1980 (4) TMI 321 - SC - Indian Laws

Summary

Issues Involved:
1. Applicability of Section 17(2) of the Defence of India Act.
2. Compliance with Section 175(3) of the Government of India Act, 1935.
3. Applicability of Section 70 of the Indian Contract Act.
4. Legality of the order under which the plaintiff company transferred its stock to G. Brothers.

Detailed Analysis:

1. Applicability of Section 17(2) of the Defence of India Act:
The core issue was whether the suit filed by the plaintiff company was barred by Section 17(2) of the Defence of India Act, which states: "Save as otherwise expressly provided under this Act, no suit or other legal proceeding shall lie against the Crown for any damage caused or likely to be caused by anything in good faith done or intended to be done in pursuance of this Act or any rules made thereunder or any order issued under any such rule." Both the trial court and the High Court rejected this contention, holding that the suit was not for damages or compensation but for the recovery of the price of goods supplied to G. Brothers. The Supreme Court agreed, stating: "We are clearly of the opinion that the suit is not for damages, etc., such as are contemplated by that Section."

2. Compliance with Section 175(3) of the Government of India Act, 1935:
The Union of India argued that the suit was not maintainable because the contract was not in writing and did not comply with Section 175(3) of the Government of India Act, 1935. The trial court held that the Kanpur Controller had undertaken the liability to pay for the goods and that the defendant could not escape liability even though the provisions of Section 175(3) were not complied with. The High Court concurred, stating that the agreement resulting from the correspondence was valid despite non-compliance with Section 175(3). It relied on Debi Prasad Srikrishna Prasad Ltd. v. Secretary of State and Section 70 of the Indian Contract Act to support this view.

3. Applicability of Section 70 of the Indian Contract Act:
The High Court's judgment heavily relied on Section 70 of the Indian Contract Act, which states: "Where a person lawfully does anything for another person 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." The High Court found that all three conditions for invoking Section 70 were met: the plaintiff company lawfully delivered the goods, did not intend to act gratuitously, and the defendant enjoyed the benefit. The Supreme Court upheld this view, rejecting the defendant's argument that no benefit was derived by the Union of India. The Court stated: "The Government must be held to have reaped full benefit of the delivery to G. Brothers."

4. Legality of the Order Under Which the Plaintiff Company Transferred Its Stock to G. Brothers:
The Union of India contended that the mandate issued by the Kanpur Controller was oral and thus the transaction fell outside the ambit of the law. The Supreme Court refused to entertain this argument, noting that it was a mixed question of fact and law not raised in the lower courts. The Court also pointed out that the written statement filed by the defendant stated that the fresh instructions were contained in a letter, contradicting the oral mandate argument. The Court concluded: "The legality of the order under which the plaintiff company transferred its stock to G. Brothers cannot be allowed to be questioned at this stage."

Conclusion:
The Supreme Court dismissed the appeal, affirming the judgments of the trial court and the High Court. The Court held that Section 17(2) of the Defence of India Act did not bar the suit, that non-compliance with Section 175(3) of the Government of India Act did not invalidate the agreement, and that Section 70 of the Indian Contract Act applied, obligating the Union of India to compensate the plaintiff company. The appeal was dismissed with costs.