Mahapatra, J.:— Both these appeals arise out of a money suit that was instituted by the State of Bihar through the Collector of Shahabad in the Court of the first Subordinate Judge. Arrah, on the 4th of December, 1952, for recovery of Rs. 85,023-2-6 as principal and interest of Rs. 43,361-13-0 on that, at the rate of Re. 1/- per month from the 19th August, 1948 to October, 1952. The total claim was Rs. 1,28,385/-. The services of the defendant were enlisted by the Collector of Shahabad with the approval of the Trade Adviser and the Chief Controller of the Supplies, Bihar, to purchase food grains for the. State of Bihar in the district of Shahabad, and accordingly the defendant purchased and supplied the food grains under the name of “the Grain Supply Agency”. This was done during the years 1943 to 1945. In that connection, the defendant received within the period from May to September 1943, Rs. 55,21,021-4-0 from the District Officer Shahabad, under several receipts and Rs. 21,30,000 from the Trade Adviser to the Government of Bihar. All this money was taken by the defendant as advances for purchase and supply of food grains. He executed an indemnity bond on the 28th June, 1945, in favour of the Governor of Bihar in which he admitted the receipt of the abovementioned money (Rs. 76,51,021-4-0). According to the plaintiff, by the supply of food grains and otherwise the defendant aforesaid for Rs. 76,65,998-2-6. (sic). As the balance of Rs. 85,023-2-6 was not, refunded by the defendant in spite of repeated demands, the plaintiff instituted the suit for recovery of the same with interest as stated above. For the period from the 5th August, 1948 to October 1952, interest was claimed by way of damage as the defendant held up the money with him for such a long period. The cause of action for the suit was stated to be on the 4th August, 1948 when the account of adjustment was made and on the 25th May, 1950, when the defendant was called upon to settle the account.

2. In the written statement Bled on the 18th November, 1953 the defendant pleaded that the suit was not maintainable and asserted that it had been agreed between him and the then Collector of Shahsbad acting on behalf of the State of Bihar that all the expenses incurred in connection with the purchase of food grains, viz., godown rent, outage, establishment charges, salary of the staff the expenses on account of travelling, postage, telegram, weighment, Coolie, sewing etc., were to be borne by the Government and the defendant was to get commission by way of his remuneration for his services. The rate of commission was left to the discretion of the authorities concerned. In accordance with that arrangement, the defendant submitted his bills where all incidental expenses were mentioned. By the accounts submitted by him to the district authorities no money remained due from him; on the other hand, the plaintiff owed a large sum to the defendant. About the indemnity bond of the 28th June, 1945, he stated that it was for different purpose and was not connected with the suit matter. The accounts attached to the plaint, according to him, were wrong and incomplete. On the accounts already given by the defendant, Rs. 96,622-12-7 remained due to the defendant. The plaintiff instituted the present suit to avoid the defendant's pressure for payment of his dues. About the audit report, on the basis of which the plaintiff claimed the money in suit, the defendant stated that the audit authorities had no right or justification to change or vary the terms end conditions agreed between the defendant and the officers of the State and he (defendant) was not bound by their report. He appended to the written statement a letter which he wrote by way of reply to the audit report on the 15th July, 1948. Several different items were mentioned in the written statement to show that the account filed with the plaint was incorrect. Other pleas such as limitation, waiver, incompleteness and vagueness were also raised. Five issues were framed on the above pleadings of which the first two were about maintainability of the suit and bar of limitation and the last one was about other reliefs, if any, to which the plaintiff was entitled. The other two issues were: “Is the plaintiff entitled to refund of Rs. 85,023 or any amount from the defendant”? and “Is the plaintiff entitled to get interest by way of damages over the amount to be ultimately refunded by the defendant?”

3. Nine witnesses were examined on plaintiff's side of whom P.W 9 Baidyanath Prasad, only proved a compromise petition not relevant for our purposes. Other witnesses were different officials and office staff of the Government, either in service or retired who had to do with the procurement of food grains scheme and the audit. For the defendant there were four witnesses, he being the first His manager and accountant were two amongst them. D.W 2 was an employee of the bank of Bihar in Calcutta who proved a cheque (Ext. E).

4. The trial Court decreed the plaintiff's suit in part for Rs. 34,201-1-3 with interest at 8 per cent per annum from the date of the suit till recovery with proportionate costs. The plaintiff's claim for interest and damage was rejected. Both the parties felt aggrieved by the judgment and have come in appeal, the plntf. (sic) challenging in first Appeal 154 of 1957 what was decreed against him and the defendant, the State of Bihar (sic) in First Appeal 181 of 1957 presses all that was disallowed.

5. On the question of the maintainability of the suit the trial court came to the view that the suit was for an ascertained sum though in order to find out whether the plaintiff was justified in claiming for an ascertained sum on the basis of the audit reports, the Court had to look into the whole account as given by me defendant and which had been proved in the case. The objection of the defendant in the Court below was that as there was no final accounting between the parties, the plaintiff could not sue for an ascertained amount.

6. The important ground on which the suit can be challenged is that it was based on a contract of agency which was not executed or expressed in accordance with the provisions laid down under section 175 of the Government of India Act 1935, substantially corresponding to Article 299 of the Constitution. The admitted case of the parties is that in the year 1943 the defendant was appointed by Mr. Crofton, the District Magistrate and Collector of Shahabad, to be the purchasing agent of the Government and he (defendant) acted in that capacity under the trade name of Grain Supply Agency. In pursuance of that arrangement the defendant received a large sum of money from time to time from the State Government with which food grains were procured and supplied According to the State, the defendant did not account for that whole money and a sum of Rs. 85,023-2-0 remained due from him Paragraph 1 of the plaint said that the services of the defendant were enlisted by the Collector with the approval of the Trade Advisor and the Chief Con troller of the Supplies, Bihar, to purchase foodgrains for and supply to the plaintiff in the district of Shahabad and the defendant made those purchases and supply during the years 1943 to 1945.

7. In the second paragraph it was stated that the defendant received advances in that connection from May to September 1943 Rs. 55,21,021-4-0 from the District Officer, Shahabad under several receipts and Rs. 21,30,000/- from the Trade Adviser to the Government of Bihar. In paragraph 3, the plaintiff said that the defendant received those advances, made purchases of foodgrains and supplied them and therefore he was liable to render account and to refund what is found to have been advanced in excess. In paragraphs 5 and 6 it was stated that the audit report showed that a balance of Rs. 85,023-2-6 had not been accounted for or adjusted or refunded by the defendant. In spite of repeated demands. These averments and Ext. B leave no doubt that the suit claim arose out of a contract of agency. If that contract did not conform to the statutory or constitutional provisions in that respect, it is void and cannot be enforced through Court. Not only that the contract of agency was not executed by the Governor or;n his name by an authorised person but also there was no written contract whatsoever. The only two correspondence, that may be referred as relating to the appointment of the defendant as a purchasing agent (Exts. B and B(22) two letters written by Mr. Crofton) do not show that he (Collector) had the authority to make the contract on behalf of the Governor. In that view, it cannot but be held that there was no contract of agency between the Government and the defendant in accordance with section 175 of the Government of India Act and as such the suit based upon or arising from that contract cannot be maintained at all.

8. Learned Government Pleader in reply to this objection contended that both parties admitted that there was negotiation between the Collector of Shahabad on behalf of the Government and the defendant. By an agreement between the two, the defendant began his work as the purchasing agent and procured foodgrains for supply to the Government. If that agreement did not ripen into a contract for lack of observance of statutory formalities, the agreement all the same was in existence and was later ratified by the Government by their conduct in accepting the purchases made by the defendant and in paying for that According to him, a contract which is unenforceable or/and void for failure of compliance with the provisions under section 175 of the Government of India Act, 1935, can be ratified at a later stage and it so ratified, can transform into enforceability through Court.

9. For this view learned Counsel very much stressed upon the observation of Bose, J., of the Supreme Court in the case of Chaturbhuj Vithaldas Jasani v. Moreshwar Parashram, AIR 1954 SC 230 The facts of that case were that one Chaturbhuj Jasani had been declared elected to the Parliament for a general seat His election was challenged on the ground that he was disqualified under Section 7(d) of the Representation of the People Act as he was interested in a contract for the supply of goods to the Central Government. The objection prevailed with the Election Tribunal and the election was set aside. Against that an appeal was taken to the Supreme Court by Chaturbhuj Jasani who was admittedly a partner in the firm of Moolji Sicka and Co. That firm had a contract for the supply of biri to the Government for troops. It was a firm of biri manufacturers. The Government had placed two of the brands of biris manufactured by that firm on its approved list and entered into an arrangement with the firm by which the Government was to buy from them, from time to time, those biris. This arrangement was argued to be a contract for the supply of goods to the Central Government and some correspondence between the Government and the firm were relied upon for that purpose. The Court did not find any binding engagement from those letters except that the firm undertook to sell biris to the canteen contractors only through the canteen stores and undertook to pay a commission on all sales. The continuing arrangement, according to their Lordships, was that the canteen stores, that is, the Government would be entitled to commission on all orders placed and accepted in accordance with that arrangement and in fact, the canteen stores obtained a sum of Rs. 7,500/- in satisfaction of a claim of that kind.

10. The Court came to the view that when in pursuance of that arrangement an order was placed and accepted, there was a contract and such contract was to be governed by the terms set out in those letters. Each separate order and acceptance constituted a different and distinct contract. From an account of the goods with dates of supply and payment, the Court also found that on the 15th November, 1901, goods worth Rs. 84,659 and odd had still remained to be paid to the firm. That date was the last date for filing the nomination papers for election. After that date and before the 14th February, 1952, which was the date on which election results were declared, further orders for supply of goods worth Rs. 39095/- and odd were placed and accepted but they had not been paid for. The argument on behalf of Chaturbhuj Jasani was that if the firm had executed its part of the contract by supplying the goods, it ceased to have any interest in the contract. Their Lordships rejected the argument and opined that the contract which the firm had entered into with Government subsisted on the two crucial dates (15th November, 1961 and 14th February, 1952), and that as Chaturbhuj Jasani, the appellant, was a partner in the firm, he also had both share and interest in them on those dates. On this finding, the other question with which we are now concerned in this appeal arose. That question was whether that contract for supply of biris was enforceable in law, and if it was not so enforceable because it had not conformed to the provisions under Article 299(1) of the Constitution, whether that would constitute the disqualification as envisaged under Section 7(d) of the Representation of the People Act.

11. In dealing with that question, Bose, J., finally observed that Section 7(d) did not require that the contract at which it strikes should be enforceable against the Government; all it requires is that the contract should be for the supply of goods to the Government, and as the contract in question was just that it was hit by that section. Before coming to that conclusion, at another place, his Lordship observed:—

“The only flaw is that the contracts were not in proper form and so, because of this purely technical defect, the principal could not have been sued. But that is just the kind of case that Section 230(3) of the Contract Act is designed to meet.

It would, in our opinion, be disastrous to hold that the hundreds of Government officers who have daily to enter into a variety of contracts, often of a petty nature, and sometimes in an emergency, cannot contract orally or through correspondence and that every petty contract must be effected by a ponderous legal document couched in a particular form. It may be that Government will not be bound by the contract in that case, but that is very different thing from saying that the contracts as such are void and of no effect it only means that the principal cannot be sued; but we take it there would be nothing to prevent ratification, especially if that was for the benefit of the Government.

12. There is authority for the view that when a Government officer acts in excess of authority Government is bound if it ratifies the excess. We accordingly hold that the contracts in question here are not void simply because the Union Government could not have been sued on them by reason of Article 299(1)”

13. Learned Counsel's reliance was on these observations to support his contention that contracts hit by Article 299 of the Constitution of section 175 of the Government of India Act, 1935, are not void absolutely, and they can be ratified if the ratification is for the benefit of the Government. On reading the passage quoted above, there cannot be any doubt about what his Lordship meant and expressed A contract not in compliance with Article 299 can also be enforced under Section 230(3) of the Contract Act against the agent or the particular officer concerned and in that view, such contracts are not absolutely void Ratification spoken about was mainly in regard to the acts done by Government officers in excess of authority and later, the acceptance of the performance of the contract. The sentence “but we take it there would be nothing to prevent ratification, especially if that was for the benefit of Government,” upon which learned Counsel very much stressed cannot be taken completely divorced from what was stated by his Lordship before and after that. The real point for consideration in that case was whether a contract not in accordance with Article 299 can be looked into for a finding if a candidate for election has any interest or share in the contract and if he has, whether that will constitute a disqualification under Section 7(d) of the Representation of the People Act All the observations are timed to that consideration and in that light they are to prevail.

14. Learned Counsel next referred to the decision of State of West Bengal v. B.K Mandal and Sons, 1981 Supp SCC 12 : AIR 1982 SC 779. There, Messrs B.K Mandal and Sons filed a suit against the State of West Bengal for certain amount of money for works done by them for the Government. They alleged that they had executed the work in terms of a contract entered into between the parties and, therefore, the Government (which was the appellant in the Supreme Court) was liable to pay the claim. Alternatively, they also made out a case that they were entitled, under Section 70 of the Indian Contract Act, to due compensation for the works done of which the benefit was appropriated by the appellant Government One of the pleas taken by the defendant-appellant, the State of West Bengal, was that the requests, in pursuance of which the plaintiff firm executed several constructions as alleged by them, were invalid and unauthorised and aid not constitute a valid contract binding the Government under Section 175(3) of the Government of India Act, 1935. There being no privity of contract between the two parties, the Government was not liable for the claim. The suit was on the Original Side of the Calcutta High Court where the learned Judge found, on evidence, that there was no valid and binding contract between the parties but the plaintiff Ann was entitled to compensation under Section 70 of the Contract Act Against that, there was an appeal to the Division Bench of the High Court which also confirmed the material findings of the trial Court. The appeal to the Supreme Court was out of that and the main point canvassed was that Section 70 of the Contract Act did not apply to that case.

15. During argument, one contention was raised for the respondents that the provisions under Section 175(3) of the Government of India Act, 1935, could not be mandatory as otherwise it would be inconsistent with the decision in the case of AIR 1954 SC 236 and reliance was placed on the passage in the judgment of Bose, J., in that case where ratification of the contract was spoken. Their Lordships of the Supreme Court in dealing with that argument reiterated that the provisions under Section 175(3) were mandatory and failure to comply with that will make the contract invalid and unenforceable Referring to the former decision of the Supreme Court (by Bose. J.) their Lordships observed:

“It would thus be seen that in the case of AIR 1954 SC 236 this Court was dealing with the narrow question as to whether the impugned contract for the supply of goods would cease to attract the provisions of Section 7(d) of the Representation of the People Act on the ground that it did not comply with the provisions of Article 299(1), and this Court held that notwithstanding the fact that the contract could not be enforced against the Government, it was a contract which fell within the mischief of Section 7(d). It would be noticed that the observation (of Bose, J.) on which Mr. Chatterji (Counsel for the Respondent) relies has to be read in the context of the question posed for the decision of this Court and its effect must be judged in that way. All that this Court meant by the said observation was that the contract made in contravention of Article 299(1) could be ratified by the Government if it was for its benefit and as such it could not take the case of the contractor outside the purview of Section 7(d) The contract which is void may not be capable of ratification, but, since according to the Court, the contract in question could have been ratified it was not void in that technical sense. That is all that was intended by the observation in question. We are not prepared to read the said observation or the final decision in the case of AIR 1954 SC 236 as supporting the proposition that notwithstanding the failure of the parties to comply with Article 299(1), the contract would not be invalid Indeed, Bose. J., has expressly stated that such a contract cannot be enforced against the Government and is not binding on it. Therefore, we do not think that Mr. Chatterji can successfully challenge the findings of the Courts below that the contracts in question were invalid. It is on this basis that we have to consider the main question about the applicability of Section 70 to the facts of the present case”.

16. In Bhikraj Jaipuria v. Union Of India , AIR 1902 SC 113 the view of the Supreme Court on the point was expressed the same way Considering the case of Chaturbhuj Vithal das Jasani. AIR 1954 SC 230 with reference to the observation made by Bose. J., their Lordships ob served:

“The rationale of the case in our judgment does not support the contention that a contract on behalf of a State not in the form prescribed is enforceable against the State

The facts proved in that case clearly establish that even though the contract was not in the form prescribed, the Government had accepted performance of the contract by the firm of which Jasani was a partner, and that in fact there subsisted a relation between the Government and the firm under which the goads were being supplied and accepted by the Government. The agreement between the parties could not. In the case of dispute have been enforced at law, but it was still being carried out according to its terms: and the Court held that for the purpose of the Representation of the People Act, the existence of such an agreement which was being carried out in which Jasani was interested disqualified him.”

17. That case was from this Court, the decision of which is reported in Dominion of India v. Raj Bahadur Seth Bhikhraj Jaipuria, (S) AIR 1957 Pat 588, in which it was clearly held that an agreement not conforming to the Constitution Act was void and unenforceable and there could be no ratification of the same. This decision was affirmed by the Supreme Court without taking any exception to this proposition.

18. In a Full Bench decision of this Court in Hindustan Construction Co v. State of Bihar, AIR 1962 Pat 330 (FB) their Lordships held that 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. Such a void contract cannot be ratified at a subsequent stage by the Government. There is no question of estoppel also with regard to a contract of this description.

19. The inevitable conclusion in this case, therefore, will be that there was no enforceable contract of agency between the State and the defendant and by the acceptance of the purchase made by the defendant the Government cannot he taken to have ratified or to have wiped out the unenforceability of the contract Whatever agreement was arrived at been Mr. Crofton on be half of the Government on one hand and the defendant on the other cannot be made the basis in any action in Court. The claim of the plaintiff as laid in the plaint having arisen from that agreement or so-called contract cannot be enforced through Court.

20. Learned Government Pleader next urged that the plaintiff was entitled to compensation on the principles laid down under Section 70 of the Contract Act Let me reproduce that section:—

“Where a person lawfully does anything for another person or delivers anything to him not intending to do so gratuitously, and such other person enjoys the benefit thereof, the latter bound to make compensation to the former in respect of, or to restore, the thing so done or delivered.”

21. Learned Counsel continued that in this case the Government delivered money to the defendant not intending to do so gratuitously and the defendant enjoyed the benefit thereof. This section postulates the absence of an agreement or contract, but its principle has been and that for good reasons, extended to cases where services were rendered or things delivered in pursuance of a contract which in law is void; that means where a contract did not exist in law but in fact the relationship between the two parties and the performance on that basis was there. The premises on which learned Counsel wanted to base the application of this section are not correct Apart from the fact whether delivery of anything as referred to in the section will include payment of money, in the present case, the payments were made by the State officials as price of goods to be purchased. In other words, it was payment of price in advance. The payments were Intended for the persons from whom foodgrains were to be purchased No doubt the defendant took money from the officials and paid the sellers. By feat, he was only acting as arr agent of the Government. He did not sell anything to Government. He only procured foodgrains on behalf of the Government. That is why in the Government purchase registers (Exts. 4 series) we find the names of all the sellers as noted there as persons from whom the Government made the purchases Suppose the payments were arranged not to be made through the defendant but through a bank, the bank would not be said to be the seller or to have received the money from the Government as price of the goods sold by the bank. On the facts of this case and particularly in view of the averments made in paragraph 1 of the plaint to the effect that the services of the defendant were enlisted by the Collector to purchase foodgrains for and sup ply to the plaintiff in the district of Shahabad the contention that money was delivered to the defendant within the meaning of Section 70 cannot prevail Entries in Exts. 4 series, purchase registers, clearly show that most of the purchases were made under the distinct orders of the Sub-divisional Officer.

22. There is another way to look at the thing Advance of money was issued for payment of the price of foodgrains. The moment the purchase was made, the contract was discharged. Whether the full advance amount was paid or spent for the purchases of any portion of it still remained undischarged will be a matter of accounting between the two parties which in other words, will relate to a contract of agency and its obligations. A thing may be delivered in pursuance of a contract and it will have to be governed by the terms of that contract Mere delivery of a thing irrespective of its context cannot bring in the aid of Section 70 for the deliverer.

23. Learned Counsel placed before us the decision in the case of Ram Pratap Kamalia Mills v. State of Bihar, AIR 1983 Pat 153 to which I was a party. There, the facts were different. The State of Bihar sued Ram Pratap Kamalia Mills for recovery of a certain sum of money on the allegation that the defendants were given paddy by the Government for nilling into rice and delivery thereafter of all rice at an agreed rate of extraction. The defendants failed to supply certain quantity of rice. After making the necessary adjustments the State sued for Rs. 13,830-14-0 in that suit. The contract in that case was also found to be void inasmuch as it was not in accordance with Section 175(3) of the Government of India Act 1939. But since paddy was delivered by the State to the defendants with the clear intention of taking it back in shape of rice after milling by the defendants and the defendants had benefited from that, the State was held to be entitled to compensation from the defendants in respect of the paddy that had been delivered and not returned.

24. Learned Counsel wanted to place the payment of advance money in the present case on the same footing as paddy was delivered in the reported case by Government I am afraid both are not the same in that, case paddy was given to be taken back bereft of the husk. In the present case when money was paid in advance, it was not intended to be taken back as money, for example, currency acts were not given to be returned. In coins here advance of money was made in discharge of a contractual obligation for payment of the price of the goods purchased. Such price is payable in advance, at the time of purchase or thereafter Whenever it is paid, it is by way of discharge of the contractual obligation. The time of its payment will not change its legal character. In that view I do not think that the plaintiff can have any support from the case of AIR 1903 Pat 153 to invoke the aid of Section 70 of the Con tract Act in this case.

25. The inevitable conclusion, therefore, is that the plaintiff's suit was not maintainable and, therefore, it must stand dismissed. The defendants appeal No. 154 of 1957 will be allowed and the plaintiff's appeal No. 181 of 1957 rejected Par ties however, will bear then own costs throughout, in view of the circumstances of the case and particularly for the reason that the objection against maintainability of the suit was not taken in the form in which it has now been decided.

26. As both the parties addressed us on the different items of respective claims arising from the judgment of the trial Court. In the two different appeals, it will be necessary to deal with them also, although in view of the finding on the question of maintainability, they will be of no consequence. It will be convenient to take the two appeals separately for examining their respective merits.

(Then after discussing the merits of the defendant's appeal (Paras 17 to 31) His Lordship concluded).

27. On merits, therefore, in the defendant's appeal (First Appeal No. 154 of 1957) the dues of the Government as decreed by the trial Court will be reduced by Rs. 625/- + 1085/- + 143-15-6 = Rs. 1853-15-6.

(Then after dealing with some of the contentions in the plaintiffs appeal (Paras 33 to 37). His Lordship proceeded).

28. Another objection raised by the Government Pleader was about disallowance of interest. He contended that a large sum of money was held by the defendant on Government account and the Government suffered loss thereby and should he compensated by interest by way of damages. It is undisputed that there was no agreement for payment of Interest to either party on the out standing balance that would be found due. In the plaint interest was at 12%. The learned Government Pleader now brought it down to 6% For the mere retention of money, interest is not payable. There is no evidence of damage suffered by the Government on this account. In absence of such evidence and any condition about payment of interest from before, the plaintiff cannot lay any claim for the period preceding the suit, and the view taken by the trial Court in this respect was correct.

29. There is thus no merit in the appeal preferred by the plaintiff. It has, therefore, to be dismissed but in the circumstances of the case without any costs in this Court. If the two appeals were to be decided on merit of the respective claims, the result would have been that the amount decreed in favour of the plaintiff State of Bihar, against the defendant would have been reduced by Rs. 1853-15-6. There should have been proportionate reduction in costs of the trial Court: but as the suit itself was not maintainable the whole decree passed by the Court below has to be set aside and the suit dismissed. In view of the circumstances of the case, parties will bear their own costs throughout.

A.B.N Sinha, J.:— I agree.

JH/D.H.Z

30. Order accordingly.