The Indian Constitution, specifically Article 299, has clearly laid out the provisions concerning government contracts. Recently, the Supreme Court of India further clarified its interpretation, particularly about how these contracts are signed in the name of the President. This article will explore what government contracts are, the role of Article 299, and how the latest ruling by the Supreme Court affects these contracts.
Understanding Government Contracts
Government contracts are agreements initiated by the government for various reasons, ranging from construction projects to IT-related ventures. These contracts involve either the central government, a state government, or a government body on one side, with a private individual or entity on the other. They must adhere to the stipulations laid out in Article 299 of the Indian Constitution, ensuring scrutiny, accountability, fairness, transparency, competitiveness, and non-discrimination.
For a government contract to be valid, it must be expressed to be made by the Governor or the President and executed in writing by individuals designated or authorized by them.
The Role of Article 299 in the Constitution
Article 299 pertains to the form and manner of contracts made by or on behalf of the government of India or any state government. Its roots trace back to the pre-independence era where the government entered into contracts under the Crown Proceedings Act of 1947. This act had dictated that the Crown could not be sued in court for a contract.
Article 299 aims to delineate a specific procedure for making contracts to protect public funds and prevent unauthorized agreements. As per Article 299(1), such contracts must be written and executed by a person authorized by the President or the Governor. While Article 299(2) shields the President or the Governor from personal liability, it does not exempt the government from the legal provisions of the contract. Thus, both Union and states can be sued for civil wrongs committed by their officials.
Recent Supreme Court Ruling on Article 299
A recent case involving Glock Asia-Pacific Limited and the Centre brought to fore the implications of Article 299 in government contracts. The dispute was about the appointment of an arbitrator for a tender-related matter, with the government opposing the appointment of a retired High Court judge as the arbitrator.
The Supreme Court ruled that the arbitration clause — which mandated a government officer to act as the arbitrator — conflicted with Section 12(5) of the Arbitration and Conciliation Act, 1996. The court stressed that Article 299 pertains only to formalities that bind the government to contractual liability, not the substantive laws governing it.
Past Judgements Concerning Article 299
In the 1954 case of State of Bihar v Majeed, the Supreme Court ruled that a government contract must comply with the provisions of Article 299 and the requirements of the Indian Contract Act, such as offer, acceptance, and consideration. Like any individual, the Central or State Government is subject to the ordinary law of contract, given the formalities specified by Article 299 are met.
In a 1995 case involving Mrs. Aliakutty Paul and The State of Kerala, the court held that if a tender of a contract was accepted but not signed in the Governor’s name, it would not conform to Article 299. This decision underscored the rationale behind Article 299, emphasizing its role in protecting the government against unauthorized contracts.
With the Supreme Court’s clarification on Article 299’s implementation and its implications for government contracts, the legal terrain surrounding these contracts has been illuminated. This understanding will aid in mitigating legal disputes and ensuring a fair system of government contracting.
