Can the govt claim immunity when entering contracts under the President’s name? Here’s what SC has ruled

Can the govt claim immunity when entering contracts under the President’s name? Here’s what SC has ruled

Context- The Supreme Court has held that the government, when entering into a contract under the President’s name, cannot claim immunity from the legal provisions of that contract under Article 299 of the Constitution, in a recent case.

(Credits- iPleaders)

A Bench led by Chief Justice of India (CJI) DY Chandrachud said, “Having considered the purpose and object of Article 299, we are of the clear opinion that a contract entered into in the name of the President of India, cannot and will not create an immunity against the application of any statutory prescription imposing conditions on parties to an agreement, when the Government chooses to enter into a contract”

What is Article 299 of the Constitution?

  • Article 298 grants the Centre and the state governments the power to carry on trade or business, acquire, hold, and dispose of property, and make contracts for any purpose, while Article 299 delineates the manner in which these contracts will be concluded.
  • Articles 298 and 299 came after the Constitution came into effect and the government entered into contracts even in the pre-independence era. According to the Crown Proceedings Act of 1947, the Crown could not be sued in court for a contract it entered into.
  • Article 299 of the Constitution provides that “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” and that all such contracts and “assurances of property made in the exercise of that power shall be executed” on behalf of the President or the Governor by persons in a manner as directed and authorised by them.
  • Further, the phrase ‘expressed to be made and executed’ under Article 299 (1) means that there must be a deed or contract in writing and that it should be executed by a person duly authorised by the President of the Governor on their behalf.
  • The objective behind Article 299(1), as per the 1954 top court ruling in ‘Chatturbhuj Vithaldas Jasani v. Moreshwar Parashram & Ors’, is that there must be a definite procedure according to which contracts must be made by agents acting on the government’s behalf; otherwise, public funds may be depleted by unauthorized or illegitimate contracts.
  • However, Article 299 (2) says that essentially, neither the President nor the Governor can be personally held liable for such contracts.

What are the requirements for government or state contracts?

  • In its judgement, the court referred to its 1966 ruling in ‘K.P. Chowdhry v. State of Madhya Pradesh. And Others’, which laid down essential requirements for government contracts under Article 299.
  • In that ruling, the top court had reiterated three conditions to be met before a binding contract against the government could arise, namely:

(1) the contract must be expressed to be made by the Governor or the Governor-General;

(2) it must be executed in writing

(3) the execution should be by such persons and in such a manner as the Governor or the Governor-General might direct or authorize.

Syllabus- Prelims; Current Affairs

Source- Indian Express