F.J Coltman, with B.J Desai, for the plaintiffs.Sir Jamshed Kanga, Advocate General, with M.L Manekshaw for the defendant.Coltman. We have here all the elements of a contract. An “act of State” in its technical meaning is not applicable to any transaction between a Sovereign and its own subject within its own territory. It is an expression used with reference to the acts of a Sovereign against foreigners. According to English law, in time of war, there may be an act of State against an English subject. The defendant applies the term “act of State” to some act outside the jurisdiction of the municipal Courts. The Government of India Act has always provided for a subject to sue the Secretary of State in cases of contracts. You cannot sue the Crown in England for a tort, but you can sue the individual Public Officer, who has committed the wrong. In England you cannot sue the Crown in contract, but you can present a Petition of Rights. The correspondence in this case shows a contract.The next objection raised is that there is no consideration. Section 61(q) of the City of Bombay Municipal Act, 1888, must be construed reasonably, according to the resources at the Municipality's disposal. The Government realised that the Corporation was doing what its resources permitted for primary education for the city. But as that was not enough, Government offered to share half the expenditure for any additional provisions for primary education which the Municipality may make. The Corporation had a vested right under the old section 62B of the City of Bombay Municipal Act to receive one-third of the expenses for free or free and compulsory education.I say there was consideration for this contract. The Municipality agreed to give up the statutory right which was vested in it under the old section 62B of the City of Bombay Municipal Act and to the amendment of section 39 on the faith of the contract.The next question is, is this contract void for uncertainty? Is it uncertain because it does not qualify the amount to be paid by the Government? The amount each year is unascertainable in advance but in fact the amount was ascertained and paid for some years. The Government of India Act, 1915, was applicable at the time of the contract. The amendments of 1919 are not applicable to this contract. Part III of the Act deals with public contracts. Contracts entered into with the Secretary of State are exactly on the same footing as contracts between private individuals (sections 29 and 30 of the Government of India Act). Sub-section (2) of section 30 provides for the enforcement of contracts. Section 32 provides for the Secretary of State to sue and to be sued. The contract binds the Secretary of State and a decree passed against him is enforceable against the revenues of India.[Mirza Who do you say was the contracting party on behalf of the Secretary of State?]The Secretary to Government was authorised to enter into contracts on behalf of the Secretary of State. (See the Bombay Government Gazette, Part I, April 4, 1895, p. 397, G.R No. 2213, and the Bombay Government Gazette, Part I, dated June 26, 1913, p. 986, head “n”). The sixth issue is illusive. It does not cover any new ground. There is no plea that this particular act of the Secretary of State was ultra vires. The Secretary of State could only contract under the Government of India Act. The Secretary to Government signed this offer which is an “instrument” referred to in the Bombay Government Gazette.The next point is that this contract has been acted upon. The Privy Council decision in Mahomed Musa v. Aghore Kumar Ganguli recognises the doctrine of part performance in the case of inchoate contracts. For four years this contract has been acted upon. The Municipality has altered its position in various ways.The other objection is under the City of Bombay Municipal Act, sections 69, 70 and 71. It is a highly technical objection. The matter was placed before the Corporation which passed a resolution which was fowarded to the Secretary to the Government. Mahomed Musa's case is a sufficient answer. The City of Bombay Municipal Act merely says that the contract shall not be binding on the Corporation if it is not in proper form. The section does not say that the contract will be void or that it will not be enforceable by the Corporation.[Mirza J. You say it is a unilateral contract.]Yes. The contract is voidable. It was for the defendants to rescind or avoid the contract (section 64 of the Indian Contract Act), but they have not done so. The contract is enforceable at the option of the Corporation, although section 71 of the City of Bombay Municipal Act says that it will not be binding on the Corporation.Section 62(c)(1) of the City of Bombay Municipal Act shows that the management was in the Schools Committee and not in the Corporation. As regards aided schools, the Government is supreme; as regards Municipal Schools, the Schools Committee is supreme. The Schools Committee is a separate entity from the Corporation (section 39).As far as the Government of India Act is concerned our contract is in order. The only person who could enter into this agreement on behalf of the Secretary of State was the Secretary to Government. It is a unilateral contract. It has been held in Abaji Sitaram v. Trimbak Municipality that where the consideration is executory an action will lie though the formality of the statute has not been observed. This decision governs the present case.The defendant says that section 72D of the Government of India Act makes the contract void, because the grants are subject to the vote of the legislature. This plea is bad, because if there is a contract, what is bound are the revenues of India and the Secretary of State, and it does not matter whether the legislature refuses the grant. Section 130 of the Government of India Act, 1915, saves contracts entered into before 1919. Section 32(4) of the Government of India Act provides for all costs to be borne by the revenues of India.Sir Jamshed Kanga, refers to Bombay Act III of 1907. The preamble is important. Refers to the City of Bombay Police Charges Act. Section 39(7) of the City of Bombay Municipal Act replaced section 8 of the City of Bombay Police Charges Act. Section 61(q) of the City of Bombay Municipal Act was amended by section 9 of the Bombay Police Charges Act. Section 62B and C of the City of Bombay Municipal Act were added by section 10 of the Bombay Police Charges Act. Refers to section 76A of the City of Bombay Municipal Act. Section 89E and F of the City of Bombay Municipal Act were amended by section 14 of the Bombay Police Charges Act. Section 461(u) of the City of Bombay Municipal Act empowers the Corporation to make by-laws for the performance of functions by the Schools Committee.In 1916-1917, it was the statutory duty of the Municipality to make suitable provisions for and maintain municipal primary schools and the liability of the Government was to make building grants [section 61(q)]. If, at the instance of the Government, primary education was introduced, the Government was to pay one-third of the expenses. See section 62B of the City of Bombay Municipal Act.The grant is a voluntary act of the Government. There can be no agreement to make a gift. Such an agreement would be void. The Government have power to allocate provincial revenues. It is a sovereign act on the part of the Government. There was no consideration moving on the part of the Corporation. There was no undertaking by the Corporation at all to expend large sums on primary education. The term “large sum” is too uncertain and vague. Who is to determine the “large sum”? There is no mutuality. There is a pure voluntary offer of a grant-in-aid. The parties were not ad idem as to the terms of the agreement. The counter offers were rejected by the Government. There must be mutuality in order to make a contract enforceable. There was no consideration. If a person promises to do what he is bound to do by law, it would not constitute a consideration on that person's part.Section 14 of Bombay Act III of 1907 adds section 89(e) and (f) to the City of Bombay Municipal Act. Section 61(q) of the City of Bombay Municipal Act casts the burden of maintaining schools on the Corporation. The Corporation was under a legal duty to provide for primary education. There was no promise given by the Corporation to do anything. The definition of “consideration” in section 2(d) of the Indian Contract Act is not satisfied. Section 62B of the City of Bombay Municipal Act was no longer necessary after what the Corporation offered. It became nugatory, because the Corporation was not introducing free or free and compulsory primary education “at the instance of Government”. Section 3 of Bombay Act XV of 1920 empowers the Corporation to make primary education compulsory by a notification. Section 18 of Bombay Act XV of 1920 enables the Government to make rules. The deletion of section 62B of the City of Bombay Municipal Act was made in 1920 long after the alleged contract and without taking any consent of the Corporation. The origin of the transaction shows that it a “voluntary grant” by the Government. It was a “subvention” made by the Bombay Government to the Bombay Municipality.The term “subvention” means a bounty, a voluntary payment without consideration. (Webster's New International Dictionary, Vol. II, p. 2072).Bombay Act XV of 1920 deals with primary compulsory education. The principles applicable to District Municipalities, viz., those of voluntary grants-in-aid, are applicable to the Bombay Municipality. There was no statutory liability on the Government in respect of these grants.As to issue No. 4, the documents do not show any undertaking by the Corporation, and if an undertaking is proved, it is too vague and uncertain and the contract would be void for vagueness of uncertainty (section 29, Indian Contract Act). If the Government came to Court to enforce the alleged contract, they would have been out of Court, because the agreement to spend “large sums of money” by the Corporation for primary education was too uncertain for enforcement.Issues 7 and 8. The Municipality never asked for a formal contract to be entered into between the Corporation and the Government, when the latter refused to incur Secretary of a statutory liability. Section 30 of the Government of India Act is imperative. It contains a mandatory provision. The contract must be on behalf and in the name of the Secretary of State. The case of Kessoram Poddar & Co. v. Secretary of State for India is an authority for the proposition that a contract not in the name of the Secretary of State is no contract. The Gazette of India, 1913, supp., p. 1195 (General Statutory Rules and Orders issued by the Government of India, Vol. I, p. 98) states that execution of contracts under section 30(2) of the Government of India Act must be executed by certain public officers. [See “n” (18) which requires the contract, if any, to be signed by the Director of Public Instruction, Bombay.] The Bombay Municipal Corporation constitute “managers of educational institutions” referred to in clause “n” (18) of the above G.R [See sections 39(10), 4, 61(q), and 89(e), of the City of Bombay Municipal Act]. Section 62E of the City of Bombay Municipal Act is not relevant. It is the Corporation which manages the primary schools through its own Schools Committee. Webster's Dictionary, Vol. I, p. 1119, defines “instrument”. It must be a formal document. Wharton's Law Lexicon, 13th Edn., p. 453, defines an. “instrument” as a formal legal writing. The plaintiffs say that this alleged contract “comes under the beading ‘n’ (1) of the G.R above”. But that heading refers to “deeds and instruments”. My submission is that the alleged contract is neither a deed nor an “instrument”. Mahomed Musa's case has been distinguished in the latest Privy Council case of Ariff v. Jadunath Majumdar.The Transfer of Property Act was not in force at the time of the mortgage referred to in Mahomed Musa's case. The dicta at p. 8 of the report of this case are dissented from in Ariff v. Jadunath Majumdar. The Government of India Act, 1915, requires that the contract must be on behalf and or in the name of the Secretary of State and the mandatory provisions of section 30 cannot be nullified by the equitable doctrine of part performance. This is not a suit for specific performance of the alleged contract.The provisions of the City of Bombay Municipal Act which are mandatory (sections 69-71) are not complied with. I rely on section 69A and C. The contract must be made by the Commissioner, and, in the case of a contract for Rs. 5,000 or more, with the previous consent of the Standing Committee. The Corporation has no power to enter into a contract. It has been argued by the other side that the alleged contract is not enforceable against the Corporation, but nevertheless the Corporation can sue to enforce it. But the Appeal Court has held that if a contract is not binding on one party, it is not binding on the other if the requirements of a statute are not satisfied. See Ahmedabad Municipality v. Sulemanji and Raman Chetti v. The Municipal Council of Kumbakonam. I say that the alleged contract in not voidable. It is void. There cannot be a one-sided contract. A contract must bind both parties. The Corporation is the creature of the statute which creates it. Sections 69, 70 and 71 of the City of Bombay Municipal Act are mandatory. The decision of the House of Lords in Young & Co. v. Mayor, & c., of Royal Leamington Spa lays down that the statute must be followed and the doctrine of executory consideration or of part-performance cannot be invoked to override the provisions of a statute. In Hunt v. Wimbledon Local Board it was held that an executory consideration could not nullify the mandatory provisions of a statute. The dictum in Abaji Sitaram v. Trimbak Municipality is obiter and this has been so held in Municipality of Sholapur v. Abdul Wahab. It is in part overruled by Chunna Mal-Ram Nath v. Mool Chand-Ram Bhagat and impliedly overruled by Ariff v. Jadunath Majumdar. It has been dissented from in Ramaswamy Chetty v. The Municipal Council, Tanjore and Radha Krishna Das v. The Municipal Board of Benares. The decision in Abaji Sitaram v. Trimbak Municipality is not binding on this Court because it is not a decision on the Government of India Act. It has no application to the Government of India Act or the City of Bombay Municipal Act. Abaji Sitaram's case is adversely criticised by Sir Frederick Pollock in Pollock and Mulla's Contract Act, 6th Edn., p. 375.You cannot enlarge the words of a statute by the application of English doctrines: Chunna Mal-Ram Nath v. Mool Chand-Ram Bhagat.Issues 5 and 6. The acts disclosed both in the correspondence and the G.O No. 499, dated February 10, 1919, constitute acts of State. The liability of the Secretary of State under the Government of India Act is the same as that of the East India Company. The test to apply is: What is the benefit to the State?The Government orders in this case, which are alleged to constitute a contract, are executive acts of the Government of Bombay over which municipal Courts have no jurisdiction. 53 Geo. III, c. 155, regulated the government of India by the East India Company. In 1858 the Government of India was transferred from the East India Company to the Crown and 21 & 22 Vic. c. 106 was passed and by section 65 of that Act the liability of the Secretary of State was stated to be the same as that of the East India Company. The same provision is contained in section 32(2) of the Government of India Act, 1919. There is a clear distinction between acts done in the exercise of sovereign powers and commercial undertakings such as might be carried on by private persons. Sovereign acts are outside the jurisdiction of municipal Courts although they may result in contracts: P. & O.S.N Co. v. Secretary of State for India, Nobin Ghunder Dey v. The Secretary of State for India, McInerny v. Secretary of State for India, Kessoram Poddar & Co. v. Secretary of State for India In The Secretary of State v. Cockcraft the whole position is analysed and reviewed: Municipal Council of Vizagapatam v. Foster, The Secretary of State for India v. Hari Bhanji, and Kishen Chand v. The Secretary of State for India in Council.Is there a commercial undertaking? Are the Government deriving any benefit out of the alleged contract? The duty to provide primary education is on the Municipality. The Government are exercising their sovereign power of allocating revenues for specific purposes. The Crown would not enter into a contract which would have the effect of limiting its executive actions in the future: Rederiaktiebolaget Amphitrite v. The King. What was given by the Government was an administrative undertaking and no administrative undertaking by a Government is binding on its successor. There was no intention at any time on either side to make a contract enforceable in a Court of law. The acts were merely administrative. The correspondence reveals a mere administrative assurance being given by the Government. See Mohamed Ebrahim Molla v. Commissioners for the Port of Chittagong.(10)Issue 15. Under section 72D of the Government of India Act, in case of a transferred subject, the grant must be put to the vote of and assented to by the Provincial Legislature. If the Council throw off the grant, there is no remedy open to the Government. Section 45A of the Government of India Act, 1915, provides for the making of Devolution Rules. Pursuant to that, Devolution Rules were made on January 3, 1921. Education was made a transferred subject. (Devolution Rules, Sec. 6, Sch. II, Col. 1, item 5.) See section 49 of the Government of India Act. Section 52 of the Government of India Act provides for the appointment of Ministers. Section 72A of the Government of India Act provides for a Provincial Legislative Council. Section 72D of the Government of India Act provides for budget and voting of grants by the legislature. The Executive Government can do nothing unless the grant is assented to by the legislature.We rely on section 56(2) of the Indian Contract Act. The contract, if any, has become impossible of performance owing to the legislative changes introduced in 1919 by the Government of India Act. All the grants which we have paid have been assented to by the legislature.Section 130 of the Government of India Act has no application to issue 15. Section 30 of the Government of India Act was in force at the time of the alleged contract and it has not been repealed. The plaintiffs say that the alleged contract was entered into under section 30 of the Government of India Act.The case of Kedar Nath Bhattacharji v. Gorie Mahomed has been adversely criticised by Pollock and Mulla in their Indian Contract Act, 6th Edn., pp. 18-19. It has no application to the facts of the present case.F.J Goltman, in reply. It is not pleaded by the defendants even now that if there was a contract it is not enforceable in a Court of law because it amounts to an act of State. See Leake on Contracts, 8th Edn., pp. 6-7; The Fishmongers' Company v. Robertson.There was acceptance by us of the Government's offer: Carlill v. Carbolic Smoke Ball Company and Baldeo Prashad Sahu v. A.B Miller. There is no vagueness about the contract in suit. The remarks of Jenkins, C.J in Abaji Sitaram v. Trimbak Municipality are not obiter. The observations of Crump J. in Municipality of Sholapur v. Abdul Wahab are obiter. The cases of Ahmedabad Municipality v. Sulemanji and Young & Co. v. Mayor, & c., of Royal Leamington Spa are distinguishable. The provisions of the statute in Young & Co.'s case are mandatory and not directory.The first part of section 30 of the Government of India Act is not mandatory. The form of the contract is not mandatory. A contract may be entered into by correspondence. Section 30(1) of the Government of India Act is an enabling section. Sub-section (c) thereof is mandatory. It must be proved that the Secretary of State prescribed particular forms of contracts under section 30(1). Wharton's Law Lexicon. 13th Edn., p. 453, gives the meaning of the word “instrument” as a record. It includes a post-mark and a telegram. See The Queen v. Riley. The case of Hunt v. Wimbledon Local Board is distinguishable. The provisions there are mandatory.The doctrines of part performance and executory consideration are distinct. The case of Ramaswamy Chetty v. The Municipal Council, Tanjore, is not against me, because the section of the District Municipal Act states that the contract shall not be binding on the Municipality if it is not in the prescribed form. Raman Chetti v. The Municipal Council of Kumbakonam follows Ahmedabad Municipality v. Sulemanji. There is no restriction imposed by section 30 of the Government of India Act as to the nature of the contracts the Secretary of State for India can enter into provided they are for the purposes of the Government of India Act. The liability of the Secretary of State is not confined to that arising out of contracts. See Shivahhajan v. Secretary of State for India.The ratio decidendi of P. & O.S.N Co. v. Secretary of State for India is given in Shivabhajan's case. It is a case of torts.“… dicta by judges, however eminent, ought not to be cited as establishing authoritatively propositions of law unless these dicta really form integral parts of the train of reasoning directed to the real question decided.”: Per Viscount Haldane in Cornelius v. Phillips.The Government of India can be sued on a bond for State loan. There is no immunity of the Secretary of State from the jurisdiction of municipal Courts in cases of contracts.[Mirza, J. If the Advocate General's argument is correct, the Government of India could wipe off all the War Bonds.]Yes.Refers to Nobin Chunder Dey v. The Secretary of State for India. In that case it was held that there was no contract. Refers to Mclnerny v. Secretary of State for India. In Kessoram Poddar & Co. v. Secretary of State for India there was no contract because it was not signed by the person authorised to do so. The Secretary of State for India v. Hari Bhanji and The Secretary of State v. Cockcraft were cases of torts. Cites The Mersey Docks Trustees v. Gibbs. A corporation, although created for public purposes, is not immune from being sued in the absence of an express provision to that effect. The Secretary of State is a corporation sole, and merely because he could do something which an individual could not, that does not make his acts “sovereign” so as to oust the jurisdiction of the municipal Courts: Municipal Council of Vizagapatam v. Foster is also a case of torts. Kishen Chand v. The Secretary of State for India in Council was a case of contract. It would be absurd to say that the Secretary of State could be sued in torts but not on a contract. Refers to Rederiaktiebolaget Amphitrite v. The King. It is not alleged that the contract is ultra vires the Secretary of State. In Mohamed Ebrahim Molla v. Commissioners for the Port of Chittagong the provisions of the statute were mandatory and not directory. See Municipal Committee, Gujranwala v. Fazal Din. There is a similar case in Srirangam Municipal Council v. Bodi.Issue 15. Section 72 of the Government of India Act would not help the Secretary of State if he refused to place the grant to be made to the plaintiffs before the legislature.[Mirza, J. The Government say the legislature is supreme and they have no power over transferred subjects.]If we obtain a decree, it would be a charge on the revenues of the Government of India. The provincial revenues have not ceased to exist and so the fund out of which our grants are to be paid is still available to the Secretary of State. The Secretary of State has merely to obtain sanction of the legislature for the appropriation of revenues. Refers to section 56 of the Indian Contract Act.Refers to 33 & 34 Vic. c. 75 for the definition of “managers.” G.R Nos. 713-734, dated June 2, 1913, ??? (18), refer to agreements with “Managers of Educational Institutions in respect of Government grants-in-aid”. The Bombay Municipality are not “Managers of Educational Institutions”. The amounts payable under the agreement are not “grants-in-aid”.Sir Jamshed Kanga replied on the new authorities cited by Coltman in his reply. The case of Municipal Committee, Gujrannwala v. Fazal Din is based on section 70 of the Indian Contract Act. No implied contract is pleaded by the plaintiffs. The Government received no “benefit out of the alleged contract”. The case of The Fishmongers' Company v. Robertson has no application. The case of Srirangam Municipal Council v. Bodi is based on Lawford v. Billericay Rural Council which was a case of a common law corporation and not a statutory corporation.Here is no question of quantum meruit where the provisions of a statute are imperative.[Mirza, J. The case of Shivabhajan v. Secretary of State for India was a case of an executed contract.]Yes. Carlill v. Carbolic Smoke Ball Company is a leading case of contract by acceptance. It was the acceptance which constituted the contract. In section 30(1) of the Government of India Act the word “may” means “are empowered to”. The ratio decidendi in Kedar Nath Bhattacharji v. Gorie Mahomed is at p. 67. Under section 72D of the Government of India Act the power to make grants was taken out of the hands of the executive council and given to the Legislative Council. The Secretary of State v. Cockcraft distinguishes the case of The Mersey Docks Trustees v. Gibbs.It has been contended by the other side that under section 30(3) of the Government of India Act every contract is included. But it has been held in P. & O.S.N Co. v. Secretary of State for India Nobin Chunder Dey v. The Secretary of State for India and Kessoram Poddar & Co. v. Secretary of State for India that the provisions of the Government of India Act did not apply to “sovereign” acts.The view enunciated in P. & O.S.N Co.'s case has been accepted by Jenkins, C.J in Shivabhajan v. Secretary of State for India.This is a contract to pay grants-in-aid from provincial revenues. Such a contract cannot be entered into by private individuals. It can only be an exercise of the sovereign power.