Article 299 of the Constitution of India

Article 299 of the Constitution of India: Formalities, Enforceability, and Judicial Scrutiny of Government Contracts

Introduction

Article 299 of the Constitution of India, 1950, plays a pivotal role in the governance of contractual relations entered into by the Union and State governments. It prescribes specific formalities for the execution of government contracts, aiming to protect public interest and ensure that the state is not bound by unauthorized agreements. This article delves into the provisions of Article 299, its historical antecedents, its mandatory nature, the consequences of non-compliance, and its interplay with other legal principles such as unjust enrichment and estoppel, as interpreted and elucidated by the Indian judiciary through landmark and contemporary case law.

As astutely observed by the Supreme Court, "Article 299 only lays down the formality that is necessary to bind the government with contractual liability. It is important to note that Article 299 does not lay down the substantial law relating to the contractual liability of the Government, which is to be found in the general laws of the land."[10] The raison d'être of this provision is to safeguard public funds from being jeopardized by contracts made by unspecified public servants without the express sanction of law, acting as a shield for the government.[11]

Background and Purpose of Article 299

Article 299 of the Constitution is not a novel concept but has its roots in the preceding constitutional enactments governing British India. Similar provisions were found in Section 30 of the Government of India Act, 1919, and more directly, Section 175(3) of the Government of India Act, 1935.[11] The framers of the Constitution recognized the necessity of such a provision to ensure that contracts entered into on behalf of the government are properly authorized and documented.

The primary purposes underpinning Article 299 are:

  • Protection of Public Interest: To ensure that the State is not "saddled with liability for unauthorised contracts."[4], [18] The formalities are designed to prevent clandestine and ill-considered contracts that could be detrimental to public revenue and welfare.
  • Accountability and Transparency: By mandating a formal procedure, the Article promotes accountability in governmental dealings and transparency in the contractual process.
  • Prevention of Misuse of Authority: It acts as a check on public servants, preventing them from committing the government to contractual obligations without proper authority. As noted in State Of Punjab And Others v. M/S Om Parkash Baldev Krishan, these provisions "have not been enacted for the sake of mere form but they have been enacted for safeguarding the Government against unauthorised contracts... on the ground of public policy — on the ground of protection of general public".[15]

Essential Requirements of Article 299(1)

Article 299(1) stipulates three essential conditions that must be fulfilled for a contract to be binding on the Government:

  1. The contract must be expressed to be made by the President or by the Governor of the State, as the case may be.
  2. It must be executed on behalf of the President or the Governor, as the case may be.
  3. It must be executed by such persons and in such manner as the President or the Governor may direct or authorize.

These three conditions were explicitly reiterated by the Supreme Court in cases like K.P Chowdhry v. State Of Madhya Pradesh And Others[5], [23] and Bhikraj Jaipuria v. Union Of India.[4] The Madhya Pradesh High Court in Ram Ratan Gupta v. The State Of Madhya Pradesh And Others also affirmed these requirements.[16] The execution must not only be on behalf of the Governor but also in his name.[19]

Mandatory Nature of Article 299(1)

The judiciary has consistently held that the provisions of Article 299(1) (and its predecessor, Section 175(3) of the Government of India Act, 1935) are mandatory and not merely directory. Strict compliance with these formalities is essential for the validity of a government contract.[4], [11], [18], [23]

In Bhikraj Jaipuria v. Union Of India, the Supreme Court emphasized that the legislative intent behind Section 175(3) was that the State should not be burdened with unauthorized contracts, and thus, the provisions were enacted in the public interest, investing public servants with authority to bind the State only when acting in the prescribed manner.[4], [18] This mandatory nature implies that any deviation from the prescribed form and procedure can render the contract unenforceable against the government.

Consequences of Non-Compliance with Article 299(1)

Voidness of Contracts

A contract that fails to comply with the mandatory requirements of Article 299(1) is void and cannot be enforced against the Government.[3], [4], [6] Such a contract is considered non est in the eyes of the law, meaning it has no legal existence from its inception. The Supreme Court in Mulamchand v. State Of Madhya Pradesh held that contracts not adhering to Article 299 formalities were "void ab initio".[6] Similarly, in Chatturbhuj Vithaldas Jasani v. Moreshwar Parashram, it was established that contracts not complying with statutory requirements cannot be enforced against the Government.[3]

No Estoppel or Ratification

The doctrine of estoppel cannot be invoked against the Government to validate a contract that is void for non-compliance with Article 299(1). Similarly, such a void contract cannot be subsequently ratified by the Government.[6], [9], [15] The Supreme Court in Bihar Eastern Gangetic Fishermen Co-Operative Society Ltd. v. Sipahi Singh And Others explicitly stated that "promissory estoppel cannot override constitutional violations in state contracts"[9] and reiterated in State Of Punjab And Others v. M/S Om Parkash Baldev Krishan that "there cannot be any question of estoppel or ratification in a case where there is contravention of the provisions of Article 299(1) of the Constitution."[15] This is because the provisions are based on public policy and cannot be waived.

Personal Liability of Officers (Article 299(2))

Article 299(2) provides immunity to the President, Governor, or any person executing a contract or assurance in compliance with Article 299(1) from personal liability in respect thereof.[11] However, if a government officer purports to enter into a contract on behalf of the government without complying with Article 299(1), the contract is void against the government. The question of the personal liability of such an officer may then arise under the general principles of agency, such as Section 230(3) or Section 235 of the Indian Contract Act, 1872. The Supreme Court in State Of Uttar Pradesh And Another v. Murari Lal And Brothers Ltd. considered the applicability of Section 230(3) of the Indian Contract Act where Article 299(1) conditions were not met, suggesting potential liability for the officers if they acted without authority.[7]

Interaction with Other Legal Principles

Section 70 of the Indian Contract Act, 1872

Despite the voidness of a contract for non-compliance with Article 299(1), the Supreme Court has carved out a path for relief under Section 70 of the Indian Contract Act, 1872, which deals with the obligation of a person enjoying the benefit of a non-gratuitous act (quasi-contract or unjust enrichment). In the landmark case of State Of West Bengal v. B.K Mondal And Sons, the Court held that even if a contract with the government was not in the form prescribed by Section 175(3) of the Government of India Act, 1935 (analogous to Article 299), the contractor could be entitled to compensation under Section 70 if three conditions were met: (i) the person lawfully did something for another or delivered something to them; (ii) in doing so, they did not intend to act gratuitously; and (iii) the other person enjoyed the benefit thereof.[1] The Court clarified that Section 70 operates independently and does not nullify the constitutional requirement but prevents unjust enrichment.[1] However, in Mulamchand v. State Of Madhya Pradesh, while acknowledging the principle, restitution under Section 70 was denied due to insufficient evidence of the petitioner's fulfillment of contractual conditions.[6]

Promissory Estoppel

As discussed earlier, the dominant view of the Supreme Court is that the doctrine of promissory estoppel cannot be used to enforce a contract against the Government that is void for non-compliance with Article 299(1).[9], [15] This is because constitutional and statutory requirements cannot be overridden by estoppel. However, some High Court judgments have explored nuances. For instance, the Madras High Court in Union Of India v. R.S. Venkataraman noted instances where promissory estoppel was applied against the Government even without a formal contract under Article 299, particularly where a party altered its position based on a government promise.[27] Such applications, however, must be reconciled with the Supreme Court's stricter stance on Article 299's mandatory nature.

Arbitration Agreements

Article 299 applies to arbitration agreements if they form part of, or are themselves, contracts entered into by the Government. In Union Of India v. A.L Rallia Ram, the Supreme Court upheld the validity of an arbitration agreement that complied with the formalities of Section 175(3) of the Government of India Act, 1935.[2] Similarly, in State Of Bihar v. Karam Chand Thapar & Brothers Ltd., an arbitration agreement executed by an authorized government official was held valid.[8] More recently, in M/S GLOCK ASIA-PACIFIC LIMITED v. UNION OF INDIA, the Supreme Court clarified that while Article 299 prescribes formalities, it does not grant the Government immunity from other statutory prescriptions. Thus, even if a contract is valid under Article 299, the Government cannot claim immunity from provisions like Section 12(5) of the Arbitration and Conciliation Act, 1996, concerning the ineligibility of arbitrators.[10]

Judicial Interpretation through Key Caselaw

The jurisprudence surrounding Article 299 has been shaped significantly by judicial pronouncements. Key cases, many of which are referenced in the preceding sections, illustrate the courts' approach:

  • Chatturbhuj Vithaldas Jasani v. Moreshwar Parashram (1954):[3] Established early on that contracts not complying with constitutional formalities (then Section 175(3) of GoI Act, 1935) cannot be enforced against the Government. The case also touched upon how such non-compliance could affect disqualification under electoral laws if a candidate had an interest in such a government contract.
  • Bhikraj Jaipuria v. Union Of India (1961):[4] Emphasized the mandatory nature of Section 175(3) of the GoI Act, 1935, rendering contracts void if not compliant. It highlighted the necessity of proper authorization for officials executing contracts.
  • State Of West Bengal v. B.K Mondal And Sons (1961):[1] A landmark ruling allowing compensation under Section 70 of the Indian Contract Act for work done for the Government, even if the contract was formally invalid under Section 175(3) of the GoI Act, 1935, thereby preventing unjust enrichment.
  • State Of Bihar v. Karam Chand Thapar & Brothers Ltd. (1961):[8] Affirmed the validity of an arbitration agreement executed by a duly authorized government official under Section 175(3) of the GoI Act, 1935.
  • Union Of India v. A.L Rallia Ram (1963):[2] Confirmed that an arbitration agreement, forming part of a government tender process, was valid and binding if it met the requirements of Section 175(3) of the GoI Act, 1935.
  • K.P Chowdhry v. State Of Madhya Pradesh And Others (1966):[5], [23] Decisively ruled that Article 299(1) prohibits implied contracts with the Government and reiterated the three mandatory conditions for a valid government contract. This principle was also noted in M.A Jabbar v. The State Of A.P Industries Department (Mines) Hyd.[28]
  • Mulamchand v. State Of Madhya Pradesh (1968):[6] Reinforced that contracts not complying with Article 299 are void ab initio and that estoppel or ratification cannot cure this defect. It also discussed the application of Section 70 of the Contract Act.
  • State Of Uttar Pradesh And Another v. Murari Lal And Brothers Ltd. (1971):[7] Examined the liability of government officers under the Indian Contract Act (Sections 230(3) or 235) when a purported government contract failed to meet Article 299(1) requirements.
  • Bihar Eastern Gangetic Fishermen Co-Operative Society Ltd. v. Sipahi Singh And Others (1977):[9], [21] Strongly held that promissory estoppel cannot be invoked to enforce a government promise if it results in a contract void under Article 299. A writ of mandamus cannot compel the government to enter into or honor such a void agreement.
  • Pandit Ishwardas v. State Of Madhya Pradesh And Others (1979):[20] Held an agreement and a related surety bond unenforceable due to non-compliance with Article 299 of the Constitution.
  • State Of Punjab And Others v. M/S Om Parkash Baldev Krishan (1988):[15] Reaffirmed that there can be no estoppel or ratification in contravention of Article 299(1), emphasizing its basis in public policy.
  • Bishandayal And Sons v. State Of Orissa And Others (2000):[22], [25] Clarified that an agreement not complying with Article 299 is unenforceable. It also discussed that the plea of non-compliance, if a mixed question of law and fact, must be raised in pleadings.
  • M/S GLOCK ASIA-PACIFIC LIMITED v. UNION OF INDIA (2023):[10] Provided a contemporary perspective, stating that Article 299 prescribes formalities and does not grant immunity from other substantive laws or statutory conditions applicable to contracts, such as those in the Arbitration and Conciliation Act, 1996.

High Court judgments like Chiranji Lal Multani v. Union Of India (P&H HC)[11], State Of Rajasthan v. Raghunath Singh (Raj HC)[18], and Thakur Dan Singh Bisht v. State Of Uttar Pradesh (All HC)[19] have consistently followed the Supreme Court's interpretation regarding the mandatory nature and purpose of Article 299 and its predecessor. The Kerala High Court in Krishnan Nambiar v. Executive Engineer, Calicut highlighted the issues arising from non-execution of agreements under Article 299(1) when seeking recovery of losses.[17]

Exceptions and Nuances

While Article 299(1) is strictly construed, certain nuances exist:

  • Statutory Contracts v. Executive Contracts: Article 299 primarily governs contracts made in the exercise of the executive power of the Union or a State. If a statute itself prescribes a specific mode for entering into a contract by a statutory authority, or if the contract is a direct creation of statute, Article 299 may not apply in the same manner. The Madhya Pradesh High Court in Ram Ratan Gupta v. The State Of Madhya Pradesh And Others touched upon the argument that Article 299 might not apply to contracts entered into under statutory power.[16] The Karnataka High Court in Shimnit Utsch India Pvt., Ltd. v. State Of Karnataka observed that for non-statutory aspects of a contract that also has statutory facets, Article 299 would apply.[26]
  • Service Contracts: It is generally understood that Article 299 does not apply to the regular employment of government servants whose conditions of service are governed by statutory rules framed under Article 309 of the Constitution. However, specific contractual appointments outside these rules may fall within Article 299's ambit. The Calcutta High Court in Ranjit Kumar Chakravarti v. State Of West Bengal opined that the operation of Article 299 is limited to contracts relating to property, etc., and not necessarily to persons in regular service whose rights are laid down in the Constitution and service rules.[12]
  • Substantial Law v. Formality: As emphasized in M/S GLOCK ASIA-PACIFIC LIMITED v. UNION OF INDIA, compliance with Article 299 ensures formal validity. However, the contract must also be valid under the general provisions of the Indian Contract Act, 1872, and other relevant laws.[10] A contract formally impeccable under Article 299 can still be void or unenforceable for reasons like lack of consideration, unlawful object, or incapacity of parties.
  • Pleading Non-Compliance: In Bishandayal And Sons v. State Of Orissa And Others, the Supreme Court indicated that if the plea of non-compliance with Article 299 involves mixed questions of law and fact, it should be raised in the pleadings to allow the other party to adduce evidence.[25] However, if it is a pure question of law arising from admitted facts or documents on record, it might be permissible to raise it later.
  • No Implied Contracts: The Supreme Court in K.P Chowdhry v. State Of Madhya Pradesh And Others firmly established that Article 299(1) bars implied contracts with the government.[5], [23] Any agreement with the government must be express and adhere to the prescribed formalities.

Conclusion

Article 299 of the Constitution of India serves as a critical safeguard for public interest in the domain of government contracts. Its mandatory provisions ensure that the executive power to enter into contracts is exercised with due authorization, formality, and transparency, thereby protecting public funds and preventing arbitrary action. The judiciary, through a consistent line of interpretation, has upheld the stringency of these requirements, rendering contracts non-compliant with Article 299(1) void and unenforceable against the Government, and disallowing circumvention through doctrines like estoppel or ratification.

However, the courts have also recognized the need to prevent unjust enrichment at the expense of citizens dealing with the Government, allowing claims under Section 70 of the Indian Contract Act, 1872, in appropriate cases. The evolution of jurisprudence, including recent clarifications on the interplay between Article 299 and other statutes like the Arbitration and Conciliation Act, 1996, demonstrates the provision's dynamic yet enduring relevance. Ultimately, Article 299 strikes a balance, albeit a carefully calibrated one, between protecting the State from unauthorized liabilities and ensuring a degree of fairness in governmental contractual dealings, reinforcing the principles of constitutional governance and the rule of law.

References

  1. State Of West Bengal v. B.K Mondal And Sons (1962 AIR SC 779, Supreme Court Of India, 1961)
  2. Union Of India v. A.L Rallia Ram (1963 AIR SC 1685, Supreme Court Of India, 1963)
  3. Chatturbhuj Vithaldas Jasani v. Moreshwar Parashram And Others (1978 SCC CRI 1 569, Supreme Court Of India, 1954)
  4. Bhikraj Jaipuria v. Union Of India (1962 SCC 2 479, Supreme Court Of India, 1961)
  5. K.P Chowdhry v. State Of Madhya Pradesh And Others (1967 AIR SC 203, Supreme Court Of India, 1966)
  6. Mulamchand v. State Of Madhya Pradesh (1968 AIR SC 1218, Supreme Court Of India, 1968)
  7. State Of Uttar Pradesh And Another v. Murari Lal And Brothers Ltd. (1971 SCC 2 449, Supreme Court Of India, 1971)
  8. State Of Bihar v. Karam Chand Thapar & Brothers Ltd. (1962 AIR SC 110, Supreme Court Of India, 1961)
  9. Bihar Eastern Gangetic Fishermen Co-Operative Society Ltd. v. Sipahi Singh And Others (1977 SCC 4 145, Supreme Court Of India, 1977)
  10. M/S GLOCK ASIA-PACIFIC LIMITED v. UNION OF INDIA (Supreme Court Of India, 2023)
  11. Chiranji Lal Multani v. Union Of India (Punjab & Haryana High Court, 1963)
  12. Ranjit Kumar Chakravarti v. State Of West Bengal (Calcutta High Court, 1958)
  13. Gopal Chunder Manna And Ors. v. Gosain Das Kalay (Calcutta High Court, 1898) - Not directly relevant to Article 299 based on provided snippet.
  14. Commissioner v. Surjitsing Jeevansing Girniwale (Bombay High Court, 2007) - Not directly relevant to Article 299 based on provided snippet.
  15. State Of Punjab And Others v. M/S Om Parkash Baldev Krishan (Supreme Court Of India, 1988)
  16. Ram Ratan Gupta v. The State Of Madhya Pradesh And Others (Madhya Pradesh High Court, 1973)
  17. Krishnan Nambiar v. Executive Engineer, Calicut (Kerala High Court, 1981)
  18. State Of Rajasthan v. Raghunath Singh (Rajasthan High Court, 1973)
  19. Thakur Dan Singh Bisht v. State Of Uttar Pradesh (Allahabad High Court, 1963)
  20. Pandit Ishwardas v. State Of Madhya Pradesh And Others (1979 SCC 4 163, Supreme Court Of India, 1979)
  21. Bihar Eastern Gangetic Fishermen Co-Operative Society Ltd. v. Sipahi Singh And Others (1977 SCC 4 145, Supreme Court Of India, 1977) [Duplicate entry, already listed as 9]
  22. Bishandayal And Sons v. State Of Orissa And Others (2001 SCC 1 555, Supreme Court Of India, 2000)
  23. K.P Chowdhry v. State Of Madhya Pradesh And Others (1967 AIR SC 203, Supreme Court Of India, 1966) [Duplicate entry, already listed as 5]
  24. Ajodhya Prasad Shaw And Another v. State Of Orissa And Others Opposite Parties. (1970 SCC ONLINE ORI 33, Orissa High Court, 1970)
  25. Bishandayal And Sons v. State Of Orissa And Others (Supreme Court Of India, 2000) [Duplicate entry, already listed as 22]
  26. Shimnit Utsch India Pvt., Ltd. v. State Of Karnataka Rep., By Its Chief Secretary And Others (Karnataka High Court, 2012)
  27. Union Of India v. R.S. Venkataraman (Madras High Court, 2010)
  28. M.A Jabbar… v. The State Of A.P Industries Department (Mines) Hyd.…. (Andhra Pradesh High Court, 1968)

Note: Some reference materials provided (13, 14) were not directly applicable to Article 299 based on their snippets. Duplicate entries in the provided list (21, 23, 25) refer to cases already cited.