The Supreme Court of India recently made a significant ruling stating that the government cannot claim immunity from the legal provisions of a contract made under the President’s name, as outlined in Article 299 of the Constitution. This essay aims to explore the essence of Article 299, its essential requirements for government contracts, its objectives, and the recent case that led to the Supreme Court’s decision.
Article 299 of the Indian Constitution:
a. Article 298 and its scope: Article 298 empowers the Centre and state governments to engage in trade, business, property acquisition, disposal, and contract-making for any purpose.
b. Manner of contracts under Article 299: Article 299 stipulates that all contracts made in the exercise of the executive power of the Union or a State must be expressed to be made by the President or the Governor of the State. It further requires that such contracts be executed on behalf of the President or the Governor by authorized individuals, following the prescribed procedures.
Essential Requirements for Government Contracts under Article 299:
a. Precedent from ‘K.P. Chowdhry v. State of Madhya Pradesh and Others’: This 1966 ruling established three conditions for a binding contract against the government: (1) the contract must be expressed to be made by the Governor or the Governor-General, (2) it must be executed in writing, and (3) the execution should be as directed or authorized by the Governor or the Governor-General.
b. Ensuring legitimate contracts: The objective of Article 299(1), as per the 1954 case of ‘Chatturbhuj Vithaldas Jasani v. Moreshwar Parashram & Ors’, is to establish a defined procedure for government contracts. This procedure prevents unauthorized or illegitimate contracts, ensuring the proper utilization of public funds.
The Recent Issue:
Glock Asia Pacific and the Ministry of Home Affairs Contract:
a. Contract and dispute: Glock Asia Pacific entered into a contract with the Ministry of Home Affairs to supply 31,756 Glock pistols. A dispute arose between the parties, leading Glock to invoke arbitration and nominate a retired Delhi High Court judge as the sole arbitrator.
b. Challenging the arbitration clause: The government objected to the nomination, citing a tender condition requiring an officer in the Law Ministry, appointed by the MHA Secretary, as the arbitrator in case of a dispute. Glock challenged this clause, arguing that it was unfair as one party was the MHA itself.
Supreme Court’s Take on the Matter:
a. Conflict with the Arbitration and Conciliation Act: The Supreme Court ruled in favor of Glock, highlighting that the arbitration clause allowed a serving employee of the Union of India, a party to the contract, to nominate another serving employee as the sole arbitrator. This contradicted Section 12(5) of the Arbitration and Conciliation Act, 1996.
b. Ineligibility of arbitrators: Section 12(5) of the Act states that individuals with specific relationships with the parties involved in the dispute are ineligible to be appointed as arbitrators. The court appointed former SC judge Justice Indu Malhotra as the Sole Arbitrator in the case.
c. Rejection of Article 299 reliance: The court dismissed the government’s reliance on Article 299, emphasizing that it only pertains to the formalities necessary to bind the government with contractual liability. The substantive law regarding the government’s contractual liability lies in the general laws of the land.
Important Points:
- Article 299 of the Indian Constitution 📜: Regulates government contracts and their legal provisions.
- Essential requirements for government contracts under Article 299:
- Expressed to be made by the President or Governor 📝
- Executed in writing ✍️
- Execution as directed or authorized by the respective authority 📋
- Objective of Article 299(1) 🎯: Prevents unauthorized or illegitimate contracts, protecting public funds.
- Recent issue: Glock Asia Pacific and Ministry of Home Affairs contract 🔫:
- Contract dispute leads to arbitration invocation 🔄
- Government objects to arbitrator nomination ⛔️
- Glock challenges the fairness of the arbitration clause ⚖️
- Supreme Court’s ruling on the matter 👨⚖️:
- Conflict with the Arbitration and Conciliation Act 🚫
- Ineligibility of serving government employees as arbitrators 🙅♂️
- Former SC judge Justice Indu Malhotra appointed as Sole Arbitrator 👩⚖️
- Dismissal of reliance on Article 299 🚫
- Article 299’s scope 🌐: Pertains to the formalities of contractual liability, while the substantive law lies in the general laws of the land.
Why In News
In a landmark ruling, the Supreme Court unequivocally stated that under Article 299 of the Constitution, the government cannot evade the legal obligations stipulated in a contract entered into under the President’s name. This precedent serves as a pivotal step towards ensuring accountability and upholding the rule of law in government-contractual relationships.
MCQs about Article 299 and Legal Provisions
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What is the purpose of Article 299 in the Indian Constitution?
A. To grant immunity to the government in all contracts
B. To establish a defined procedure for government contracts
C. To prevent private entities from engaging in business with the government
D. To limit the power of the President and Governors in contract-making
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According to the Supreme Court’s ruling, Article 299 of the Indian Constitution:
A. Defines the substantive law relating to contractual liability of the government
B. Provides complete immunity to the government in all contractual matters
C. Specifies the individuals eligible to be appointed as arbitrators
D. Outlines the general laws of the land regarding government contracts
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What were the essential requirements for government contracts as laid down in ‘K.P. Chowdhry v. State of Madhya Pradesh and Others’?
A. The contract must be executed in writing
B. The contract must be expressed to be made by the President or Governor
C. The execution should be as directed or authorized by the Governor or Governor-General
D. All of the above
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