Suits by the State Government against the defendants were sustainable even if the contracts were void, and the defendants were bound to restore the advantage received under the agreement or make compensation for it to the State Government.

Headnote:
Contracts - Government Contracts - S.175 (3) of the Government of India Act, 1935, and Art.299 (1) of the Constitution - Contracts made in the exercise of the executive authority of the Federation or of a Province - Contracts made in the exercise of the executive power of the Union or of a State - Suits against State Government or the Central Government based on an alleged contract - Contracts not embodied in an agreement entered into by the President or the Governor, as the case may be and executed on behalf of the President or the Governor in the manner prescribed and by the authority empowered to do so - Suits not maintainable - Doctrine of mutuality - Exception to the rule that a contract required under seal is not enforceable by or against the corporation - Contracts fully executed on the part of the corporation - Suits by the corporation for enforcing the promise of the other contracting party sustainable - S.65 of the Indian Contract Act - S.70 of the Contract Act - Suits by the State Government sustainable even if the contracts are void - Claims for Board's Overhead Charges and interest disallowed - Claims for difference in prices on the stocks determined to be in existence on 27 111948 allowed - Costs - Parties to bear their respective costs throughout
Fact of the Case:

The State of Kerala filed suits against several defendants for the amounts specified in the plaints, alleging that the defendants were appointed as their agents for the purchase of paddy. The defendants protested and refused to execute written agreements. The Government fixed enhanced prices for paddy and directed the collection of the difference between existing and revised prices from the stocks of the defendants. The defendants sold the paddy at the enhanced prices but did not agree in writing to pay the difference to the Government. Requisition orders were issued to the defendants for the sale of their stock of paddy to the Government. The security amounts were later returned to the defendants. The defendants contended that there were no contracts enforceable at law against them. They argued that S.91 of the Evidence Act was a bar to plead and prove the terms of the contracts and that the alleged contracts were unenforceable and void under S.175 (3) of the Government of India Act, 1935, and Art.299 (1) of the Constitution.
Finding of the Court:

The court held that the defendants had accepted the terms of the proposal at the last moment before they started selling the goods at the enhanced prices, and that there was an agreement. S.91 of the Evidence Act was held not to be a bar to the sustainability of the suits. The court also held that the suits by the State Government were sustainable even if the contracts were void, and that the defendants were bound to restore the advantage received under the agreement or make compensation for it to the State Government. The court disallowed the claims made by the State for Board's Overhead Charges and interest up to the dates of the suits. The court remitted the case to the trial court to determine the stocks that were in existence with each of the defendants on 27 111948 and to pass a decree for the difference in the prices on the stocks determined to be in existence on that date.
Issues: The main issues were whether the suits by the State Government against the defendants were maintainable, whether the contracts were enforceable, and whether the claims made by the State for Board's Overhead Charges and interest were sustainable.
Ratio Decidendi: The court held that the suits by the State Government were sustainable even if the contracts were void, and that the defendants were bound to restore the advantage received under the agreement or make compensation for it to the State Government. The court disallowed the claims made by the State for Board's Overhead Charges and interest up to the dates of the suits. The court remitted the case to the trial court to determine the stocks that were in existence with each of the defendants on 27 111948 and to pass a decree for the difference in the prices on the stocks determined to be in existence on that date.
Final Decision: The court disallowed the claims made by the State for Board's Overhead Charges and interest up to the dates of the suits. The court remitted the case to the trial court to determine the stocks that were in existence with each of the defendants on 27 111948 and to pass a decree for the difference in the prices on the stocks determined to be in existence on that date. The court directed the parties to bear their respective costs throughout.

Judgment :-

1. These twelve appeals are by the defendants in O. S. Nos. 66, 62,124, 58, 59,125, 61, 121, 126, 122, 123 & 60 of 1955 on the file of the Principal Subordinate Judge of Kozhikode. The respondent in all these appeals is the State of Kerala. The suits were instituted by the State against the several defendants in the suits for the amounts specified in the plaints. The suits have been decreed.

2. The respondent in these appeals, the State of Kerala, alleged that the defendants in the various suits were appointed as their agents for the purchase of paddy, determined to be surplus to the requirements of producers in the delta area of West Godavari and Kistna Districts. In proof they relied on a notification dated 10-3-1948 issued by the Collector, West Godavari District,Ext. A-16. The schedule to Ext. A-16 mentioned the names of 22 such agents and the defendants in the suits mentioned above are 8, 9,11,13 to 11 and 20 to 22 mentioned in that schedule. A similar notification was issued by the Collector of Kistna District on 28 61948, and 8, 9,11,13 to 18, 20 & 21 mentioned in that notification are 11 of the twelve defendants in the various suits out of which these appeals arise. Ext. B-2 is a memorandum sent with Ext. A-16 to the District Supply Officers, Revenue Divisional Officers, Tahsildars, Deputy Tahsildars, Grain Purchase Tahsildars and Taluk Supply Officers for information that the persons mentioned in the notification, Ext. A-16, have been appointed as procuring agents for the purchase of paddy in the West Godavari District. The District Supply Officer was required by Ext. B-2 to collect the necessary deposits immediately from the dealers and he was requested to get the necessary agreements executed and was directed to issue authorisations to them to commence their business. Five of these dealers executed agreements, which are Exts. A-17 to A-20 and A-27. These dealers agreed to abide by all the provisions prescribed from time to time by or under the said schemes and any directions issued thereunder. They also undertook to sell the stocks of paddy, rice or millets, to the persons to whom they were directed to sell and that at such rates as may be prescribed from time to time. There was also the provision to deposit certain sums of money as security for the fulfilment of the undertaking. The agreements further provided for the forfeiture of the deposits on any breach to comply with the provisions of the agreement and regulations and duties prescribed from time to time under the intensive procurement and/or informal rationing scheme. Ext. A-26 is a request by ten of those dealers addressed to the Collector, Malabar, for orders for the release of the paddy which they said they had procured pursuant to Exts. A-17 to A 20 and A-27 and furnished certain information for fixing the selling price. Agreements similar to Exts. A-17 to A-20 and A-27 have not been produced in the case of dealers other than those who executed those agreements, i. e. the appellants in A. S. Nos. 655, 664 to 667, 669 and 732. It is however, agreed by the parties that the terms and conditions on which the other dealers acted were the same as those contained in those agreements. The wholesale issue price of paddy was fixed by Ext. A-29 and this was communicated to the dealers.

3. The Government by G. O. (MS) 1048 (Food Department) dated 19 111948, fixed the fair price of foodgrains for the new Khariff year 1948-49 and addressed Ext. A-66 communication to the Board of Revenue. It is stated therein that Government have decided to fix increased prices as indicated in Annexure I to Ext. A-66 and that "the difference between the. existing prices and revised prices now fixed" should be collected on the stocks of the wholesalers and retailers as on the evening of the 20th of November 1948, as also a surcharge of twelve annas per maund of rice. The procedure suggested for the collection of the above dues was:

"The stocks with all stockholders (whether mill

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Judicial Analysis

1963 Supreme(Ker) 18

Suits by the State Government against the defendants were sustainable even if the contracts were void, and the defendants were bound to restore the advantage received under the agreement or make compensation for it to the State Government.

Cases Referred (1)

Judicial Analysis