Liability in Tort

7/27/2019 Liability in Tort

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LIABILITY IN TORT

The term "administration" is used synonymously with "State" or "Government". The

question as to what extent the State would be liable for the tortious acts committed by its

servants is a complex one. In other words, it refers to the vicarious liability of the State for

the wrongs committed by its servants. The answer to this vexed question is governed by the

principles of public law inherited from English Common Law.

The concept of vicarious liability is said to be founded on two maxims:

(i) Respondent superior (Let the principal be liable).

(ii) Quifacit per alium facit per se (He who does an act through another does it himself).

Lord Brougham, in Duncan v. Fin Later, explaining the concept observed:

The reason that I am liable in this, that by employing him I set the whole thing in

motion; and what he does, being done for my benefit and under my direction, I am

responsible for the consequences of doing it. Lord Pearce said that the doctrine of vicarious

liability was based on "social convenience and rough justice." Stating that there was no

reason why this doctrine should not be applied to the Crown in respect of torts committed

by its servants, His Lordship observed:

In fact, if the Crown is not held vicariously liable for such torts, the aggrieved party,

even though it had sustained a legal injury, would be without any effective remedy,inasmuch as the government servant may not have sufficient means to satisfy the judgment

and decree passed against him.

(a) Position in England

At Common Law, the Crown was always immuned from legal process. It was said that

"against the King the law had no coercive power." English law has always clung to the

amaxim "the King can do no wrong". It meant that the King had no legal power to do wrong.

The position was that the Crown could not be sued in tort either for wrong actuallyauthorised by it or committed by its servants, in the course of their employment. Further,

that no action could lie against the head of the department or other superior officials for the

acts of their subordinates for relationship between them was not of master and servant but

of fellow servants. The immunity implies that neither any wrong can be imputed to the

Crown nor could it authorise any wrong. One of the reasons for the doctrine of immunity as

implied from the maxim "King can do no wrong" was that it was regarded as an attribute of

sovereignty that the State could not be sued in its courts without its consent.

In Royster v. Cavey it was held that if it was necessary for a case to succeed, the

person named by the Treasury Solicitor should be the same who was apparently the


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wrongdoer. The position has been entirely changed after the passing of the Crown

Proceedings Act, 1947. Now the Crown is liable for a tort committed by its servants, just like

a private individual. Section 2 (1) of the Act provides:

"Subject to the provisions of this Act, the Crown shall be subject to all those liabilities in tort

to which, if it were person of full age and capacity, it would be subject:

(a) In respect of torts committed by its servants or agents;

(b) In respect of any breach of those duties which a person owes to his servants or

agents at Common Law by reason of being their employer; and

(c) In respect of any breach of the duties attaching at common law to the ownership,

occupation, possession or control of property:

Provided that no proceeding shall lie against the Crown by virtue of paragraph (a) ofthis sub section in respect of any act or omission of a servant or agent of the crown unless

the act or omission would, apart from the provision of this Act, have given rise to a cause of

action in tort against the servant or agent of the estate

The Act, 1947makes the Crown in principle, liable for torts to the same extent as a

private person of full age and capacity, subject to expectation contained in Statues imposing

restrictions on the liability of any government department or officer.

(b) Position in India

(i) Position in General

Unlike the Crown Proceedings Act, 1947 (England), we do not have any statutory

provision mentioning the liability of the State in India. The position of State liability as stated

in Article 300 of the Constitution of India is as under:

" (1) The Government of India may sue and be sued by the name of Union of India and

the Government of a State may sue or be sued by the name of the State and may, subject to

any provision which may be made by Act of Parliament or of the Legislature of such Stateenacted by virtue of power conferred by this Constitution, sue or be sued in relation to their

respective affairs in the like cases as the Dominion of India and the corresponding Provinces

or the corresponding Indian States might have sued or been sued if this Constitution had not

been enacted.

(2) If, at the commencement of this Constitution

(a) any legal proceedings are pending to which Dominion of India is a party, the

Union of India shall be deemed to be substituted for the Dominion in those proceedings;

and


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(b) Any legal proceedings are pending to which a Province or an Indian State is a

party, the corresponding State shall be deemed to be substituted for the Province or the

Indian State in those proceedings."

Article 300, thus, provides that the Union of India and the States are juristic persons

for the purpose of suit or proceedings. Although the Union of India and State Governments

can sue and be sued, but the circumstances under which that can be done, have not been

mentioned. According to Article 300, the Union of India and the State Government can sue

or be sued in the like cases as the Dominion of India and the corresponding Indian States

might have sued or been sued if the Constitution had not been enacted. The position

prevailing before the commencement of the Constitution, therefore, remains unchanged

though the Parliament and the State Legislature have been empowered to pass laws to

change the position. To know the present position as regards the liability of the State for

tortious acts, we have to go back to the pre-Constitution days. For that, we refer to Sec. 176of the Government of India Act, 1935. That Act, like the present Constitution, did not give

the circumstances of the Government's liability but recognized the position prevailing

before the passing of that Act. We find a similar position in Sec. 32 of the Govt, of India Act,

1935 and ultimately we refer to the Govt. of India Act, 1858. Section 65 of that Act provides

as under:

"The Secretary of State in Council shall and may sue and be sued as well in India as in

England by the name of the Secretary of State in Council as a body corporate and all persons

and bodies politic shall, and may have and take the same suits, remedies and proceedings,

legal and equitable, against the Secretary of State in Council of India as they could have

done against the East India Company.

Therefore, to know whether the State is liable for a particular act or not, we have to find the

position of the East India Company prior to 1858.

An important case in this connection is Peninsular and Oriental Steam Navigation

Company v. Secretary of State for India.

In that case, the plaintiff's servant was travelling in a horse driven carriage and was

passing by the Kidderpore Dockyard in Calcutta, which is the government property. Due to

negligence on the part of the defendant's servants, a heavy piece of iron, which they were

carrying for the repair of a steamer, fell and its clang frightened the horse. The horse rushed

forward against the iron and was injured. The plaintiff filed a suit against the Secretary of

State for India in Council for the damage which was caused due to the negligence of the

servants employed by the Government of India. The Court tried to look to the liability of the

East India Company. A distinction was drawn between the sovereign and non-sovereign

functions of the East India Company. It was held that, if the act was done in the exercise of

sovereign functions, the East India Company would not have been liable, but if the function

was a non-sovereign one, i.e., which could have been performed by a private individual


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without any delegation of power by the Government, the Company would have been liable.

Maintenance of the dockyard was considered to be a non-sovereign function and, as such,

the Government was held liable.

According to Peacock, C.J., "The East India Company were a Company to whom

sovereign powers were delegated, and who traded on their own account and for their own

benefit and were engaged in transactions partly for the purpose of Government and partly

on their own account, which without any delegation of sovereign rights might be carried on

by private individuals. There is a great and clear distinction between acts done in exercise of

what are usually termed sovereign powers and acts done in the conduct of undertakings

which might be carried on by private individuals without having such powers delegated to

them. It was further observed:

But, where the act is done, or a contract is entered into, in the exercise of powers

usually called sovereign powers, by which we mean powers which cannot be lawfully

exercised except by a sovereign or private individual delegated by a sovereign to exercise

them, no action will lie.

It may be stated that there was distinction in liability, depending upon the sovereign

and non-sovereign functions of the East India Company. It was due to the dual character

which the East India Company was having. It performed commercial functions and exercised

sovereign powers as well. The East India Company got the administrative power as the

representative of the British Crown and as such, the position as prevailing in England was

tried to be applied in India. In England, the King could not be held liable for the wrongs ofhis servant. That was due to the conviction that "the King can do no wrong, nor can he

authorize the same."

The Supreme Court in the case of Kasturi Lal v. State of U.P. has again stated that if

the act of the Government servant was one which could be considered to be in delegation

of sovereign powers, the State would be exempt from liability, otherwise not. In the instant

case, Ralia Ram, one of the partners of a firm of jewellers, Kasturi Lal Ralia Ram Jain, at

Amritsar happened to go to Meerut, reaching there on the midnight of 20th September,

1947 by Frontier Mail. He had gone to Meerut in order to sell gold and silver, etc. in theMeerut market While he was passing through one of the markets with his belongings, he

was taken into custody by three police constables on the suspicion of possessing stolen

property and then he was taken to the police station. On search, it was found that he had

been carrying 103 tolas of gold and over 2 maunds of silver. He was kept in police lock-up

and his belongings were also kept in the custody of the police under the provisions of the

Criminal Procedure Code. Next day, he was released on bail and sometime thereafter the

silver was returned to him. The gold had been kept in the police Malkhana under the charge

of the then Head Constable Mohammad Amir. The Head Constable misappropriated the

gold and fled to Pakistan in October, 1947. The plaintiff brought an action against the State


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of U.P. claiming either the return of the gold, or in the alternative, compensation amounting

to over Rs. 11,000 in lieu thereof.

The State of U.P. was held to be not liable on the grounds that : (i) the police officials

were acting in discharge of statutory powers (this point has been discussed in greater details

below), and (ii) the power of the police official in keeping the property in the Police

Malkhana was a sovereign power.

(ii) Acts of Police Officials

In State of Orissa v. Padmalochan, the question which had arisen was whether the

excesses committed by police personnel while discharging their duties could come within

the purview of delegated sovereign function so as to exempt the State from liability. The

facts of the case are that, there was an apprehension of an attack on the office of the S.D.O.

and its properties by a mob which had resorted to violence there. The Orissa Military Policeunder the control of supervising officers and a Magistrate, cordoned the areas. Some police

personnel assaulted members of the mob without order from the Magistrate or any higher

police officer, as a result of which the plaintiff was injured.

It was held that the posting of police personnel for cordoning in front of the S.D.O.'s

court was in exercise of delegated sovereign function. The fact that the police personnel

committed excess in discharge of their function without authority would not take away the

illegal act from the purview of the delegated sovereign function. Thus, the injuries caused to

the plaintiff while police personnel were dispersing unlawful crowd were, in exercise ofsovereign function of the State. The State was held not liable.

Every act of the police official may not be in exercise of sovereign function. In State of

Punjab v. Lal Chand Sabharwal, some detenus arrested in connection with 'save Hindi'

agitation, who were lodged at a Chandi Mandir Police Station were taken out at midnight

for being carried in a bus to an unknown destination. Due to the negligence of the constable

driver, the bus met with an accident and the plaintiff suffered severe injuries. It was held

that the purpose of carrying the detenus being to disperse them, rather than producing

them before a magistrate, could not be considered to be a sovereign act and, as such, the

driver and the State were liable.

The following position emerges from the above decisions:

(1) The liability of the Government, i.e., the Union of India and the States is the same as

was that of the East India Company.

(2) The Government is not liable for the torts committed by its servants in exercise of

sovereign powers. The Government is liable for the torts which have been committed in

exercise of non-sovereign powers.


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(3) Sovereign powers means powers which can be lawfully exercised only by a sovereign

or by a person to whom such powers have been delegated.

(4) There are no well defined tests to know what are sovereign powers. Functions like

maintenance of defence forces, various departments of the Government for maintenance of

law and order and proper administration of the country, and the machinery for the

administration of justice can be included in sovereign functions. Functions relating to trade,

business and commerce and the welfare activities are amongst the non-sovereign functions.

Broadly speaking, such functions, in which private individual can be engaged in, are not

sovereign functions.

(iii) Negligence of Military Servants

Although the maintenance of the army is a sovereign function but this does not

necessarily mean that the State will be immune from liability for any tortious act committedby the army personnel. Here also, a distinction has to be drawn between acts which could

be done by the Government in the exercise of sovereign powers and acts which could have

been equally done by a private individual. There is no hard and fast rule to distinguish

sovereign and non-sovereign functions.

In Baxi Amrik Singh v. Union of India, on 14th May, 1967, there was an accident

between a military truck and a car on the Mall Road in Ambala Cantt. Due to the negligent

and rash driving by the truck driver, Sepoy Man Singh, who was also an army employee,

Amrik Singh, an occupant of the car, received serious injuries. Subsequently, he brought anaction against the Union of India to recover compensation amounting to Rs. 50,000/-. The

Union of India, apart from pleading that there was no fault on the part of the Military driver,

averred that the driver was acting in exercise of the sovereign power of the Union

Government at the time of accident in so far as he was detained for checking Army

personnel on duty throughout that day, and therefore there was no liability of the Union of

India to pay compensation. The Full Bench of the Punjab and Haryana High Court, after

discussing in detail the various authorities on the point, came to the conclusion that the

checking of the Army personnel on duty was a function intimately connected with the Army

discipline and it could only be performed by a member of the Armed Force and that too bysuch a member of that Force who is detained on such duty and is empowered to discharge

that function. It was, therefore, held that since the military driver was acting in discharge of

a sovereign function of the State, the Union of India was not liable for injuries sustained by

Amrik Singh as a result of rash and negligent driving of the military driver.

Tort committed while performing duty in discharge of obligations imposed by law

has been considered to be a defence in India.

In order to exempt the State from liability, it is further necessary that the statutory

functions which are exercised by the Government servant were exercised by way of


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delegation of the sovereign power of the State. In case, the tortious act committed by the

servant was in discharge of non-sovereign functions, the State would be liable for the same.

The position was thus, stated by the Supreme Court in Kasturi Lal Ralia Ram Jain v. State of

U.P:

If the tortious act is committed by a public servant and it gives rise to a claim for

damages, the question to ask is : Was the tortious act committed by the public servant in

discharge of statutory functions which are preferable to, and ultimately based on, the

delegation of the sovereign powers of the State of such public servant? If the answer is in

the affirmative, the action for damages for loss caused by such tortious act will not lie. On

the other hand, if the tortious act has been committed by a public servant in discharge of

duties assigned to him, not by virtue of the delegation of any sovereign power, an action for

damages would lie. The act of the public servant committed by him during the course of his

employment is, in this category of cases, an act of a servant who might have been employedby a private individual for the same purpose.

In Kasturi Lai Ralia Ram Jain v. State of U.P., the Supreme Court also refused to hold

the State liable for the act done by its servant in the exercise of statutory duties. In this case,

a partner of the firm of jewellers in Amritsar, Kasturilal Ralia Ram Jain, happened to go to

Meerut (in U.P) reaching there by a train in the midnight. He was carrying a lot of gold and

silver with him. The police constables, on the round in the market through which he was

passing, suspected that he was in the possession of stolen property. He was taken to the

police station. He, with his belongings, was kept in the police custody under the provisions

of the Cr. P.C. Next day, he was released on bail and sometime thereafter the silver was

returned to him. The gold was kept in the police Malkhana, and the same was then

misappropriated by the Head Constable, Mohammad Amir, who thereafter fled to Pakistan.

The plaintiff brought an action against the State of U.P. claiming either the return of the 103

tolas of gold, or compensation of Rs. 11,000/- in lieu thereof.

In Kasturi Lal's case, it was found that the police officers failed to observe the

provisions of the U.P. Police Regulations in taking care of the gold seized. The Supreme

Court held that since the negligence of the police officers was in the exercise of statutory

powers which can also be characterised as sovereign powers, the State was not liable for

the same. According to Gajendragadkar, C.J. : "In the present case, the act of negligence was

committed by police officers while dealing with the property of Ralia Ram which they had

seized in exercise of their statutory powers. Now, the power to arrest a person, to search

him, and to seize property found with him, are powers conferred on the specified officers by

statute and in the last analysis, they are powers which can be properly characterised as

sovereign powers, and so, there is no difficulty in holding that the act which gave rise to the

present claim for damages has been committed by the employees of the respondent during

the course of its employment; but the employment in question being of the category which

can claim the special characteristic of sovereign power, the claim cannot be sustained, and


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so we inevitably hark back to what Chief Justice Peacock decided in 1861 and hold that the

present claim is not sustainable."

(iv) Sovereign Immunity Is Subject To Fundamental Rights

In Peoples Union for Democratic Rights v. State of Bihar, about 600 to 700 poor

peasants and landless persons had collected for a peaceful meeting. Without any previous

warning by the police or provocation on the part of those collected, the Superintendent of

Police surrounded the gathering with the help of police force and opened fire, as a result of

which at least 21 persons, including children died and many more were injured. The Peoples

Union of Democratic Rights (PUDR) filed an application before the Supreme Court under

Article 32 of the Constitution, claiming compensation for the victims of the firing. It was held

by the Supreme Court that the State should pay compensation of Rs. 20,000 for every case

of death and Rs. 5,000 for every injured person. This amount was ordered to be paid within

two months without prejudice to any just claim for compensation that may be advanced by

the sufferers afterwards.

In Smt. Kumari v. State of Tamil Nadu, six year old son of the appellant died as a

result of falling in a ten feet deep sewerage tank in the city of Madras. The Supreme Court

issued a direction to the State of Tamil Nadu to pay compensation of Rs. 50,000/- to the

appellant with interest @ 12% p.a. from Jan. 1, 1990 till the date of payment. The Supreme

Court further held that it was open to the State of Tamil Nadu to recover the said amount or

any part thereof from the local authority or any other person who might be responsible of

keeping the sewerage tank open.

(iii) Liability of StateConstitutional Tort

In Ramjan v. State of Rajasthan, the Rajasthan High Court has held the State liable to

provide free and full medical aid as also compensation to the victim for injury caused by

private person, as per new horizons of constitutional tort. It has been held that the claim in

public law for compensation for unconstitutional deprivation of a fundamental right is a

claim based on strict liability and is in addition to private law remedy.

In the instant case, four women were injured by throwing acid on them. It was held

to be deprivation of the right to live with human dignity of the victims. Scars on their face

and ,other parts of their bodies, which were caused by the acid thrown on them had

resulted in their permanent disfiguration and continuous mental torture for the whole of

the remaining life or loss of status, particularly the women.

It was held to be a duty of the State to protect fundamental right, maintain the law

and order situation, prevent the crime, the prosecution of the accused in case the crime is

committed. Since it amounted to violation of the right secured by Article 21 of the

Constitution of India, the Rajasthan High Court held that the writ was also the properremedy. The State, the Court said, could not be allowed to take the defence of filing of civil


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suit for compensation against the private person who had caused the injury. It is interesting

to note that in many of the cases, subsequent to Kasturi Lal case, the Supreme Court has

granted compensation as an ancillary relief while exercising its writ jurisdiction under Article

32 of the Constitution. The Supreme Court has not only itself granted compensation as an

interim measure but has also expressly stated that the same is granted without prejudice tothe right of the petitioners to claim just compensation from the State by a subsequent

regular suit. This approach by the Supreme Court is a welcome measure which was long

overdue to do away with the outmoded law which was being applied for historical reasons,

and perhaps, owing to the wrong interpretation of the law on the subject.

Liability of Administration under Contract

The subject of government contracts is becoming more and more important day by

day. The law in this respect is in many ways distinct from the law pertaining to private

contracts. Although, contract is basically a matter of private law, but in the area of

government contracts, there arises need to protect public interest and also to protect

individuals against unfair exercise of administrative power.

Besides, government contracts involve problems of public law, such as, estoppel,

natural justice, fundamental rights, writ jurisdiction. The Courts in India seem to regard

contracts between the Government and private individuals as not merely a matter of private

law, but, to some extent of public law as well. It has been emphasized that in these matters,

the Government ought to be held subject to some public law discipline. It has been said that

if the Courts lay stress on contractual aspects ignoring public law aspects of government

contracts, it might be tantamount to letting public authorities to use their powers as they

like without the other party having an opportunity to have any redress. The Supreme Court

in Divisional Forest Officer v. Ram Sanehi Singh, emphasized :

We are unable to hold that merely because the source of right which the respondent

claims was initially in a contract, for obtaining relief against any arbitrary and unlawful

action on the part of a public authority, he must resort to a suit and not to a petition by wayof writ...There can be no doubt that the petition was maintainable, even if the right to relief

arose out of an alleged breach of contract, where the action challenged was of a public

authority invested with statutory power.

1. Formation of Contract-Power ThereforeArticle 298 of the Constitution of India provides that "the executive power of the

Union and of each State shall extend to the carrying on of any trade or business and to the

acquisition, holding and disposal of property and the making of contracts for any purpose."


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Proviso to Article 298 conditions the executive power of the Union or of the State, as

the case may be, to the laws of the Legislature within the legislative competence, the

subject matter in respect to which the trade or business carried on falls. Article 298,

however, does not restrict the power of the respective Government, Union or a State, by

the scheme of distribution of legislative power between the Centre and the States. It meansthat the Central or the State Government may enter into a contract whether or not the

subject-matter of the contract is within its legislative competence. Secondly, the

Government can enter into a contract, in exercise of its executive power. So no statutory

authority is necessary for the purpose.

2. Valid ContractConditions ThereforeClause (1) of Article 299 of the Constitution of India provides : "All contracts made in

the exercise of the executive power of the Union or of a State shall be expressed to be made

by the President, or by the Governor of the State, as the case may be, and all such contracts

and all assurances of property made in the exercise of that power shall be executed on

behalf of the President or the Governor by such persons and in such manner as he may

direct or authorise".

Article 299 (1) lays down that a contract to bind the Government must satisfy the

following requirements

(a) The contract must be expressed to be made by the President or by the Governor of

the State, as the case may be ;

(b) The contract must be executed on behalf of the President or the Governor, as the

case may be ;

(c) The contract must be executed by such person and in such manner as the President

or the Governor may direct or authorise.

(a) Object

It has been held that "in order to bind a Government there should be a specific

procedure enabling the agents of the Government to make contracts. The public funds

cannot be placed in jeopardy by contracts made by unspecified public servants without

express sanction of the law". The provisions of Article 299 are therefore, based on the

ground of protection of the general public.

Article 299 (1) does not prescribe any particular mode in which authority must be

conferred on a person to execute a contract on behalf of the President or the Governor.

Normally, such conferment is done by Notification in the Official Gazette. It can also be

conferred ad hoc on any person. However, grant of government contract, without

publishing advertisement in newspaper having wide circulation, is held to be arbitrary.


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(b) Effect of Non-Compliance

The provisions of Article 299 (1) are mandatory in character and their contravention

nullifies the contracts and make them void. It follows that a contravention of this

constitutional requirement cannot be waived and the waiver of either party cannot confer

any validity upon the invalid agreement. There is, therefore, no question of estoppel or

ratification in such a case. Also, in such cases, the doctrine of indoor management cannot be

applied.

(c) No Personal Liability [Article 299(2)]

Clause (2) of Article 299 immunizes the President or the Governor, or the person

executing any contract on his behalf, from any personal liability in respect of any contract

executed for the purposes of the Constitution or for the purposes of any enactment relating

to the Government of India.

However, in case of arbitrary exercise of power, the principle of public accountability

applies and in case of loss to the State, the concerned Minister would be liable to

compensate.

(d) Ratification of Invalid Contract

Prior to 1968, the judicial attitude was that though, the Government could not

ordinarily, be sued on a contract not conforming with the requirements of Article 299(1), yet

the Government could accept the responsibility for it by ratifying the contract. It was heldthat the contracts which did not conform with Article 299(1) would not be void simply

because the Government could not be sued on them by reason of Article 299(1). The Court

in Chaturbhuj v. Vithaldas Moreshwar, specifically ruled that "there would be nothing to

prevent ratification of the contract by the Government especially if that was for the benefit

of the Government."

The purpose of Article 299(1), the Court explained was to dispense with proof of the

due "making and execution" of the contract when the form prescribed was followed. The

contract not non-forming with Article 299(1) was not "void" in "the technical sense" that it

could not be ratified. It was thus held that when the contract was negotiated by an officer in

excess of his authority or it was entered into by an unauthorised person, it could be ratified

by the Government if it was for its benefit.

3. Statutory ContractsA distinction is to be made between a Contract entered into in the exercise of

executive power and that which is made in the exercise of statutory powers. It has been said

that the act of entering into a contract is an executive act to which the provisions of Article

299(1) apply. But, a contract that has been entered into in the exercise of statutory powers

would not attract the operation of Article 299(1). Statutory duties and liabilities, it has been


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said, might be enforced in accordance with statutory provisions and therefore, equitable

obligations might also arise and be enforced by decree of courts quite apart from

requirements of Article 299.

For instance, in State of U.P. v. Kishori Lal Minocha, the Court held that absence of

agreement executed in the manner required by Article 299(1) would not be a bar to

proceedings for recovery of exercise dues in view of Section 39 of the U.P. Excise Act, 1910.

In Indian Aluminium Co. v. K.S.E. Board, in the exercise of power under Section 49(3)

of the Electricity (Supply) Act, 1948, the Board entered into an agreement with the

petitioner, consumer, stipulating for a special concessional tariff for supply of electricity for

25 years with effect from 1957. In the exercise of its power under Section 49(1) of the Act,

1948, the Board fixed new rates and right to apply these to the petitioner as well in breach

of the agreement with them. The Apex Court held the agreement between the Board and

the petitioner as binding since it was entered into by the Board in the exercise of power

conferred on the Board under the Statute. The Court explained that if the statutory power

was to have any meaning and content, the stipulation made in exercise thereof must be

valid and binding and it would exclude the exercise of other statutory powers in respect of

the same subject-matter. The Court reasoned that if the Board were allowed to escape its

contractual obligations, then it would have meant that no one could depend on a contract

with a statutory body or with any other government body for that matter and plan on the

basis.

4. Article 299 and Doctrine of Unjust EnrichmentIt is settled that a contracts which do not comply with the requirements of Article 299

is absolutely void, not even capable of ratification. Nevertheless, it may give rise to certain

equities which the Courts may enforce against the Government. One such equity is based on

the doctrine of unjust enrichment. It is based on the principle that no person can get benefit

when he has not suffered any loss. Explaining the principle, Lord Wright, in Fibrosa v.

Fairbarin, stated :

Any civilized system of law is bound to provide remedies for cases of what has been

called unjust enrichment or unjust benefit, that is, to prevent a man from retaining the

money of, or some benefit derived from another which it is against conscience that he

should keep. "Such remedies in English law", Lord Wright said :

are genetically different from remedies in contract or in tort and are now recognised to fall

within a third category of the Common Law which has been called quasi-contract or

restitution.

The Supreme Court in Mulamchand v. State of M.P., recognised :


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...in all civilised systems of law proper remedy must be provided to prevent a person from

getting unjust enrichment or unjust benefit and restitution must be allowed in all such cases

so as to place the parties as nearly as possible in the same position, as if the contract had

not come into existence.

The principle of unjust enrichment is incorporated in Section 70 of the Indian Contract

Act, 1872. This Section provides :

Where a person lawfully does anything for another or delivers anything to him, .not

intending to do so gratuitously and such other person enjoys the benefit" thereof, the latter

is bound to make compensation to the former in respect of, or to restore, the thing so done

or delivered. Section 70, however, would be applicable where what has been done is for the

benefit of the Government, its use and enjoyment and is otherwise legitimate and proper.

Therefore, where a person has done something for the Government under a void contract

but the Government has not obtained any benefit under it, a more complicated question of

liability arises.

The question as to the relationship between Article 299(1) and Section 70, was

explained by the Supreme Court in State of West Bengal v. B.K. Mondal. Dilating upon the

nature of Section 70 and the basis of the liability thereunder, the Court said that three

conditions were to be fulfilled before this Section could be invoked. These are :

(1) A person should lawfully do something for another person or deliver something to

him;

(2) In doing so, he must not intend to act gratuitously; and

(3) The other person for whom something is done or to whom something is delivered,

must enjoy the benefit thereof.

If the above conditions are satisfied, Section 70 imposes upon the latter person the

liability to make compensation to the former in respect of, or to restore, the thing done or

delivered. In the instant case, the respondent executed some construction work on the

request of a Sub-Divisional Officer, who had accepted his tender. The building so

constructed was accepted by the Government. But, it denied its liability to pay on the

ground that the requests in pursuance of which the building was constructed was made

were invalid and unauthorised being not complying with the requisites of Article 299(1).

Stating that all the ingredients of Section 70 were satisfied, the Supreme Court held that

Government liable to pay to the plaintiff.

Explaining the content of Section 70 the Court said that where a claim for

compensation was made by one against another person, it was not on the basis of any

subsisting contract between the parties, but it was on the basis of the fact that something

was done by the party for another and the said work so done had been voluntarily accepted


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by the other party. The word "lawfully" in Section 70, the Court said, indicate that there was

undoubtedly subsisting between the parties some lawful relationship.

"It is only when the latter party accepts an enjoys what is done by the former party that a

lawful relationship arises between the parties and it is the existence of the said lawful

relationship, that would give rise to the claim for compensation, the Court said.

Explaining the nexus between Section 70 and Article 299(1) the Court said that the

former, in no way, detracted from the binding character of Article 299(1) nor did it amount

to circumvention of Article 299(1) in any way. Therefore, the cause of action for the former

party's claim under Section 70 was not any breach of any contract but it was based upon the

acceptance and enjoyment of the goods delivered or the work done by the former. Thus,

"Section 70 does not nullify Article 299(1)", the Court held.

The propositions enunciated by the Apex Court in Mandal case have been reiteratedand applied by the Courts in a number of subsequent cases. The liability under Section 70 is

said to arise on equitable grounds even though express agreement may not be proved. "The

right here is not peculiar to equity or contract or tort, but falls naturally within the

important category of cases, where the Court orders restitution if the justice of the case so

requires, the Court explained.

A complicated question of liability, however, arises in situations where the party to

the contract has done something for the Government, under a void contract but the

Government has not obtained any benefit under it. In such a case Section 70 has been held

not applicable.

5. Grant of Government LargessTodays functional State is to undertake several commercial activities. It discharges its

wide ranging functions even through its instrumentalities. Being a big source of wealth, the

Government has power to grant licences, quotas, permits. Though, free to enter into

contracts like any private individual the Government does not stand in the same position as

a private individual in the matter of granting largess.

The Government, it is held, is still a Government and therefore, it cannot act

arbitrarily while entering into a contract or in administering' largess. The Supreme Court in

Erusian Equipment & Chemicals Ltd. v. State of West Bengal, stated : The Government is a

Government of laws and not of men.... The activities of the Government have a public

element and, therefore,, there should be fairness and equality. The State need not enter

into any contract with any one but if it does so, it must do so fairly without discrimination

and without unfair procedure.

In the instant case, the question related to the blacklisting of a person without giving

him an opportunity to be heard. Stating that the blacklisting "not only affects the reputation


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of the affected person, but it also denies him equality in the matter of entering into

contract, with the Government, the Court held that the Government not like a private

individual, could pick and choose the person with whom it would deal.

Stating that the power of judicial review on the question of awarding licences and

contracts should rest only on grounds of bad faith, irrational or irrelevant consideration,

non-compliance with the prescribed procedure or violation of any constitutional or

statutory provision, the Apex Court in L.I.C. v. Consumer Education and Research Centre,

elaborating their approach further held :

That, in the sphere of contractual relations the State, its instrumentalities, public

authorities whose acts bear insignia of public element, action to public duty or obligation

are enjoined in a manner that is fair, just and equitable, after taking into consideration all

the relevant options and in a manner that is reasonable, relevant and germane to effectuate

the purpose of public god and in general public interest.

That, the State must not take any irrelevant or irrational factors into consideration or

appear arbitrary in its decisions. So said, the Court held that the power of the LIC to enter

into contract and prescribe terms and condition for life insurance, did not include power to

confine, its policies for salaried class from Government, semi-government or reputed

commercial firms. Many-a-time, the provision of law vests power in the statutory

authorities, to be exercised as they "think fit". Stating it as misconceived, the Court in Delhi

Science Forum v. Union of India, said that such provisions, while vesting power in authorities

enjoined a fiduciary duty to act with restraint to avoid "implaced philanthropy or ideology".As such, the State is expected to put such conditions while granting largess which would

safeguard public interest and interest of the Nation. Such condition, the Court said, should

commensurate with the obligations that flow while parting with the privilege which had

been exclusively vested in the Central Government by the Act in question.

6. Contractual Liability and Writ JurisdictionFor long, the judicial trend had been that a writ petition was not an appropriate

remedy against breach of contractual obligations.

In Satish Chandra v. Union of India, the service of the petitioner, a civil servant, were

terminated in accordance with the terms of the service contract. The petitioner challenged

his termination by way of writ petition filed under Article 32 alleging violation of his

fundamental rights secured under Articles 14 and 16(1). Dismissing the petition the Court

observed that he had not been discriminated against nor denied any protection of any laws

which others similarly situated could claim and therefore, the remedy of writ was

misconceived.


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Liability in Tort

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Transcript of Liability in Tort