A.P. Shah, J.@mdashThe petitioners are the owners of commercial units on 5th, 6th and 7th floor of Arun Chambers, Tardeo, Mumbai. The 1st respondent is the State of Maharashtra. In or about 1968 the 1st respondent was in need of accommodation for housing Industrial Court and Labour Court and the offices of Wage Board. By letter dated June 1, 1968 of the Secretary, Labour and Industrial department addressed to the President of Industrial Court, Mumbai directed him to take from the then owners Ishwardas Haridas Bhatia an area of 24,684 sq. ft. in Arun Chambers at the monthly rent of Rs. 1.60/- paise per sq. ft. on the terms and conditions recorded in the said letter. The proposed lease was for a period of 5 years with the option to the Government to renew for another 5 years. However, it is an admitted position that no lease was executed in writing although several drafts of lease deed were exchanged between the parties. The 1st respondent is thus occupying the said premises without any written agreement and/or lease deed from the owners of the premises. The original owners of the premises Ishwardas Haridas Bhatia sold the commercial units to the present petitioners under diverse agreements and they are the assignees and transferees of the said units which are now in occupation of the 1st respondent.
2. It appears that on December 7, 1972 the Registrar of Industrial Court addressed a letter to Ishwardas Haridas Bhatia for renewal of the lease of the premises, for a further period of five years. No lease was, however, executed pursuant to the said letter. It appears that thereafter drafts of lease deed were exchanged even in 1975 but no lease deed was executed. In 1991 again the Registrar of the Industrial Court wrote to the owners for finalizing the draft lease and suggesting additional terms and conditions and inquiring about the names and addresses of the unit holders. No lease was however, finalized. On June 14, 1994 the Registrar of the Industrial Court wrote to the unit holders that the Executive Engineer, Public Works Department, Mumbai by his letter dated May 24, 1994 has issued reasonable rent certificate at Rs. 13.75/- per sq. ft. excluding the electric charges, water charges, and municipal taxes. However, the 1st respondent continued to pay rent at the old rate i.e. Rs. 1.60 per sq. ft. In or about May 1999 the Industrial Court, Labour Court and Wage Boards were shifted to Bandra, Mumbai and at present the premises are occupied by some other government departments. We may mention that two of the unit holders filed petitions in 1990 whereas the rest of the unit holders have filed a petition in 1999. The main contention raised on behalf of the petitioners is that under Article 299(1) of the Constitution the State Government can only make written contract to be executed in the name of the Governor of Maharashtra in the manner laid down in Article 299(1). There cannot be implied contract of lease between the lessors and the lessee and in the absence of contract in accordance with Article 299(1), the transaction is void ab-initio and therefore the State Government is liable to vacate the premises and restore the property to the petitioners. The petitioners are also seeking a direction to the State Government to pay damages/compensation at the rate of Rs. 13.75/- per month per sq. ft. at least from the date of letter of the Executive Engineer dated May 24, 1994.
3. On behalf of the petitioners the learned counsel Mr. E.P. Bharucha, Mr. Cama and Mr. Jagtiani strenuously urged that there is no completed, binding and enforceable contract between the State of Maharashtra and the unit holders. The learned counsel submitted that the contract for lease was in exercise of executive authority of the State. The contract had therefore under Article 299(1), (a) to be expressed to be made by the Governor; (b) to be executed on behalf of the Governor; and (c) to be executed by the officers duly appointed in that behalf and in such manner as the Governor may direct or authorize. No formal contract was however, executed by the State Government and the contract is therefore null and void. Consequently the State Government is liable to restore the possession of the premises to the unit holders and to pay damages at the rate of Rs. 13.75/- per sq. ft. as fixed by the Executive Engineer of the P.W.D. Mumbai from May 1994. The learned counsel relied upon various decisions of the Supreme Court in support of their case. An alternate contention was also raised that the proposed lease was for a period exceeding one year and, therefore, required registration. In reply Mr. Dixit, learned counsel appearing for the respondents submitted that it was not a case of oral lease but that there was correspondence between the parties showing concluded written contract of lease. In any event according to Mr. Dixit a contract entered into without complying with the requirement of Article 299(1) of the Constitution is not void for all purposes and it can be taken into consideration and looked into for collateral purpose. The contract can be said to be executed validly for that purpose. The submission of Mr. Dixit is that the tenancy being a monthly tenancy can be oral because section 107 of the Transfer of Property Act permits them to be oral and, therefore Article 299(1) is not attracted and such a tenancy is protected by the Bombay Rent Act.
4. Before we examine the relevant authorities on the provisions of Article 299(1) we will deal with the question whether the lease in question requires registration. u/s 107 of the Transfer of Property Act, a lease of immovable property from year to year, or for any term exceeding one year, or reserving yearly rent, can be made only by registered instrument. All other leases of immovable property may be made either by registered instrument or by oral agreement accompanied by delivery of possession. In this case there is no dispute that the rent of the premises was being paid monthly and the rent was not reserved yearly. There is also further no dispute that the lease was accompanied by delivery of possession. It is therefore clear that the lease in question is a monthly lease and not a lease for any term exceeding one year and, therefore registration is not required. Thus only two questions fall for determination. The first is whether the contract between the parties is hit by Article 299(1) of the Constitution. The second is if the contract is void for non compliance of Article 299(1), whether the petitioners are entitled to claim possession and damages.
5. It is now well settled that the provision of Article 299 of the Constitution which are mandatory in character require that a contract made in the exercise of the executive power of the Union or of a State must satisfy three conditions viz. :
i) it must be expressed to be made by the President or by the Governor of the State as the case may be; ii) it must be executed on behalf of the President or the governor as the case may be; and
iii) its execution must be by such person and in such manner as the President or Governor may direct or authorize. Failure to comply with these conditions nullifies the contract and renders it void and unenforceable. See
6. It will also be useful to refer to the judgment of the Supreme Court in
"There is no question of estoppel of ratification in such a case. 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 of India have not been enacted for the sake of mere form but they have been enacted for safeguarding the Government against unauthorized contracts. The provisions are embodied in section 175(3) of the Government of India Act and Article 299(1) of the Constitution of India on the ground of public policy -- on the ground of protection of general public - and these formalities cannot be waived or dispensed with. If the plea of the respondent regarding estoppel or ratification is admitted that would mean in effect the repeal of an important constitutional provision intended for the protection of the general public. That is why the plea of estoppel or ratification cannot be permitted in such a case.".
7. This principle was reiterated by a three judge Bench of the Supreme Court in
8. In a recent judgment in
"As found earlier, there is no signed agreement by a duly competent officer on behalf of the appellant. The doctrine of "indoor management" cannot be extended to formation of the contract or essential terms of the contract unless the contract with other parties is duly approved and signed on behalf of a public undertaking or the Government with its seal by an authorized or competent officer. Otherwise, it would be hazardous for public undertakings or Government or its instrumentalities to deal on contractual relations with third parties".
9. In the present case no contract was executed in writing between the State of Maharashtra and the owners of the premises. Reliance was placed by Mr. Dixit on the letter dated June 1, 1968 from the Industrial and Labour department to the President, Industrial Court and the letter of December 7, 1972 from the Registrar, Industrial Court to the original owners Ishwardas Haridas Bhatia to contend that these letters coupled with the fact that the State Government was put in possession of the premises shows that there was a concluded contract between the parties. Even assuming that a fair reading of the correspondence shows that the contract was entered into between the State of Maharashtra and Ishwardas Haridas Bhatia, there is nothing to show that the Secretary, Labour and Industrial Court was authorized to enter into the contract on behalf of the State Government and that the contract was expressed to be made in the name of the Governor. Nothing has been placed before us to establish that the Secretary, Labour and Industrial department was legally authorized to enter into such contract on behalf of the Government nor do the documents show that the agreement was expressed to be made in the name of the Governor. Letter dated June 1, 1968 did not purport to emanate from the Governor. At best it was issued under the directions of the Minister. We therefore find it difficult to accept the contention of Mr. Dixit as it would make the provisions of Article 299(1) completely nugatory. The contract in question is not in full compliance with Article 299(1) and therefore it is not a contract at all and cannot be enforced either by the Government or by the petitioner as a contract.
10. We are also not impressed by the submission of Mr. Dixit that the contract in the present case being a monthly tenancy can be oral because section 107 of the Transfer of Property Act permits them. When Government is a party to the contract the question to be considered is not whether general statute such as Transfer of Property Act or Contract Act permits a contract in a particular form but whether the contract is in compliance with the mandatory provisions laid down in that behalf by the fundamental statute as such provisions stand superimposed in general law and have to be satisfied in addition to the requirement of ordinary law. In the present case it is not disputed that there was no contract as required under Article 299(1). The position therefore is that no contract exist in the eye of law. Further in view of the mandatory terms of Article 299(1) no implied contract would be spelt out between the Government and the owners of the units.
11. This brings us to the second question i.e. whether the petitioners are entitled to recover possession of the premises and claim damages from the State Government. In the light of our finding that there was no contract in conformity with Article 299(1), the State Government is bound to restore the possession of the premises to the owners i.e. the petitioners herein. Surely the State cannot take benefit of unenforceability of the contract on account of non-compliance of the provisions of Article 299(1) in order to remain in perpetual possession of the property belonging to the petitioners, the possession of which was handed over to the State with intention to create a lease. Of course the petitioners will not be entitled to any compensation or damages for breach of the contract because there was no contract lawfully entered into between the parties. However, the petitioners would be entitled to claim damages/ compensation from the date of filing of the petitions. Only two unit holders approached this Court in 1990 and the rest of the unit holders filed the petition in 1999. The case of the unit holders is that the rent of Rs. 1.60/- per month per sq. ft. which was fixed earlier is ridiculously low and even society''s charges are far more that the rent paid by the State Government and consequently the petitioners had to pay society''s charges from their own pocket. The petitioners therefore contend that they are entitled to damages at the rate of Rs. 13.75/- per month per sq. ft. as certified by the Executive Engineer by his letter dated May, 24, 1994 as reasonable rate of rent. In the circumstances of the case we feel that the ends of justice would be met if the State Government is directed to pay damages at the rate of Rs. 6/- per month per sq. ft. from September 1, 1999.
12. For the reasons set out hereinabove, we allow the petitions and direct the State Government to hand over vacant possession of the premises to the petitioners within three months from today. The State Government shall pay to the petitioners damages at the rate of Rs. 6/- per month per sq. ft. from September 1, 1999 till delivery of possession.
13. Rule is made absolute accordingly with no order as to costs. All the parties concerned to act on the ordinary copy of this order duly authenticated by the Private Secretary of this Court.
