.R.
A
Ac.t to cases when the contract suffers from the infirmity that the requirements of Art. 299(1) of the Constitution have not been complied with]

## Text

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STATE OF UTTAR PRADESH &"ANR.
v.
MURARijLAL & BROTHERS LTD.
August 3, 1971
[K. s. HEGDE AND A. N. GROVER, JJ.]
Constitution of India, Art. 299(1)-Contract Act, 1872. s. 230(3)-
Purported contract between Government and private party not complying
withrequirements of Art. 299(1)-Whether enforceable-Liability of
agent of Government.
The respondent company had a cold storage. It filed a suit
against the Government of Uttar Pradesh and three of its officials claiming rent or damages on the allegation that under an agreement negotiated by Defendant No. 3 under instructions from Defendants Nos. 2
and 4 on behalf of the State Government {defendant No. 1) space had
been reserved in its cold storage by the company for the storage of
Government potatoes but no potatoes had been sent for storage. o,.
behalf of the State Government it was pleaded that no contract was
entered into in accordance with Art. 299(1) of the Constitution.
The trial court upheld the objection of the State and dismissed the
suit against it, but it held the other defendants liable for the storage
charges. The High Court on appeal by the defendants set aside the
decree against defendants Nos. 2 and 4 but maintained it against
defendant No. 3. According to the High Court the entire transaction
had been entered into by the defendant No. 3 on behalf of the Govern-·
ment and since the State Government was not liable by virtue of Art.
299 of the Constitution the said defendant would be liable under s.
230(3) of the Contract Act. In appeal to this Court by certificate,
HELD : Except in Chatturbhuj's case which lent some support
to the High Court's view, this Court has taken the view that the provisions of Art. 299(1) are mandatory and contain a prohibition against
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a contract being entered into otherwise than in the manner prescribed
by the aforesaid provisions. The obsevations in Chaturbhuj's case
have been regarded in subsequent decisions as either not laying down
the law correctly or as being confined to the facts of that case. The
consensus of opinion is that a contract entered into without complying
with the conditions laid down in Art. 299(1) is void. If there is no
contract in the eye of the law it is difficult to see how s. 230(3) of the
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Contract Act would become applicable. [5 DJ
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The appeal must accordingly be allowed.
Chatturbhuj Vithaldas Jasani v.
Moreshwar Pamsliram & Ors.
[1954] S.C.R. 817, not followed.
State of West Benga/v. M/s. B. K. Monda/ & Sons. [1962] Supp.
I S.C.R. 876, and Mulamchand '" State of Madhya Pradesh, [1968] 3
S.C.R. 214, applied.
[For the reasons stated in the judgment the court did not give any
final opinion on the question of applicability of s. 235 of the Contract
SUPREME COURT REPORTS
[1972] l S.C.R.
A
Ac.t to cases when the contract suffers from the infirmity that the requirements of Art. 299(1) of the Constitution have not been complied with]
CIVIL APPELLATE JURISDICTION: Civil Apeal No. 15 of
1968.
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Appeal from the judgment -and decree dated August
11, 1964 of the Allahabad High Court in first Appeal
No. 11 of 1957.
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C. B. Agrawala, O. P. Rana and R. Bana, for the
appellants.
S. P. Sinha, 0. P. Gupta and M. I. Khowaja, for the
respondent
The Judgment of the Court was delivered by.
Grover, J.-This is an appeal by certificate from
the judgment of the Allahabad High Court dacreeing
the suit filed by the respondent company for recovery
of a sum of Rs. 21,000/- on account of rent or damages
in respect of storage charges for 4,000 Maunds of potatoes for which space had been reserved in the cold
storage by the company
The plaintiff respondent brought a suit against th@
-State of Uttar Pradesh and impleaded three other
defendants who were, at the material time. in the
service of the State. Defendant No. 3 was a Horticulturist in the Department of Agriculture. He negotiated
with the plaintiff for storing Government potatoes in a
cold storage which belonged to the plaintiff. It was
.agreed that the Government potatoes would be sent for
storage and the plaintiff would be entitled to charge at a
certain rate per maund. It was understood that 4,000
maunds of potatoes would be sent for storage. However, no potatoes were sent although the plaintiff had
reserved the requisite space in the storage which remained
unoccupied
during
the
season.
It appears that
defendant No. 3 A. P. Gupta was acting on behalf of
Srivastava defendant No. 2 who was Deputy Director,
Horticulture. Both these defendants were acting upon
instructions from Sri Ram Krishna defendant No. 4 Who
was Assistant Development Commissioner, Planning,
Lucknow. The suit was therefore filed against the State
and the other three defendants to recover the storage
·charges amounting to Rs. 21,000/-.
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U.P. STATE V. MURARI LAL (Grover, J.)
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Although all the defendants raised a common plea
th<tt there was no contract between the parties for the
storage of potatoes and that the entire matter remained
at the stage of negotiations the real plea taken on behalf
of the State was that no contract had been entered into in
accordance with Art. 299 (I) of the Constitution. The
trial court uph~ld the objection of the State and dismissed the suit against it but it held the other defendants
jointly liable for the storage charges. The High Court
on appeal by the defendar:
et aside the decree against
defendants
Nos. 2 and 4 but maintained it against
defendant No. 3. No appeal, however, was filed by the
plaintiff against the State. As the judgment of the High
Court proceeded mainly on the provisions of sub-s.
(3) of s. 230 of the Contract Act the whole of that section
may be set out :-
S. 230. "In the absence of any contract to that
effect an agent cannot personally enforce
contracts entered into by him on behalf
of his principal, now is he personally
bound by them.
Such a contract shall be presumed
to exist in the following cases:-
(!) Where the contract is made by an agent for
the sale or purchase of goods for a merchant
resident abroad ;
(2) Where the agent does not disclose the name
of his principal;
(3) where the principal, though disclosed, cannot
be sued.·
According to the High Court the entire transaction had
been entered into by the defendant on behalf of the
Government. As the State Government was not liable
by virtue of Art. 299 of the Constitution s. 230 (3) would
be applicable and defendant No. 3, who was apparently
acting as an agent of the State Government, would
become pers'Onally liable under the contract. Certain
observations
in
Chatturbhuj
Vithaldas
Jasani v ..
Moreshwar Parshram & Others (1) appear to lend support
to this view. In that case also no formal contract had been
(1) [1954] S.C.R. 817.
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SUPREME COURT REPORTS
[1972] 1 S.C.R .
·entered into as required by Art. 299 (1) of the ConsA
titution. The court observed that the Chairman of
the Board of Administration had acted on behalf of the
Union Government and his authority to contract in
that capacity had not been questioned. Both sides
acted in the belief and on the assumption that the goods
were intended for Government purposes. The only
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·flaw was that the contracts were not in proper form and
because of this technical difficulty the principal could not
have been sued. But that was just the kind of case that
s. 230 (3) of the Indian Contract Act was designed to
meet. The Government might not be bound by the
contract but it was very difficult to say that such conc
tracts were void and of no effect. There would be
nothing to prevent ratification especially if that was for
the benefit of the Government . However, in a subsequent decision in State of West Bengal v. M/s B. K .
. Monda! and sons, (1) GaJendragadkar J., as he then was,
delivering the majority judgment of the Constitution
Bench said at page
885 with reference to the above
·Observation:
"The contract which is void may not be capable
of ratification, but, since according to the Court
the contract in question could have been ratified
it was not void in that technical sense. That is all
that was intended by the observation in question.
We are not prepared to read the s<id observation
or the final decision in the case of Chatturbhuj
as supporting the proposition that notwithstanding the failure of the parties to comply with Art.
299 (1) the contract would not be invalid. Indeed,
Bose, J., has expressly stated that such a contract
cannot be enforced against the Government and is
not binding on it."
The effect of the reference to s. 230 ~3) of the Contract
Act in Chatturbhuj's case (2) was not directly considered
but in a large number of subsequent decisions this ·
Court has taken the view that the provisions of Art.
299 (1) (Corresponding to s. 175 (3) of the Go.vernment
of India Act 1935) are mandatory and contam a prohibition against a contract being
entered
into
1(1) [1962] Supp. 1 S.C.R. 876.
(2) [1954] S, C. R. 8\7,
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U.P. STATE v. MURARI LAL (Gro\'er, J.)
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except in the manner prescribed by the aforesaid provisions. We need only refer to the recent judgment
in Mulamchand v. State of Madhya Pradesh (1). After
referring to the earlier decisions Ramaswami, J. observed
at page 221 :-
"The principle is that the provisions of s. 175 (3)
of the Government ofindia Act, 1935 or the corresponding provisions of Art. 299 (I) of the Constitution of India are mandatory in character and the
contravention of these provisions nullifies the contracts and makes them void.
There is no question
of estoppel or ratification in such a case."
It is clear that the observations in Chatturbhuj's case(2)
have been regarded either as not laying down the law
correctly or as being confined to facts of that case.
The consensus of opinion is that a contract entered
into without complying with the conditions laid down
in Art. 299 (l) is void. If there is no contract in the
eye of the law it is difficult to see how s. 230 (3) of the
Contract Act would become applicable.
Although the High Court did not rely on s. 235 of
the Contract Act the trial court had held that the defendants had no authority to enter into a contract on behalf
of the State Government but still they purported to do
so. There was an implied warranty of authority which
had to be presumed and the plaintiff Was entitled to
receive compensation for breach of that warranty under
s. 235 of the Contract Act. Section 235 provides that
a person untruly representing himself to be the authorised agent of another, and thereby inducing a third person to deal with him as such agent, is liable, if his alleged
employer does not ratify his acts, to make compensation
to the other in respect of any loss or damage which he
has incurred by so dealing. The High Court did not
base its decision on the above section. But it seems that
s. 235 also can become applicable only if there is a valid
contract in existence. This appears to follow from
the ')Vords "if his alleged employer does not ratify his
acts." The contract should thus be such that it is
(I) [1968] 3 S.C.R. 214.
(2) [!954] S.C.R. 817.
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SUPREME COURT REPORTS
[1972] l S.C.R.
capable of ratification. ·In; the present case where!the'contract was entered into ·without complying with th~ requirements of Art. 299 (1) of the Constitution the question
of ratification could not arise
because on the
view
which has already been followed such a contract is void
and is not capable of ratification. However, we do
not wish to express any final opinion on the applicability
of s. 235 of the Contract Act to cases where the contract
suffers from the infirmity that the requirements of Art.
299 (1) of the Constitution have not been complied with.
The reason is that before the High Court no contention
appears to have been advanced on behalf of the plaintiff
based on s. 235 of the Contract Act nor has the plaintiff's
counsel chosen to satisfy us that even ifs. 230 (3) was not
applicable the decree should be sustained on the ground
that relief could be granted by virtue
of s. 235
of the
Contract Act.
The appeal thus succeeds and the judgment and
decree of the courts below are hereby set aside and the
suit of the plaintiff is dismissed. In the circumstances
of the case the parties are left to bear their own costs
throughout.
G.C.
Appeal allowed
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