(1) 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, as the case may be, and all such contracts and all assurances of property made in the exercise of that power shall be executed on behalf of the President or the Governor by such persons and in such manner as he may direct or authorise.
(2) Neither the President nor the Governor shall be personally liable in respect of any contract or assurance made or executed for the purposes of this Constitution, or for the purposes of any enactment relating to the Government of India heretofore in force, nor shall any person making or executing any such contract or assurance on behalf of any of them be personally liable in respect thereof.
Article 299 authorises the Government of India to enter into contract for any purpose subject to the mode and manner provided for it in article 299. A contract is binding on the Government of India if the following three conditions are fulfilled, that-
(a) it must be expressed to be made by the President or by the Governor of the State as the case may be;
(b) it must be extended on behalf of the President or the Governor as the case may be; and
(c) its execution must by such person and in such manner as the President or Governor may direct or authorise.
Bihar Eastern Gangetic Fishermen Co-operative Society Ltd. v. Sipahi Singh, MANU/SC/0060/1977 : AIR 1977 SC 2149: 1978 BLJR 22: (1978) 1 SCWR 268: (1978) 1 SCR 375. Failure to comply with these conditions nullifies the contract and renders it void and unenforceable. There is no question of estoppel or ratification of the provisions of article 299(1) of the Constitution.
(1) The Government of India may sue or be sued by the name of the Union of India and the Government of a State may sue or be sued by the name of the State and may, subject to any provisions which may be made by Act of Parliament or of the Legislature of such State enacted by virtue of powers conferred by this Constitution, sue or be sued in relation to their respective affairs in the like cases as the Dominion of India and the corresponding Provinces or the corresponding Indian States might have sued or been sued if this Constitution had not been enacted.
(2) If at the commencement of this Constitution-
(a) any legal proceedings are pending to which the Dominion of India is a party, the Union of India shall be deemed to be substituted for the Dominion in those proceedings; and
(b) any legal proceedings are pending to which a Province or an Indian State is a party, the corresponding State shall be deemed to be substituted for the Province or the Indian State in those proceedings.
Article 300(1) consists of three parts. The first deals with the question about the form and the title for a suit intended to be filed by or against the Government of India or Government of a State. The second part provideds, inter alia, that the Union of India or a State may sue or be sued in relation to its officers in cases like those in which the Dominion of India or a corresponding province or an Indian State as the case may be, might have sued or been sued if the Constitution had not been enacted. The third part provides that it would be competent to the Parliament or the Legislature of a State to make appropriate provisions in regard to the topic covered by article 300(1).
P&O Steam Navigation Co. v. Secretary of State for India, (1861) 5 Bom HCR App 1. The facts of the case were that a servant of the plaintiff's (company) was travelling from Garden Reach to Calcutta in a carriage driven by a pair of horses. The accident took place when the coach was passing through the Kidderpore dockyard which was Government Dockyard. Some Government workmen employed in the Government Dockyard were carrying a heavy piece of iron rod for the purpose of repairing a steamer. The men carrying the
iron rod were going in the middle of the road. When the carriage of the plaintiff drove up nearer the coachman gave a warning to the men carrying the iron rod and the coachman slowed its speed. The men carrying the iron rod attempted to get out of the way, those in front tried to go the one side of the road while those behind tried to go to the other side of the road. The consequences of this was a loss of the time, brought the carriage close up to them before they had left the centre of the road. Seeing the horses and carriage they got alarmed and suddenly dropped the iron rod and run away. The iron rod fell with a great noise resulting in injuries to one horse, which started the plaintiff's horses which thereupon rushed forwards violently and fell on the iron rod. The company filed a suit against the secretary of State in Council for the damages for injury to its horse caused by the negligence of the servant employed by the Government of India.
The Supreme Court held that the Secretary of State for India was liable for the damages caused by the negligence of Government servants, because the negligent act was not done in the exercise of sovereign function. The court drew a distinction between acts done in the exercise of 'sovereign power' and acts done in the exercise of 'non-sovereign power' that is, acts done in the conduct of undertaking which might be carried on by private person. The liability could only arise in case of 'non-sovereign functions'.
State of Rajasthan v. Vidhyawati, MANU/SC/0025/1962 : AIR 1962 SC 933: (1962) 2 SCA 362. The driver of a jeep owned and maintained by the State of Rajasthan for the official use of the Collector of a district, drove it rashly and negligently while bringing it back from the workshop after repairs and knocked down a pedestrian and fatally injured him. As a result of the injuries the pedestrian died. His widow sued the State of Rajasthan for damages.
The Supreme Court held that the State was liable and awarded damages. The accident took place while the driver was bringing it back from the workshop to the Collector's residence. It cannot be said that he was employed on task which was based on delegation of sovereign or government powers of the State. His act was not an act in the exercise of a sovereign function. The court said that the employment of driver of a jeep for the use of civil servant was an activity which was not connected in any manner with the sovereign power of the State at all.
Kasturi Lal Ralia Ram Jain v. State of Uttar Pradesh, MANU/SC/0086/1964 : AIR 1965 SC 1039: 1965 (2) SCJ 318: (1965) 1 SCWR 995: (1965) 1 SCA 809: (1965) 2 Cr LJ 144: (1965) 1 SCR 375. A person was taken into custody on suspicion of being in possession of State property and taken to police station. His property including certain quantity of gold and silver was taken from him and kept out in the Malkhana till the disposal of the case. The gold and silver was misappropriated by a police constable who fled to Pakistan. The appellant sued the State of Uttar Pradesh for return of the gold and silver, and in the alternative claimed damages for loss caused by negligence of the Meerut police. The State contended that no liability would accrue for acts committed by a public servant where such acts were related to the exercise of a sovereign power of the State. The Supreme Court held that the State was not liable.
N. Nagendra Rao and Co. v. State of Andhra Pradesh, MANU/SC/0530/1994 : (1994) 6 SCC 205: AIR 1994 SC 2663: 1994 AIR SCW 3753: JT 1994 (5) SC 572: 1994 SCC (Cri) 1609. The Supreme Court has held that when due to the negligent act of the officers of a State a citizen suffers any damage the State will be liable to pay compensation and the principle of sovereign immunity of State will not absolve him from this liability. The court held that in the context of modern concept of sovereignty the doctrine of sovereign immunity stands diluted and the distinction between sovereign and non-sovereign functions no longer exists.
Rudal Shah v. State of Bihar, MANU/SC/0380/1983 : AIR 1983 SC 1086: 1983 Cr LJ 1644: (1983) 4 SCC 141: 1983 UJ (SC) 759: 1983 SCC (Cri) 798. The court directed the State of Bihar to pay compensation of Rs. 35,000 to the victim of tortuous acts done by Government employees during sovereign functions. The petitioner already had completed his sentence but the prison officials did not take care to release him. He was kept in jail for 14 years even after his acquitted by the court.
Bhim Singh, MLA v. State of Jammu and Kashmir, MANU/SC/0064/1985 : AIR 1986 SC 494: 1986 Cr LJ 192: (1985) 4 SCC 677: 1986 SCC (Cri) 47: 1986 UJ (SC) 458: (1986) 1 APLJ (SC) 36. The Supreme Court awarded a sum of Rs. 50,000 to the petitioner as compensation for violation of his fundamental right of personal liberty under article 21 of the Constitution. The petitioner was an MLA was illegally arrested and detained in police custody and deliberately prevented from attending the session of the Legislative Assembly.
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