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Liability of The State

The document outlines the legal framework governing contracts with the government in India, specifically Articles 298 and 299, which dictate the conditions under which contracts are valid and binding. It discusses the implications of such contracts, including the necessity for proper execution and the potential for judicial review in cases of alleged unfairness. Additionally, it addresses the government's liability under tort law and the doctrine of public accountability, emphasizing the need for reasonable exercise of discretionary powers by public officials.

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0% found this document useful (0 votes)
20 views14 pages

Liability of The State

The document outlines the legal framework governing contracts with the government in India, specifically Articles 298 and 299, which dictate the conditions under which contracts are valid and binding. It discusses the implications of such contracts, including the necessity for proper execution and the potential for judicial review in cases of alleged unfairness. Additionally, it addresses the government's liability under tort law and the doctrine of public accountability, emphasizing the need for reasonable exercise of discretionary powers by public officials.

Uploaded by

manu
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Title Lorem Ipsum

Sit Dolor Amet


Liability of State
 Article 298: Provides that the executive Power of the union and
of each state Shall extend to the carrying on of any trade or
business and the acquisition of holding and disposal of property
and making of contract for any purpose.
 Article 299: Lays down the manner of formulation of such
contract.
“ All contracts made in the exercise of the executive power of the
Union or State shall be expressed to be made by the President or by
the Governor of the State and shall be executed on behalf of the
President or the Governor in such manner as he may direct or
authorise”.
Conditions
 Contract with the Government of the Union or State will be valid
and binding only if the following conditions are followed:
1. The contract with the Government will be binding only if it is
made in the name of the President or the Governor
2. The contract must be executed on behalf of the President or the
Governor as the case may be
3. A person duly authorised by the President or the Governor of the
State as the case may be must execute the contract.
 It is well settled that governments can only be bound by contracts
that are entered into in a particular way and which is signed by
the proper authority [Thawardas Pherumal and Another v UOI
, 1955]
 Supreme Court has made it clear in the case Grant of Govt
contract, the court should not interfere unless substantial public
interest is involved or grant is malafide when writ petition is filed
in the high court challenging the award of a contract by a public
authority or the state, the court must be satisfied that there is
some element of Public Interest involved in entertaining such a
petition.
Effect of a valid contract with the
Government
 As soon as a contract is executed with the government in
accordance with article 299 the whole law of contract as
contained in Indian contract act comes into operation.
 A contract of service with the government is not covered by article
299. After a person is taken in a service under the government his
rights and obligations are governed by the statutory rules framed
by the government and not by the contract of parties. They are
subjected to “pleasure”.
Remedy
 In India the remedy for the branch of a contract with Govt is
simply a suit for damages.
 The writ of Mandamus could not be issued for the enforcement of
contractual obligations.
But SC in Gujarat State Financial Corporation vs Lotus Hotels
(1983) has taken a new stand and held that the writ of mandamus
can be issued against the government or its instrumentality for the
enforcement of contractual obligations.
 The doctrine of judicial review has extended to the contracts
entered into by the State or its instrumentality with any person.
 Before the case of Ramana Dayaram Shetty v. International
Airport Authority 1979, the attitude of the court was in favour of
the view that the government has freedom to deal with anyone it
chooses, if one person is chosen over the other, the aggrieved
party cannot claim the protection of article 14 because the choice
of the person to fulfil a particular contract must be left to the
government.
 However there has been a significant change in court’s attitude,
after this case the court appears to be in favour of the view that
the government does not enjoy absolute discretion to enter into
contract with anyone it likes. They are bound to act reasonably
fairly and in non discriminatory manner.
 In the case of Kasturi Lal vs State of Jammu and Kashmir
(1980) Justice Bhagwati has said “every activity of the
government has a public element in it and it must, therefore, be
informed with reason and guided by public interest. Every
government cannot act arbitrarily without region and if it does, its
action would be liable to be invalidated.
Ratification
 The present position is that contract made in contravention of
article 299 shall be void and therefore cannot be ratified. In such
cases question of estoppel does not arise.
 In the case of Shrilekha Vidyarathi vs State of UP (1991)
Supreme Court has made it clear that the State has to act justly,
fairly and reasonably even in contractual field. In the case of
contractual actions of the State the public element is always
present so as to attract article 14 the court has held that the state
action is public in nature and therefore it is open to judicial review
even if it pertains to the contractual field.
Liability of Government under
Torts
ENGLISH LAW INDIAN LAW

The crown cannot be sued for the tortious act The liability of the Govt
for the torts of their
servants
was accepted quiet
earlier.
 In India Article 300 declares that the government of India or of a
State may be sued for the tortious act of its servants in the same
manner as the Dominion of India and the corresponding provinces
could have been sued or have been sued before the
commencement of the present Constitution. This rule is however
subjected to any such law made by the Parliament or State
Legislature.
 The first important case involving the tortious liability of the
Secretary of State for India in Council was raised in P and O’s
Steam Navigation vs Secretary of State for India.
Doctrine of Public Accountability
 All administrative authorities have discretionary powers and it
should be exercised reasonably and in larger public interest.
 If a public officer abuses his office and the consequences of that is
an injury to an individual, an action may be maintained against
such public officer.
 A public officer who abuses his official position can be directed to
pay compensation, damages or cost.
 In Lucknow Development Authority vs MK Gupta 1994, Supreme
Court observed when the court directs the payment of damages or
compensation against state the ultimate sufferer is the common
man. It is a taxpayers money which is paid for in action of those
who are interested under the act to discharge their duties in
accordance with law. Therefore it is necessary when it is satisfied
that a complainant is entitled to compensation for harassment or
mental agony, the court should direct the department concerned
to pay the amount to the complainant from the public fund
immediately, but to recover the same from those who are found
responsible for such unpardonable behaviour.
Title Lorem Ipsum

01 02 03
LOREM IPSUM NUNC VIVERRA PELLENTESQUE
DOLOR SIT AMET, IMPERDIET ENIM. HABITANT MORBI
CONSECTETUER FUSCE EST. TRISTIQUE
ADIPISCING ELIT. VIVAMUS A TELLUS. SENECTUS ET
MAECENAS NETUS ET
MALESUADA
FAMES.

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