1. In the suit out of which this appeal arises the plaintiff alleged that the State of Bihar required bricks, Jhama and brickbats for the construction of (1) Muzaffarpur-Hajipur Road, (2) Muzaffar-Border Champaran-Sagauli Road, (3) Buildings at Muzaffarpur, (4) Buildings at Darbhanga, and (5) Buildings at Lohata (Motihar). The plaintiff offered tenders in response to the notification by the Public Works Department for supply of bricks etc. for the execution of the aforesaid schemes. The tenders of the plaintiff were accepted and accordingly bricks were laid and the necessary process for the supply of materials was taken in hand by the plaintiff. It is said that one of the terms of the contract between the parties was that the Public Works Department would arrange for the supply of the proper quantity of coal for burning the bricks in various kilns. The defendant, however, failed to fulfil this part of the contract with regard to the supply of the requisite quantity of coal.
As a result of this the bricks were not burnt and a huge quantity of imburnt bricks was damaged and destroyed by the rains which caused considerable loss to the plaintiff. The plaintiff, therefore, brought the suit claiming damages for breach of contract. The plaintiff also made an additional claim for the price of burnt bricks which were actually supplied to the defendant, but the price of which was not paid. The suit was resisted by the defendant mainly on the ground that the contracts were void as they did not comply with the requirements imposed by Section 175(3) of the Government of India Act and the plaintiff cannot be granted damages For breach of such contracts. With regard to the claim of the plaintiff for the price of the burnt bricks actually supplied to the Government, the defence was that the amount has already been paid. The suit was dismissed by the learned Subordinate Judge of Muzaffarpur and the plaintiff preferred an appeal to the High Court against the decree and judgment of the learned Subordinate Judge.
The appeal to the High Court was heard by Misra and Anant Singh, JJ. It was argued on be half of the appellant that the provisions of Section 175(3) of the Government of India Act were not mandatory in character and it is open to the State Government to waive the irregularities and to ratify the contracts. It was contended that the plaintiff was entitled to damages from the defendant for its failure to supply the requisite quantity of coal and the consequent loss to the plaintiff with regard to the huge quantity of unburnt bricks destroyed by the rains. With regard to the claim of the plaintiff for the price of the burnt bricks actually supplied to the Government, the argument was that the finding of the learned Subordinate Judge was erroneous and the plain tiff has not been paid the price of the fully burnt bricks actually supplied. In support of these contentions counsel on behalf of the plaintiff relied upon the decision of a Division Bench of the High Court in State v. K. T. and Brothers Ltd. ILR Pat 1067 where it was held that non-compliance of the formalities of Section 175(3) of the Government of India Act 1935, only rendered the agreement between the parties unenforceable and not void.
It was also held by that Bench that such a contract might be ratified by the Government, which ratification may not be in accordance with the provisions of Section 175(3) of the Government of India Act. Reliance was also placed on behalf of the appellant on the observations of Bose, J. in
In view of these conflicting decisions the learned Judges hearing the First Appeal have formulated the following questions of law for decision by the Full Bench:
"(1) Whether a contract with the Union Government or the State Government made without complying with the formalities of Section 175(3) of the Government of India Act, 1935, or Article 299(1) of the Constitution, of India, is void or merely unenforceable?
(2) Whether such a contract could be ratified at a subsequent stage by the Government?
(3) Whether the Government can be made liable to compensate the person delivering any goods or rendering any service in pursuance of such a contract the benefit of which has been enjoyed by the Government"?
2. After hearing learned counsel for both the parties we consider that the third question referred to the Full Bench should be slightly modified in the following manner in order to bring out the real point in controversy between the parties:
"If the contract is void and not merely unenforceable, is the Government liable u/s 70 of the Indian Contract Act to compensate the person delivering any goods or rendering any service in pursuance of such a void contract the benefit of which has been enjoyed by the Government?"
3. After the reference was made to the Full Bench there have been three decisions of the Supreme Court
The same principle has been reiterated by the Supreme Court in the later case, Civil Appeal No. 286 of 1958, D/- 5-12-1961:
If the plea of the appellant 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. But if goods are supplied or if services are rendered in terms of the void contract, the provisions of Section 70 of the Indian Contract Act may be applicable. It has been held by the Supreme Court in Civil Appeal No. 286 of 1958, D/- 5-12-1961:
When these conditions are satisfied, Section 70 imposes upon the latter person the liability to make compensation to the former in respect of, or to restore, the thing so done or delivered. It was pointed out by Gajendragadkar, J. that in a case falling u/s 70 the person doing something for another or delivering something to another cannot sue for the specific performance of the contract, nor ask for damages for the breach of the contract, for the simple reason that there is no contract between him and the other person for whom he does something or to whom he delivers something. So where a claim for compensation is made by any person against another u/s 70, it is not on the basis of any subsisting contract between the parties (sic-but?) a different kind of obligation. In my opinion, the juridical basis of the Obligation in such a case is not founded upon a contract or tort but a third category of law, namely, quasi-contract or restitution. In Fibrosa v. Fairbaim 1943 AC 32 at p. 61, Lord Wright has stated as follows:
"....any civilised system of law is bound to provide remedies for cases of what has been called unjust enrichment or unjust benefit, that is, to prevent a man from retaining the money of, or come benefit derived from, another which it is against conscience that he should keep. Such remedies in English Law are genericaliy different from remedies in contract or in tort, and are now recognised to fall within a third category of the common law which has been called quasi-contract or restitution."
In Nelson v. Larholt (1948) 1 KB 339 Lord penning has stated the legal position in the following manner :
"It is no longer appropriate to draw a distinction between law and equity. Principles have now to be stated in the light of their combined effect. Nor is it necessary to canvass the niceties of the old forms of action. Remedies now depend on the sub-stance of the right, not on whether they can be fitted into a particular framework. The right here is not peculiar to equity or contract or tort, but falls naturally within the important category of cases where the court orders restitution if the justice of the case so requires."
4. In view of the principles laid down by the Supreme Court we are of opinion that the questions of law referred to the Full Bench must be answered in the following manner :
(1) A contract with the Union Government or the State Government made without complying with the formalities of Section 175(3) of the Government of India Act, 1935 or Article 299(1) of the Constitution of India, is a void contract and not merely unenforceable.
(2) Such a void contract cannot be ratified at a subsequent stage by the Government. There is no question of estoppel or ratification with regard to a contract of this description.
(3) If the goods have been delivered or services have been rendered to the Government in pursuance of such a void contract, then an obligation is imposed upon the State Government u/s 70 of the Indian Contract Act to make compensation to the person delivering the goods or rendering the services, provided the conditions imposed u/s 70 of the Indian Contract Act are satisfied, as pointed out by the Supreme Court in State of Went Bengal v. B. K. Mondal and Sons (Civil Appeal No. 286 of 1958, decided on the 5th December, 1961):
Let the records be placed now before the Division Bench for being dealt with in accordance with the answers given above.
