Work Without Contract in India: Legal Principles and Judicial Interpretations
I. Introduction
The performance of work or the supply of goods and services in the absence of a formally valid, express, or enforceable contract presents complex legal challenges in India. Such scenarios, broadly termed "work without contract," can arise from various circumstances, including non-compliance with statutory formalities, particularly in government dealings, misunderstandings between parties, or situations where services are rendered under an expectation of payment that is later disputed. This article explores the legal framework and judicial pronouncements in India that address claims arising from work performed without a contract. It focuses on the pivotal role of Section 70 of the Indian Contract Act, 1872, the principles of unjust enrichment and quantum meruit, and their application in diverse contexts, including government contracts and employment relationships. The Indian judiciary has consistently endeavored to strike a balance between upholding the sanctity of contractual procedures and preventing unjust enrichment, thereby ensuring equitable outcomes.
II. The Doctrine of Unjust Enrichment and Section 70 of the Indian Contract Act, 1872
At the heart of addressing claims for work done without a formal contract lies the equitable doctrine of preventing unjust enrichment, which posits that no person should be allowed to enrich himself unjustly at the expense of another. In India, this principle is primarily encapsulated within Section 70 of the Indian Contract Act, 1872, which deals with the "obligation of person enjoying benefit of non-gratuitous act."
Section 70 stipulates three conditions for its applicability:
- A person must lawfully do something for another person or deliver something to him.
- In doing the said thing or delivering the said thing, he must not intend to act gratuitously.
- The other person must have enjoyed the benefit thereof.
When these conditions are met, the latter person is bound to make compensation to the former in respect of, or to restore, the thing so done or delivered. This is a quasi-contractual obligation, arising not from an agreement but from the relationship between the parties and the dictates of justice.
The Supreme Court's decision in State Of West Bengal v. B.K Mondal And Sons (1962 AIR SC 779) is a seminal authority on Section 70, particularly concerning government contracts. The Court held that even if a contract with the government was not made in compliance with the mandatory provisions of Section 175(3) of the Government of India Act, 1935 (analogous to Article 299 of the Constitution of India), and was therefore void, the government could still be liable under Section 70 if it had accepted and enjoyed the benefit of the work done by the contractor, provided the work was not intended to be gratuitous. The Court clarified that a claim under Section 70 is not based on any subsisting contract but on the fact that something was done by one party for another, and the said work was voluntarily accepted and enjoyed by the other party (State Of West Bengal v. B.K Mondal And Sons, 1962). This principle ensures that statutory formalities do not become a tool for unjust enrichment by public authorities.
Similarly, in Piloo Dhunjishaw Sidhwa v. Municipal Corporation Of The City Of Poona (1970 SCC 1 213), the Supreme Court allowed compensation under Section 70 for goods supplied to a municipal corporation even though the contract was unenforceable due to non-compliance with statutory requirements (absence of an official seal). The Court emphasized that compensation should be based on the market value of the goods at the time of supply, reflecting the benefit enjoyed by the corporation.
However, the application of Section 70 is not automatic. In Mulamchand v. State Of Madhya Pradesh (1968 AIR SC 1218), while acknowledging the principles of Section 70 and Article 299, the Supreme Court denied restitution to the petitioner because he failed to provide sufficient evidence of fulfilling his obligations or the extent of the benefit derived by the State. This underscores that the burden of proof lies on the claimant to satisfy the conditions of Section 70.
III. Work Performed Beyond or Outside Express Contractual Terms
Situations also arise where a valid contract exists, but work is performed that falls outside its original scope, or where the terms concerning additional work are disputed. In such cases, the claim is not strictly for "work without contract" but for work done in deviation or addition to an existing one.
The Supreme Court in Puran Lal Sah v. State Of U.P (1971 SCC 1 424) dealt with a contractor's claim for additional payment due to discrepancies in estimated stone availability. The Court held that where a contract exists and prescribes rates or procedures for extra work, claims must be governed by those terms. Quantum meruit (as much as he has deserved) would not apply if the price is fixed by the contract or if the contract provides a mechanism for determining payment for additional work. The contractor's failure to adhere to contractual clauses for notifying and agreeing upon rates for extra work was detrimental to his claim. This highlights that the existence of a contract, even if its terms are contested regarding specific aspects of the work, channels the dispute through contractual remedies rather than purely quasi-contractual ones, unless the work is entirely distinct and accepted non-gratuitously.
In a related vein, delays in performance and acceptance of belated performance can impact claims. The Calcutta High Court in State Of West Bengal v. Afcons Infrastructure Ltd (2010), referencing Sections 55 and 56 of the Indian Contract Act, noted that if a contractor accepts belated performance of reciprocal obligations by the employer without giving notice of an intention to claim compensation for the delay, such a claim might be waived. This applies where work continues under a strained or modified contractual understanding.
IV. Employment and Service Contexts: Implied Contracts and Statutory Protections
The concept of "work without contract" takes on specific dimensions in employment law. Often, individuals may work without formal appointment letters, or under terms that are designed to circumvent labor law protections.
The judiciary has been vigilant in piercing "camouflage contracts" intended to disguise an employer-employee relationship as a contractual one to deny statutory benefits. In Maharashtra State Power Generation Company Ltd. v. Anant (2013, Bombay HC), the court looked beyond the label of an "individual contract basis" to the reality of continuous work, fixed hours, and supervision to infer an employment relationship, thereby making labor laws applicable. A similar approach was seen in National Thermal Power Corporation v. K.K Shrivastava And Others (2002 SCC ONLINE MP 518), where work on a "contract basis" was alleged to be a method to defeat labor laws, and the court considered the continuous nature of work (240 days in a calendar year) for determining permanency rights.
The Punjab & Haryana High Court in Bhikku Ram v. The Presiding Officer, Industrial Tribunal-Cum-Labour Court, Rohtak & Another (1994) observed that an employer cannot unilaterally impose oppressive and unreasonable conditions of service. If contract terms are found to be arbitrary and designed solely to avoid obligations under industrial law, a termination based on such terms may be rejected. This suggests that even if a document purports to be a contract, its unconscionable nature might lead a court to scrutinize the reality of the work relationship.
Conversely, the principle of "no work, no pay" was affirmed in Bank Of India v. T.S Kelawala And Others (1990 SC). An employee must prove they worked or were willing to work according to the contract of employment. If only partial performance is offered and declined by the employer, wages for unwanted service may not be recoverable. This applies even in the absence of a detailed written contract, based on the implied understanding of reciprocity in employment.
The Contract Labour (Regulation and Abolition) Act, 1970 (CLRA) plays a crucial role. The Supreme Court in B.H.E.L. WORKERS' ASSOCIATION HARDWAR & ORS. v. UNION OF INDIA & ORS. (1985 SC) clarified that contract labor is entitled to the same wages and conditions of service as directly employed workmen for similar work, and the government has the power to abolish contract labor in certain establishments. The engagement of contract labor without a license is an offence (Padam Prasad Jain v. State Of Bihar And Another, 1977 Patna HC). However, the Supreme Court in the SAIL case (referenced in Aeronautical Development Agency And Others v. Nanjamma And Others, 2012 Karnataka HC) overruled its earlier decision in Air India, holding that engagement of contract labor does not automatically culminate in a master-servant relationship with the principal employer, nor does it mandate absorption. The focus remains on regulation and, where appropriate, abolition by the government. The perennial nature of work performed by contract labor is a significant factor considered by courts and labor authorities (Municipal Corporation Of Greater Mumbai v. K.V Shramik Sangh And Others, 2002 SC).
V. Formalities and Enforceability of Government Contracts
As discussed earlier, government contracts are subject to strict constitutional and statutory formalities, primarily under Article 299 of the Constitution of India, which mandates that contracts by the Union or a State must be expressed to be made by the President or Governor and executed on their behalf by duly authorized persons. Non-compliance renders the contract void and unenforceable against the government.
The jurisprudence surrounding Section 70 of the Contract Act, particularly cases like B.K Mondal and Piloo Dhunjishaw, provides a crucial equitable remedy in such situations. It ensures that while the government is protected from unauthorized contractual liabilities, it cannot unjustly benefit from work done or goods supplied in good faith by a party, even if the underlying contract is void due to procedural lapses. The emphasis is on the voluntary acceptance and enjoyment of the benefit by the government.
The case of Kaikkara Construction Company v. Superintending Engineer (1998 SCC ONLINE KER 204), while primarily about the award of contracts, touches upon the scenario where work might commence under an arrangement later challenged. If such an arrangement is found void, and work has been performed and accepted, Section 70 could potentially be invoked by the performing party.
VI. Termination and Absence of Reciprocity
The terms of termination, even in seemingly informal work arrangements, can give rise to disputes. If a contract, whether express or implied, outlines termination rights, those may govern. For instance, Dyna Technologies Private Limited v. Crompton Greaves Limited (2019 SC) discussed a contractual clause allowing termination without compensation under specific circumstances. If work is validly terminated as per an agreed (even if one-sided but not unconscionable) term, claims for further work or compensation may not arise.
However, an arbitrary termination of an ongoing work arrangement, especially without due process like a proper show-cause notice, can be challenged. As indicated in M/S United Construction v. State of Tripura and Ors. (2024 Tripura HC), cancellation of a contract without proper show-cause can be deemed arbitrary and a violation of natural justice. If work was performed and then improperly stopped, claims might arise, potentially under Section 70 for benefits already conferred and accepted, or for breach if an implied agreement or legitimate expectation was violated.
VII. Conclusion
The legal landscape in India for "work without contract" is predominantly shaped by Section 70 of the Indian Contract Act, 1872, which embodies the principle of preventing unjust enrichment. This provision serves as a vital tool for claiming compensation when work is done or goods are supplied lawfully and non-gratuitously, and the benefit is enjoyed by the recipient, especially in cases where formal contracts are absent or rendered void due to non-compliance with statutory or constitutional mandates, such as those governing government contracts under Article 299.
The judiciary distinguishes between a complete absence of contract, defective or unenforceable contracts, and work performed beyond the scope of an existing contract. While Section 70 provides a remedy in the former scenarios, disputes in the latter often involve interpretation of existing contractual terms or principles of quantum meruit as modified by the contract itself.
In the employment sphere, courts are often called upon to look beyond the facade of contractual arrangements to determine the true nature of the relationship, particularly when exploitative terms or "camouflage contracts" are used to deny workers their statutory rights under labor laws, including the Contract Labour (Regulation and Abolition) Act, 1970.
Ultimately, Indian law seeks to balance the need for contractual certainty and adherence to prescribed formalities with the equitable imperative of ensuring that no party unjustly benefits at another's expense. While avenues for redress exist, claimants must diligently prove the conditions for invoking quasi-contractual remedies like Section 70 or establish the de facto existence of an employment relationship to avail themselves of statutory protections. The judicial approach reflects a pragmatic and justice-oriented interpretation of the law in these complex situations.