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TMI Blog1932 (2) TMI 24X X X X Extracts X X X X X X X X Extracts X X X X ..... which the Government of Bombay agreed to share equally with the plaintiffs the expenses which the plaintiffs would incur on primary education in the city of Bombay over and above the plaintiffs' net budgetted expenditure for that purpose during the year 1917-18, the half share of Government being made payable at or before the end of each financial year following that in which the expenditure was incurred. In consequence of the contract so arrived at the plaintiffs incurred large expenditure in respect of primary education in the years 1918-19, 1919-20 and 1920-21, the expenditure incurred by them in each of these years being in excess of the net budgetted expenditure for the year 1917-18. The Bombay Government paid up their share of this excess expenditure in accordance with the bills submitted to them by the plaintiffs. Thereafter the Bombay Government invented excuses and made provisional payments only which were short of the bills which were submitted by the plaintiffs from time to time, with the result that an aggregate sum of ₹ 12,05,127-5-2 has remained unpaid and the plaintiffs are seeking to recover this amount together with interest from the Secretary of State f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... correspondence between the parties and/or the order No. 499 dated February 10, 1919, creating rights and obligations subject to the jurisdiction of and enforceable by a municipal Court ; that the correspondence and the order referred to amounted to an administrative act of the Executive, Government of Bombay, and whatever else was done or was to be done were administrative acts of Government and as such were acts of State which could not be interfered with by a municipal Court. Mr. Coltman on behalf of the plaintiffs has vigorously attacked the language of this amendment and contends that the plain meaning to be attached to it as it stands is not that the contract if proved created rights and obligations which were not subject to the jurisdiction of a municipal Court, as is contended for by the Advocate General, but that the correspondence and order of Government to which reference is made were acts of State which as such were not subject to the jurisdiction of or enforceable by a municipal Court. In that sense the previous clause denying that there was any contract would be mere repetition of the denial contained in paragraphs 1 and 2 of the original written statement and the sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ract are not entitled to any relief in respect of it. 5. After Mr. Coltman had opened the case for the plaintiffs for some days, the parties agreed that they would in the first instance take the Court's decision on issues Nos. 1 to 8 and 15 only as these issues did not require the taking of any oral evidence except perhaps on the question of executed consideration which was a mixed question of fact and law. As the documentary evidence already placed before the Court seemed to contain ample materials on the subject of the executed consideration relied on by Mr. Coltman, it was left for further consideration after hearing the Advocate General in reply whether any oral evidence was required. No application was made to me at the end of the Advocate General's reply for any oral evidence to be taken on this point. I understand, therefore, that both parties have dispensed with oral evidence so far as the preliminary issues before me are concerned. 6. In construing the correspondence on which reliance has been placed I will deal with it in the first instance as if no objection attached on the ground that the offer and acceptance said to be contained in it were not by persons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bombay the President was forwarding therewith a copy of the Schools Committee's letter No. 5056 dated October 5, 1917, together with a draft scheme laying down a programme of ten years preparatory to the introduction of free and compulsory primary education in Bombay. The letter proceeds: I am to request the attention of Government to the question of finance dealt with in paragraphs 6 to 10 of the letter and to express the hope of the Corporation that for the reasons given in the Schools Committee's letter Government will be pleased to agree to share from year to year one-third of the enhanced expenditure involved in giving effect to the Scheme, as suggested by the Schools Committee. 8. This letter appears to have been in the nature of a proposal made on behalf of the Municipality to Government requesting Government to share from year to year one-third of the enhanced expenditure which would be involved in giving effect to the scheme of primary education which the Schools Committee of the Municipality had framed. Government replied to this letter on November 29, 1918. The letter states that the Governor-in-Council after giving the question his deepest consideration h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on were made free and compulsory for the city of Bombay. Section 62 B was not to come into operation except at the instance of Government. The Advocate General contends, therefore, that there was no consideration for the offer made by Government. 11. The letter of Government, as I read it, seems to me to amount to more than a voluntary offer made out of charitable motives as the Advocate General contends. Government was interested in the welfare of the citizens of Bombay and recognising that the Corporation had not adequate means at its disposal to advance primary education so as eventually to make it both free and compulsory, it offered, by way of an inducement to the Municipality, to expend more moneys on primary education than it had hitherto done, to contribute one half of such extra expenditure. Section 61(q) of the City of Bombay Municipal Act must be taken with its natural limitations, viz., that the Municipality was to discharge its obligations towards primary education as far as its means permitted. Section 62B as it then stood had by implication recognised that the Municipality could not be expected to bear the whole burden of primary education if it became free and co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unicipality had made to Government was based upon a scheme. The scheme showed that the Municipality would be incurring a large expenditure in excess of what they were then doing. So far as the sum to be expended under the scheme was concerned it was quite definite and it could not be said that any uncertainty attached to it. Government in not agreeing to the scheme in all its details relied upon that part of the scheme in general which implied a promise on the part of the Municipality to spend a large sum of money on primary education over and above what they were then doing. Government's offer being based on that assumption it would be permissible, in my opinion, to look at the scheme which was then before Government in considering what meaning was to be attached to the expression large sum as used by Government. It is not alleged on behalf of the defendant that what the Municipality claims to have spent under the agreement would not amount to a large sum . The attempt is to rely upon a loose expression which Government have themselves used in this connection to show that the consideration promised by the Municipality was vague and uncertain and therefore unenforceable. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... further contention taken by the Advocate General is that Clause (4) of this letter constituted a condition which the plaintiffs did not accept when they accepted the offer. As I read Clause (4) of this letter, it does not seem to me to form part of the offer which was made. It seems to point to an omission in the scheme of the Schools Committee, and expresses Government's wish that the system which was then being followed of Municipal Schools' teachers being trained at the Government Training Colleges free of charge should be maintained. The letter does not call upon the Municipality expressly or by necessary implication to give its assent to it as part of the offer made. In the absence of a term to the contrary it would be assumed that the practice which prevailed at the date of the agreement of Municipal Schools' teachers being sent up for training to Government Training Colleges would be continued. 17. Exhibit B (collectively) shows that the offer of Government contained in this letter was placed before a meeting of the Corporation held on December 5, 1918, when a resolution was passed, which was as follows: ...2. That the President be requested to convey to L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esident's reply the Municipality approved of the proposed deletion of Section 62B, and merely suggested that the arrangement which had been arrived at by Government promising to contribute one-half of the additional expenditure might be embodied in the Municipal Act in. place of the first paragraph of Section 62B, the second paragraph being retained. The suggestion does not seem to me to be in the nature of a counterproposal. The offer is accepted unconditionally in the previous paragraph and what follows is merely a suggestion that the agreement arrived at may find a place in the Municipal Act. With regard to the second suggestion contained in the Government letter to amend Section 39 by increasing the number of members of the Schools Committee, that again, in my opinion, is no part of the offer but is merely an expression of intention on the part of Government in view of the coming expansion of primary education in Bombay under their agreement with the Municipality to increase by legislation the number of members to sixteen of whom twelve were to continue to be elected by the Corporation from among the Municipal councillors and the remaining four were to be selected by the Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in Council, which would have the effect of binding the parties as a concluded contract if those who professed to act respectively on behalf of the parties were vested in law with the power to bind their respective principals by the acts they purported to do on behalf of their respective principals. 22. I will now proceed to consider whether the agreement arrived at is binding upon the defendant. 23. It is conceded by Mr. Coltman that the contract which has been arrived at could not be enforced against the Bombay Municipality as it is not made on behalf of the Municipality by its Commissioner as required by Section 69A of the City of Bombay Municipal Act, the President of the Corporation having no such authority by law to bind the plaintiffs. It is pointed out by the Advocate General that the alleged contract contravenes also the provisions of Section 69C and Section 70 (1)(b) of the City of Bombay Municipal Act. These sections are mandatory and not merely directory. While conceding that the contract would not be enforceable against the plaintiffs, Mr. Coltman relies upon Section 71 of the City of Bombay Municipal Act which provides that a contract which has not been executed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therefore it was open to the defendant: before him to show that it was not binding on him inasmuch as it was not binding upon the plaintiff. Mr. Coltman contends that this ruling is not applicable to the present case because here the Court is concerned not. with an executory but with an executed contract. He relies upon Leake on Contracts, 8th Edn., pp. 6-7, where it is stated: An executed consideration is some act performed or some value given at the time of making the promise and in return for the promise then made: as where goods are delivered, or services rendered, upon credit, that is, upon a promise to pay for them at a future time; or where money is paid in advance for a promise given.An executory consideration is a promise to do or give something in return for the promise then made:. The contract with an executory consideration thus comprises two promises commonly described as mutual promises; the one promise forming the consideration for the other, and conversely. Consequently, contracts of this kind must be binding on both parties, otherwise the consideration for one of the promises fails, and the contract is then described as being void for want of mutuality;. 26. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore the Appeal Court. These observations appear in the judgment at p. 72 of the report and are as follows: This discussion leads us to consider a point, which was raised before us for the first time, and then only as a result of investigation made in the course of the hearing before us. It appears that the contract under which defendant 1 became entitled to levy and collect the tolls was not under seal, and so failed to comply with section 30 (of the District Municipal Act II of 1884) to which I have already alluded. The Advocate General, relying for this purpose on section 23 of the Indian Contract Act, has asked us to hold that there was no contract at all under which the plaintiff Municipality can claim. Apart from the fact that this is travelling outside the pleadings of the parties, we think, there is another reason why we cannot give effect to the contention. It is well recognized law in England that though a contract by a corporation must ordinarily be under seal, still where there is that which is known as an executed consideration, an action will lie though this formality has not been observed. Notwithstanding section 23 of the Indian Contract Act, we see no reason fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as to the form of corporate contracts. These are questions which will require consideration when a proper case arises. 30. The above observations made by Mr. Justice Crump regarding Abaji Sitaram v. Trimbak Municipality were not necessary as the learned Judge himself recognises for deciding the appeal before the division bench and were obiter. The object with which the observations were made was to draw attention to the ruling of the House of Lords in Young Co. v. Mayor and c of Royal Leamington Spa with which the remarks of the learned Chief Justice seem to be in conflict and to suggest that the remarks of the learned Chief Justice were in the nature of obiter. A further point seems to be thrown out for consideration in an appropriate case when it arises, viz., whether a contrary ruling of the Appeal Court should be allowed to override the clear provisions of a statute. With great respect it seems to me that Mr. Justice Crump was right, sitting in the Appeal Court as he did, to throw doubt on the validity of the observations made by the learned Chief Justice in Abaji Sitaram v. Trimbak Municipality. With great respect I agree with Mr. Justice Crump that these observations of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Those observations are as follows (p. 8): Their Lordships do not think that there is anything either in the law of India or of England inconsistent with it, but, upon the contrary, that these laws follow the same rule. In a suit, said Lord Selborne in Maddison v. Alderson founded on such part performance (and the part performance referred to was that of a parol contract concerning land) the defendant is really 'charged' upon the equities resulting from the acts done in execution of the contract, and not (within the meaning of the Statute of Frauds) upon the contract itself. If such equities were excluded, injustice of a kind which the statute cannot be thought to have had in contemplation would follow. The Lord Chancellor then enumerates a series of acts referable to the parol contract, and he adds,' the matter has advanced beyond the stage of contract; and the equities which arise out of the stage which it has reached cannot be administered unless the contract is regarded'. Many authorities are cited in support of these propositions from English and Scotch law, and no countenance is given to the proposition that equity will fail to support a transaction clothe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cable in India. In the former case the appeal was dismissed upon the grounds that the contract to convey had been made and that at the relevant date no written conveyance was required, the Transfer of Property Act, 1882, not having been passed. In the latter case the decision rested entirely on the fact that a valid contract had been made and was enforceable by the appellant. In each case, however, the judgment contains statements to the effect that even if the contract, in question had been incomplete, the acts of the parties had been such that equity would in some way have bound the parties. Their Lordships do not understand these dicta to mean more than that equity may hold people bound by a contract which, though deficient, in some requirement as to form, is nevertheless an existing contract. Equity does this, as before stated, in the case of a verbal contract for the sale of land which has been partly performed. Their Lordships do not understand the dicta to mean that equity will hold people bound as if a contract existed, where no contract was in fact made; nor do they understand them to mean that equity can override the provisions of a statute and (where no registered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Government of India Act (5 6 Geo. V. c. 61; 6 7 Geo. V. c. 37; and 9 10 Geo. V. c. 101), Section 30. The substantial provisions of this section were in force at the date of the contract relied upon. Section 30(1) of this Act provides that: any local Government may on behalf and in the name of the Secretary of State in Council...make any contract for the purposes of this Act. 39. Sub-section (2) of Section 30 requires that Every...contract made for the purposes of Sub-section (1) of this section shall-be executed by such person and in such manner as the Governor-General in Council by resolution directs or authorises, and if so executed may be enforced by or against the Secretary of State in Council for the time being. 40. It is conceded by Mr. Coltman that the terms of this section are mandatory and not merely directory. It will be observed that a paramount condition laid down in this section for such a contract is that the contract should be on behalf and in the name of the Secretary of State in Council. In the correspondence on which reliance has been placed, it nowhere appears that the Bombay Government were purporting to act on behalf and in the name of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contract should be evidenced by a formal document in the nature of an indenture or deed to which the Secretary of State in Council is made a party and not merely by correspondence. In my opinion it would be forcing the language of the section too far to say that a contract could be entered into on behalf and in the name of the Secretary of State in Council by means of correspondence. Apart from this consideration, the contract, as disclosed in the correspondence, cannot bind the Secretary of State in Council as it would appear it has not been entered into on behalf and in the name of the Secretary of State in Council. 43. In pursuance of Section 30, Sub-section (2), of the Government of India Act, the Governor General in Council has by resolution directed and authorised certain officers of Government holding such capacity to execute contracts on behalf and in the name of the Secretary of State in Council. The resolution which was in force at the date of the contract relied on is to be found in the Supplement to the Gazette of India for 1913, at p. 1195, and is made in the exercise of the powers conferred by Section 2 of the East India Contracts Act, 1870, (33 34 Vic. c. 59) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the school houses being legally vested in the Municipality and the Municipality being under a duty to provide the Schools Committee with funds to defray the expenses of primary education. This argument seems to lose sight of certain considerations which arise on an interpretation of the several provisions of the City of Bombay Municipal Act. Under Section 61(q) a statutory duty is cast upon the Municipality of maintaining, aiding and suitably accommodating schools for primary education subject always to the grant of building grants by Government in accordance with the Government Grant-in-aid Code for the time being in force. Under Section 39 of the same Act a statutory duty is cast upon the Municipality to appoint a Schools Committee of sixteen members for the purpose of giving effect to the provisions regarding primary education. By Section 4 of the same Act, it is provided that the Municipal authorities charged with carrying out the provisions of this Act are : (a) a Corporation; (b) a Standing Committee; (c) a Municipal Commissioner. The Schools Committee is not included in this list. The effect of Section 4 of the City of Bombay Municipal Act seems to be that the whole duty ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons within the meaning of Sub-clause (18) of Clause N. The Municipality, in my judgment, must be regarded with reference to their primary schools to be managers of such schools. The contract relied on would, therefore, come under Sub-clause (18) of Clause N, and Sub-clause (1) of clause N would not be applicable. 46. Mr. Coltman has argued that Government by their conduct throughout the correspondence have indicated that the matter was one of considerable importance which could not be dealt with by a subordinate officer like the Director of Public Instruction, but required the weight and prestige which attaches to the position of a Secretary to Government. The Municipality too according to this contention indicated by their conduct that they in their turn attached considerable importance to the proposal which Government had made and thought it to be more in keeping with the dignity of the situation that the proposal should not be accepted by the Municipal Commissioner in the ordinary course, but by the President on behalf of the Corporation. In my judgment by such conduct neither the Municipality nor Government could waive a statutory provision which is intended for their re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se on which Mr. Coltman strongly relied for this part of his argument is the case of Mahomed Musa v. Aghore Kumar Ganguli. I have had occasion in the earlier part of this judgment to state that this case has been dissented from in Ariff v. Jadunath Majumdar : see the observations of Lord Russell of Killowen at pp. 103 and 104 of his judgment. 49. Having regard to all these considerations, with great respect, the observations of the learned Chief Justice do not seem to be the correct law, and, as they are merely obiter, in my judgment, I am not bound to give effect to them in the present suit. 50. Mr. Coltman has next relied on the case of Kedar Nath Bhattacharji v. Gorie Mahomed (1886) I.L.R. 14 Cal. 64 where it was held that a suit would lie to recover a subscription promised, the subscriber knowing that on the faith of his and other subscriptions, an obligation was to be incurred to a contractor for the purpose of erecting a building to be paid for out of the moneys subscribed. Pollock and Mulla in their Commentary on the Indian Contract Act, 6th Edn., p. 18, have thus analysed this case : Questions may sometimes arise whether the thing done by the plaintiff claiming und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ses the Municipality has incurred large liabilities, and therefore applying the ruling in this case they should be held liable in respect of their promise. This authority does not seem to help the plaintiffs to meet the defendant's case on the point that the contract relied on as binding on the defendant was executed by a person who was not entitled to act on defendant's behalf in respect of a contract of the nature relied on in this suit. The authority of this case, in my opinion, is not applicable to the present suit. 52. Mr. Coltman has next relied upon the case of Carlill v. Carbolic Smoke Ball Company [1893] 1 Q.B. 256. It is contended with great force that the action of Government as disclosed in their correspondence amounted to an offer, which offer by being acted upon by the Municipality has been accepted and a valid contract has been concluded. I am unable to appreciate how this case can help Mr. Coltman's argument on the point which I am, now considering. It is clear that there has been no advertisement on the part of Government inviting the public at large to fulfil certain conditions upon the fulfilment of which they would become entitled to a reward. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... over the territories in India from the East India Company. It was then enacted that the liability of the Secretary of State for India in respect of future transactions was to be the same as was that of the East India Company before its enactment. The Government of India Act of 1915 by Section 32, Clause (2), reproduces the same provisions. Relying upon these statutes, the Advocate General contends that the transaction relied on was not in the nature of a commercial transaction for which the Secretary of State in Council could be made liable as on a contract but was in the nature of an act of State. He has cited the following cases in support of the distinction which he urges the Court to draw between an act of the Secretary of State which is commercial in its nature and an act of his which is undertaken in the discharge of the sovereign or administrative functions of the State:- P. O.S.N. Co. v. Secy. of State for India (1861) 5 B.H.C.R. (Appx.) 1 : S.C. Borukes Rep., Part VII p. 166, Nobin Chunder Dey v. The Secretary of State for India (1875) I.L.R. 1 Cal. 11, Mclnerny v. Secretary of State for India (1911) I.L.R. 38 Cal. 797, Kessoram Poddar Co. v. Secretary of State for Indi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to consider that the contract here relied on is not one between Government on the one hand and a foreign subject on the other in time of war, but between Government and its own subject in time of peace. An act of State, as generally understood, is a term which is not applicable to an action of the Sovereign towards its own subject in its own territory in time of peace. The expression is usually applied to an action of the Sovereign towards foreign subjects whether it be in time of war or in time of peace. There can be an act of State as between the Sovereign and its own subject in time of war. It would be a misnomer, in my opinion, to call the administrative acts of a Sovereign against its own subjects in time of peace as acts of State and to claim immunity in respect of them although they may amount to a contract in the ordinary sense between the Sovereign and his subject. 55. The Advocate General has contended that all administrative acts of Government, including contracts with its subjects if they do not relate to a commercial transaction, would amount to acts of State over which the municipal Courts can have no jurisdiction. He has contended that under the Government of Ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld seem to indicate that the parties were entering into a contract. But it must be observed that the plaintiffs never insisted upon a formal contract being drawn up. No suggestion was made on their behalf that the Commissioner of the Municipality and the Director of Public Instruction should meet and execute a formal agreement which would be under the seal of the Corporation and would conform to the formalities which are necessary for a contract on behalf and in the name of the Secretary of State in Council. The Municipality raised no objection to the offer on behalf of Government being signed by a Secretary to Government instead of the Director of Public Instruction. In accepting the offer the Corporation directed its President to communicate their acceptance to Government. Had the plaintiffs considered the transaction they were entering into to be in the nature of a binding contract they should have authorised the Commissioner to enter into a proper contract with Government on the lines of their offer contained in their Secretary's letter. In the course of the correspondence the plaintiffs suggested to Government that the provisions of Section 62B of the City of Bombay Munic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2), 52, 72A, 72B and 72D. Section 56 of the Indian Contract Act provides that a contract to do an act which, after the contract is made, becomes impossible, becomes void when the act becomes impossible. The argument of the Advocate General seems to omit to consider that the plaintiffs are seeking to make the Secretary of State in Council liable in respect of the contract on which they are relying. The Secretary of State in Council continues as a corporate sole and his liability extends to the revenues of all India and not merely to provincial revenues. If a valid contract was entered into on behalf of the Secretary of State, it would be binding on him although the constitution of the provincial Government may have since changed. It would be presumed in such cases that the Secretary of State in Council would make all necessary arrangement to see that the successors of the Government who originally foisted liability upon him have taken over the burden from their predecessors. There is no evidence before me to show that the Bombay Government have made any effort to include the amount which the Bombay Municipality was claiming as Government's contribution towards the expenditure fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before the Court. The complaints made under these heads do not appear to me to be of a sufficiently serious nature and could be easily adjusted if the parties were inclined to be reasonable. I have not considered it necessary to have further evidence on this point as the evidence already on the record appears to me to be ample and no useful purpose is to be served by going more deeply into the said subject of these undignified squabbles between Government and the Municipality on matters falling under the three heads. It was unfortunate for the plaintiffs that they came to Court without properly considering their legal position in respect of this contract and it was still more unfortunate for them that the written statement which was originally filed on behalf of Government gave no indication that the Secretary of State was relying on any technical defences which he was entitled to take. After the written statement was amended the Municipality should have reconsidered their position and not persisted with their claim as they have done before me in this suit. They must have realised that some of the points raised by the amended written statement would be fatal to their claim. As it ..... X X X X Extracts X X X X X X X X Extracts X X X X
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