A contract between government and individuals must be executed in a formal document as per Section 175(3) of the Government of India Act, 1935, and cannot be established through correspondence.

1. On a difference of opinion between my brothers Nigam and Katju in First Appeal No. 2 of 1955 the following question of law has been referred to me by them under S.98(2) of the Code of Civil Procedure :
"Whether the terms of S.175(3) of the Government of India Act, 1935 , require the execution of a formal document or whether the contract can be culled from the correspondence passing between the parties ?"

2. The facts giving rise to this reference are as follows :
The State of Uttar Pradesh (hereinafter referred to as the respondent) owned and possessed two bungalows at Banramghat, Tahsil Fatehpur, district Bara Banki, known as the Works Manager's bungalow and the Works Superintendent's bungalow. These bungalows stood on the land belonging to the Oudh - Tirhut Railway Administration (hereinafter referred to as the O.T.R. Administration) and not the Government of U.P. The respondent offered to sell these bungalows for Rs. 19,965-6-6, their book value, to Thakur Dan Singh Bisht (hereinafter referred to as the appellant) by means of a telegram dated 23-12-1943. The offer was accepted by the appellant by means of a telegram as also by a confirmatory letter both dated 27th December, 1948. The respondent confirmed the sale on 12-1-1949. The appellant, however, did not pay the sale price nor did he take possession of the bungalows and sometime in July, 1949, refused to go through the sale. The respondent served a notice dated 28th of November, 1949, on the appellant and on the failure of the appellant to comply with the terms of the notice resold the two bungalows on 5-2-1950 for a sum of Rs. 6,250/-. Thereafter, the respondent fried the suit giving rise to this First Appeal for recovery of a sum of Rs. 14,762-6-5 made up by the inclusion of the sum of Rs. 13,715-6-6 the difference in the price agreed to be paid by the appellant and the one received by the respondent in the sate held on 5-2-1950, a sum of Rs. 1,044-3-0 claimed as maintenance charges arid Rs. 2-11-0 as miscellaneous charges. The total of these three items comes is Rs. 14,762-4-6 but a decree for a sum of Rs. 14,762-5-6 was claimed.

3. The suit was contested by the appellant, inter alia, on the plea that S.175(3) of the Government of India Act (hereinafter referred to as the Act) required the execution of a formal document of contract and inasmuch as it was not done in the present case, the respondent could not sue the appellant on the basis of letters and telegrams spelling out from them the contract between the appellant and the respondent to the effect that the appellant had agreed to purchase from the respondent the two bungalows mentioned above for a sum of Rs. 19,965-6-6.

4. In respect of this plea issue No. 7, which is reproduced below, was framed :
"7. Is the contract relied upon by plaintiff not valid and not enforceable for non - compliance with the provisions of S.175 of the Government of India Act as alleged in para 25 - A of the written statement and if so its effect ?"
The learned trial Judge answered this issue in favour of the respondent and against the appellant on the finding that the letters and the telegram "effected a valid contract between the parties within the meaning of S.175(3) of the Government of India Act of 1935 and the plaintiff is, therefore, competent to sue for damages for breach of this contract." The trial Court decreed the suit of the respondent for the recovery of a sum of Rs. 13,715-6-6 with proportionate costs on 11-10-1954.
Against that decree First Appeal No. 2 of 1955 was filed in this Court, which was heard by Nigam and Katju, JJ. and as already said earlier, the learned Judges differed on the question as to whether or not the respondent