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LAW OF CONTRACTS

PROJECT ON:

(FINAL DRAFT)

PUBLIC LAW REMEDY IN GOVERNMENT CONTRACTS

I express my gratitude and deep regards to my teacher for the subject, for giving me such
a challenging topic and also for her exemplary guidance, monitoring and constant
encouragement throughout the course of this thesis.

I also take this opportunity to express a deep sense of gratitude to my seniors in the college
for their cordial support, valuable information and guidance, which helped me in completing
this task through various stages.

I am obliged to the staff members of the Madhu Limaye Library, for the timely and valuable
information provided by them in their respective fields. I am grateful for their cooperation
during the period of my assignment.

Lastly, I thank almighty, my family and friends for their constant encouragement without
which this assignment would not have been possible.
CONTENTS
INTRODUCTION ..................................................................................................................... 4
FORMATION OF CONTRACT ............................................................................................... 5
CONTRACT MUST BE IN WRITING .................................................................................... 6
EXECUTED BY AUTHORISED PERSON ............................................................................. 6
CONTRACTS NOT IN CONFORMITY WITH ARTICLE 299 (1) ........................................ 6
RESTITUTION.......................................................................................................................... 7
NO PERSONAL LIABILITY ................................................................................................... 7
CONTRACTUAL LIABILITY ................................................................................................. 8
FAIRNESS IN GOVERNMENT CONTRACTS ...................................................................... 8
REASONABLENESS ............................................................................................................... 9
ARTICLE 299 AND EQUITABLE ESTOPPEL ...................................................................... 9
POSITION IN OTHER COUNTRIES .................................................................................... 10
Britain ................................................................................................................................... 10
United States of America ..................................................................................................... 10
Australia ............................................................................................................................... 10
CRITICAL ANALYSIS .......................................................................................................... 11
CONCLUSION ........................................................................................................................ 17
REFERENCES.........................................................................................................................18
INTRODUCTION

In modern state, whatever be the form of government, the individual is affected in his
everyday life and in the exercise of his civil rights by acts of the State and its officials in
various spheres and in different ways. Some of these acts are done by the State as the
sovereign while others are done by the State in trading and other capacities in the same
manner as a private individual does.1

Hence, the subject of government contracts has assumed great importance in the modern
times. In the modern era of a welfare state, government's economic activities are expanding
and the government is increasingly assuming the role of the dispenser of a large number of
benefits. Today a large number of individuals and business organisations enjoy largess in the
form of government contracts, licenses, quotas, mineral rights, jobs, etc. This raises the
possibility of exercise of power by a government to dispense largess in an arbitrary manner.
Therefore, there is a necessity to develop some norms to regulate and protect individual
interest in such wealth and thus structure and discipline the government discretion to confer
such benefits.

A contract is an agreement enforceable by law, which offers personal rights, and imposes
personal obligations, which the law protects and enforces against the parties to the agreement.
The general law of contract is based on the conception, which the parties have, by an
agreement, created legal rights and obligations, which are purely personal in their nature and
are only enforceable by action against the party in default.2 Section 2(h) of the Indian
Contract Act,1872 defines a contract as "An agreement enforceable by law". The word
"agreement" has been defined in Section 2(e) of the Act as "every promise and every set of
promises, forming consideration for each other." A contract to which The Central
Government or a State Government is a party is called a "Government Contract".

Governments Contracts that is the contract in which Government or some authority is one
party and private individual is the other party. Government Contracts have come to assume a
very significant place and great importance in modern economy. “To-day the Government, is

1
Basu, D. D., Administrative Law, 6th Ed., Kamal Law House, Kolkata, at p. 371
2
Avatar Singh, Contract and Specific Relief, 10th Ed., Eastern Book Company, Lucknow,2008atp.6
a welfare State, is the regulator and dispenser of special services and provider of a large
number of benefits, including jobs contracts, licences, quotas, mineral rights etc. The
Government pours forth wealth, money, benefits, services, contracts, quotas and licences.
The valuables dispensed by Government take many forms, but they all share one
characteristic. They are steadily taking the place of traditional forms of wealth. ”

Features of Government Contract:

i. The policies sought to be achieved by the contracts;

ii. The importance from a public interest point of view of the subject matter, and of the need
for flexibility and control; and

iii. The large amounts of public money often involved .

Thus there is a need to develop some norms to protect the individual interest in such wealth.
The basic question is to regulate structure and discipline government discretion to confer
such benefits.

FORMATION OF CONTRACT
The law relating to the Government contracts is provided under Article 299 of the
Constitution of India. Article 299 (1) reads as follows: “All the 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 such contracts and all
assurances of property made in the exercise of that power shall be executed on behalf of
President or the Governor by such persons and in such manner as he may direct or authorise.”
Article 299 (1) of the Constitution derives its Source from Section 173 (3) of The
Government of India Act 1935.

Article 299 (1) lays down three requisite conditions for the formation of Government
Contacts which are as follows, i. All the Contracts shall be expressed to be made by the
President or by the Governor as the case may be. ii. All such Contracts and assurances of the
property made in the exercise of the executive power shall be executed on the behalf of the
President or the Governor as the case may be. iii. All such Contacts must be executed by such
person and in such a manner as may be authorised or directed by the President or Governor.
“It is clear that the Parliament intended in enacting the provision contained in s. 175(3) that
the State should not be saddled with liability for unauthorised contracts and with that object
provided that the contracts must show on their fact that they are made on behalf of the State,
i.e., by the Head of the State and executed on his behalf and in the manner prescribed by the
person authorised.

CONTRACT MUST BE IN WRITING


In order to be valid under Article 299(1) of the Constitution, a contract has to be writing. In
Article 299 (1) word “executed” is used which written Contract is necessary. Thus oral
contract is no contract at all for the purpose of Article 299 (1). Now the question arises
whether the contract should be written on a formal document or mere correspondence
through letters or written offer and acceptance is sufficient. In Union of India v. A. L. Rallia
Ram , Supreme Court upheld the validity of a contract entered into between the government
of India and Respondent through mere correspondence.

EXECUTED BY AUTHORISED PERSON


Under article 299 (1) Contract has to be entered on the behalf of the Government by the
person authorised for that purpose by the President or Governor as the case may be. A
contracted executed by a person not authorised for that purpose is no contract, hence null and
void. Government can only held bound by the contracts which are entered and executed by
the authorised authority. Article 299 (1) does not prescribe any particular mode to confer
authority on a person does not prescribe any particular mode to confer the authority on a
person to execute the contract on the behalf of the government.

CONTRACTS NOT IN CONFORMITY WITH ARTICLE 299 (1)


The general proposition is that no legal relationship will ensue from a contract which is not in
conformity of article 299 (1), such a contact is void and unenforceable both sides. Nether
Government nor the private Contracting party is bound by the contract which does not
comply article 299 (1). However there arise two very important questions. First is that
whether government can ratify the contacts not in conformity with article 299 (1). And
second is that whether a contract not in conformity with article 299 (1) can be enforced
against the officer signing the contract because of section 230 (3) of Indian Contract Act.
Earlier a view was expressed that when a contract was not in conformity of article 299 (1),
the exemption of 299 (2) would not apply to the officer executing the contract and it could be
enforce against him personally under section 230 (3). In chatturbhuj Case Supreme Court
ruled that “There can be no doubt that the Chairman of the Board of Administration acted on
behalf of the Union Government and his authority to contract in that capacity was not
questioned.

RESTITUTION
One very important which need a consideration here is that whether one can recover any
payment made by him to the Government under a contract which is not in conformity with
Article 299 (1). What is the base of restitutory claim against the government. For instance a
person pays tax under a tax law which is ultra vires, whether he can claim refund of the
amount paid under a void statute? These cases relate restitution to the public law doctrine of
ultra vires. No charge can be levied by the administration without the authority of law so any
payment in response to an unlawful official demand ought to be refunded unless there is a
very good reason to the contrary. For some time however the courts are moving away the
broad ultra vires principle to the narrow principle of restitution as contained in section 72 of
Indian Contract Act There is no distinction made under section 72 between mistake of fact
and mistake of law. However Supreme Court in S. T. O v. Kanhaiya Lal Mukand Lal Saraf
ruled that the expression “Mistake” under section 72 is wide enough to include both mistake
of fact and mistake of law. In State of Madhya Pradesh v. Bhailal Bhai sales tax were being
levied by the Government which the petitioner made the payment of tax later, the tax was
held to be unconstitutional. Applicability of Doctrine of Estoppel to Government Contracts:
So far law has been made clear that if effect is given to the contract which is not in
conformity with Article 299 (1) it will amount to by-passing a very important Constitutional
provision. A contract which is not in conformity with article 299 (1) is void, it cannot be
enforced against any party either government or private party . If the contention of the
respondent regarding the ratification and estoppel is accepted that would render a very
important provision useless, which is a safeguard for general public.

NO PERSONAL LIABILITY
Article 299 (2) of the Constitution protects the President and the Governor from personal
liability. It says that “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 ”. The same is the law in England. In Macbeath V.
Haldimand3, which arose out of supplies of stores for a fort under the control of the
Government of Qubec, it was held that public officers cannot be sued either personally or in
their official capacity, for contracts made by them in their official capacity.

CONTRACTUAL LIABILITY
In order to protect the innocent parties, the courts have held that if government derives any
benefit under an agreement not fulfilling the requisites of Article 299(1), the Government
may be held liable to compensate the other contracting party under S.70 of the Indian
Contract Act, on the basis of quasi contractual liabilities, to the extent of the benefit received.
Section 70 lays down three conditions namely:
1. a person should lawfully do something for another person or deliver something to him;
2. in doing so, he must not intend to act gratuitously; and
3. the other person for whom something is done or to whom something is delivered must
enjoy the benefit thereof.
If under a contract with a government, a person has obtained any benefit, he can be sued for
the dues under Section 70 of the Act though the contract did not confirm to Article 299 4 and
if the Government has made any void contracts, it can recover the same under Section 65 of
the Indian Contract Act5.

FAIRNESS IN GOVERNMENT CONTRACTS


Subject to the applicable law of contract the Government as a contracting party must stand as
any other party to the contract, it has been held that Government must comply eith certain
requirements of public law such as fundamental rights, particularly right to equality, not to be
complied by non-government contracts6. Appearance of public justice is as important as
doing justice. Nothing should be done which gives an appearance of bias, jobbery or
nepotism7. State owned or public owned properties are not to be dealt with at the absolute

3
1934 AC 176.
4
State of Orissa v Rajballav, AIR 1976 Ori 79
5
Pannalal v Deputy Commissioner, AIR 1973 SC 1174; see also Union of India v J.K Gas Plant, AIR 1980 SC
1330.
6
Ramana Dayaram Shetty v. International Airports Authority, (1979) 3 SCC 489.
7
Shri Sachidanand Pandey v State of W.B., AIR 1987 SC 1109
discretion of the executive. Certain principles have to be observed in accordance with the
public interest.8

REASONABLENESS
The principle of reasonableness and rationality which is legally as well as philosophically an
essential element of equality or non arbitrariness is projected by Article 14 and it must
characterize every State Action, whether it be under the authority of law or in exercise of
executive power without making of law. The state cannot , therefore , act arbitrarily in
entering into relationship, contractual otherwise with a third party, but its action must
conform to some standard or norm which is rational an non discriminatory. The action of the
Executive Government should be informed with reason and should be free from
arbitrariness. It is settled law that the rights and obligations arising out of the contract after
entering into the same is regulated by terms and conditions of the contract itself9. In a
democratic society governed by the rule of law, it is the duty of the State to do what is fair
and just to the citizen and the State should not seek to defeat the legitimate claim of the
citizen by adopting a legalistic attitude but should do what fairness and justice demand10.

ARTICLE 299 AND EQUITABLE ESTOPPEL


It is open to the party which has acted on a representation made by the Government to claim
that the Government shall be bound to carry out the promise made by it even though the
promise is not recorded in the form of a formal contract as required by Article 299 of the
Constitution. For the application of this principle, it is necessary to establish that there has
been a promise or representation on the part of the Government relying on which thecitizen
has acted to his detriment. The Central Government under the Export Control Scheme made
under the Imports Control Order, 1955, declared that the import licences would be granted for
materials upto 100% of the value of goods exported.11The petitioner had acted on the
representation and made export of goods of certain value. The Government did not grant the
import certificate for the full value of the goods exported. The Court held that the petitioner's
claim was based on the equity which arises in their favour as a result of representation made
on behalf of the Union of India in the Export Promotion Scheme.

8
LIC v. Consumer Education & Research Centre, (1995) 5 SCC 482.
9
Y.Konda Reddy v State of A.P.,AIR 1997 AP 121
10
M/s. Hindustan Sugar Mills v State of Rajasthan, AIR 1981 SC 1681
11
Union of India v. Anglo Afghan Agencies, AIR 1968 SC 718.
POSITION IN OTHER COUNTRIES

Britain

According to Common Law, before 1947, the Crown could not be sued in a Court on
a contract. This privilege was traceable to the days of feudalism when a lord could not be
sued in his own courts which had arisen out of the theory of irresponsibility of the State as
propounded by Roman Law.12 Another maxim which was pressed into service was that the
"King can do no wrong". A subject could, however, seek redress against the Crown through a
petition of right in which he set out his claim, and if the royal fiat was granted, the action
could then be tried in the Court. The royal fiat was granted as a matter of course and not as a
matter of right, and there was no remedy if the fiat was refused.

The Crown Proceedings Act,1947, abolished this procedure and permitted suits being brought
against the Crown in the ordinary courts to enforce contractual liability, a few types
of contracts being, however, excepted.13 It follows, therefore, that regular proceedings now
lie against the Crown for breach of contract, in those cases in which the petition of right
earlier lay.14

United States of America

in the United States, the principle of immunity of the State as a sovereign power was
imported from England.15 This led the Congress to enact the Federal Tort Claims Act, 1946,
to abrogate, largely, the immunity of the Federal Government from Tortious liability, subject
to specified exceptions. The application of this Act has been further liberalised by the
Judiciary in various cases like Hathley v. U.Section16, Rayonier v. U.Section17, India Towing
Co. v. U.Section18 etc.

Australia

The Judiciary Act, 1963 lays down the law relating to government liability. In the case of
Sargood Bros. v. Commonwealth19 it was held that an action lies against the Commonwealth

12
Basu, D. D., Administrative Law, 6th Ed., Kamal Law House, Kolkata, at p. 371
13
Jain, M. P., Outlines of Indian legal & Constitutional History by M.P. Jain,Wadhwa and Co. Nagpur, New
Delhi, 2006 at p. 1801
14
Windsor & Annapolus Ry. Co. v. Counties Ry. Co., (1886) 11 App. Cas. 607
15
Supra Note 4 at p 375
16
(1956) 351 U.Section 173
17
(1956) 352 U.Section 315
18
(1955) 350 U.Section 61
19
(1910) 18 CLR 258.
in contract or tort, in the ordinary manner, by a subject or a state. Similarly, in the case of
Commonwealth v. New South Wales20, it was held that a State may be sued in contract or in
tort without its consent. Thus the maxim, the King can do no wrong, has not been applied in
Australia.

CRITICAL ANALYSIS
The Government in a welfare state is the regulator and provides large number of benefits and
dispenses of services to its people. In the process of dispensing the benefits and services, the
Government enters into contracts i.e. contracts between private individuals, on the one hand
and Government or its instrumentalities on the other. A large body of individuals seek to deal
with the Government as the modern welfare state, the Government is increasingly assuming
the role of dispenses of large monetary benefits including jobs, contracts, licenses, quotas,
mineral rights out sourcing, the services of many individuals and many more business enjoy
the largesse in the form of contracts. Many enterprises set up primarily to do business with
Government. The basic question is to regulate and discipline the Government discretion to
confer such benefits. Simentously it is necessary to ensure that injustices are not done to an
individual by the state or its instrumentalities. As such, wealth assumes greater and greater
importance in the life of the nation, there is going to be greater competition amongst the
seeking of such wealth. The constitutional reorganization of Government contracts is to be
found in Article 298 and 299(1) of Constitution. Article 298 provides that the executive
power of the union and each state shall extend to the making contracts for any purpose. So it
provides the state can enter into a contract in exercise of its executive power. Article 299(1)
mandates the requisite conditions which contracts in exercise of the executive power of the
union each state is required to fulfill. These provisions in the constitution relating to form of
contract on behalf of the Government is mandatory

As pointed out by the Supreme Court of India in R.D.Shetty Vs. International Airport
Authority1979 (3) SCC 489, that “The Government cannot be permitted to say that it will
give jobs or enter into contracts or issue quotas or licenses only in favor of those having grey
hair or belonging to a particular political party or professing a particular religious faith. The
Government is still the Government when it acts in the matter of grating largesse and it
cannot act arbitrarily. It does not stand in the same position as a private individual”. The

20
(1923) 32 CLR 200
Hon’ble Supreme Court while agreeing with the observations made in the case of V. Punnah
Thomas Vs. State of Kerala AIR 1969 Ker 81 stated that “The Government is not and should
not be as free as an individual in selecting the recipients for its largesse”.

Since the Government no longer enjoys the absolute discretion to enter into contract with
anyone the Government must choose the party in a non – discriminatory manner. The state
must act fairly and make a choice in the selection of a contracting party by affording equal
opportunity to all contenders by examining their claims fairly. Government discretion is not
unlimited that it can give or withhold largess in its arbitrarily but its action must be confirm
with some principle which meets the test of reason and relevance. Hon’ble Supreme Court in
Rammanna’s Case followed the Judgment as held in E.P.Rayappa Vs. State of
Tamilnadu(1974 (4) SCC3) and Maneka Gandhi Vs. Union of India (1978 (1) SCC 248) that
Article 14 strikes arbitrariness in state action and ensures fairness and equality of treatment.
The court further observed in Para 21 that:-

“ It must, therefore follow as a necessary corollary from the principle of equality enshrined
in Article 14 that though the state is entitled to refuse to enter into relationship with any one,
yet if it does so, it cannot arbitrarily choose any person it likes for entering into such
relationship and discriminate between persons similarly circumstanced but it must act in
conformity with some standard or principle which meets the test of reasonableness and non –
discrimination and any departure from such standard or principle would be invalid unless it
can be supported or justified on some rational and non – discriminatory ground”

The above principle laid down by the Hon’ble Supreme Court was subsequently affirmed
inKasturilal Vs. Jammu & Kashmir reported in 1980(4) SCC page 1 held that “Every activity
of the Government has a public element in it and it must, therefore be informed with reason
and guided by public interest. Every action taken by the Government must be in public
interest. The Government cannot act arbitrarily and without reason and if it does, its action
would be liable to be invalidated.”

Therefore, there is restriction of Government power in respect of the persons, with whom the
Government may enter into a contract. The Government or its instrumentalities are not free,
as an ordinary individual, as it selects the party with absolute and unfettered discretion.
Another application of Article 14 of Constitution was considered in Becil Vs.
Arraycom IndiaLtd 2010(1) SCC 139 that “in contracts to be given by Government
authorities or statutory bodies or instrumentalities of the state, Article 14 of Constitution
applies. Hence, there should be transparency by holding an open public auction or tender
because such contracts often involve huge amounts of public money”.

The Supreme Court further in Siemens public communication Net Work(P) Ltd Vs. Union of
India AIR 2009 SC 1204 unambiguously observed that the decision making process of
Government or its instrumentality should exclude remote possibility of discrimination,
arbitrariness and favoritism. It should be transparent, bona fide and in public interest. In
another case, the Supreme Court approved the Swiss challenge method under taken by the
state in the case of Rani Development Vs. Shre Krishna Prathisthan 2009(7) SCC 462. The
Supreme Court further examined the award of contract in light of Article 14, and held that the
action taken by authorities in awarding contract can be judged and tested in the light of
Article 14 as in the case of Meerat Development Authorities Vs. Ass. Of Management
Studies2009 (6) SCC 171. Concerning binding nature of tender conditions (NIT condition)the
Supreme Court in Ramanna Case held that “It is well settled rule of administrative law that an
executive authority must be rigorously held to the standards by which it professes its action to
be judged and it must scrupulously observe those standards on pain of invalidation or
violation of them”. This rule was enunciated by U.S. Supreme Court in Vitervalli Vs.
Saton359 U.S. 535 in the following words.

“An executive agency must be rigorously held to the standards by which it professes its
action to be judged --------
This Judicially evolved rule of administrative law is now firmly established ------------
He that takes procedural sword shall perish with the sword.”

The Supreme Court accepted this rule as valid and applicable in India in A. S. Ahmewalia Vs.
Punjab 1975(3) SCC 503, in Sukhadev Vs. Bhaghathram 1975(1) SCC 421. The above said
rule subsequently affirmed in B.S. Minhas Vs. Indian Statistical Institute 1983(4) SCC 582.

In Harmindar singh Arora Vs. Union of India 1986(3) SCC 247 the court dealt with a case, in
which Tenders were invited for supply of milk the contract was awarded to state undertaking
by rejecting the offer of a private party which was more suitable in that situation, the
Supreme Court cancelled the grant of tender by holding that the instrumentalities of state
cannot act arbitrarily. If it chooses invite tenders, it must abide by the conditions specified in
the tender notice. If the party fails to fulfill the conditions of the tender notice, it cannot be
accepted.

However, in respect of conditions of eligibility, its strict compliance is required, in other


words the state, and its instrumentalities are required to adhere norms. Standards and
procedures cannot be departed from, arbitrarily. The award of contract, its action would be
tested for its validity.

In another case wherein it is reported in AIR 1982 Gahuathi 37 in the case of Omega
Advertising Agency Vs. State Electricity Board where the state Electricity Board issued a
notice inviting offers from advertisements fulfilling certain conditions as per NIT. One of
applicants fulfilled the essential conditions, while the others had not, in this situation, the
state electricity board decided to split its work between the two. The Assam High Court set
aside the division of splitting the work by declaring the action of instrumentalities as being
against the tenor of notice inviting offer, and further declared that the action amounts to
discrimination under Article 14, as authority had awarded the contract to a person who was
not qualified according to the prescribed standards.

The Hon’ble High Court of A.P. examined the law in the case of M/s.Nandini Deluxe 2005
(6) ALT 748 wherin the court held that “the state is bound to adhere to the norms, standards
and procedures laid down by them and cannot depart from them arbitrarily. If the
Government indicates preconditions of eligibility and evaluates the technical bid ignoring
such norms and standards, the entire decision making process must suffer the wrath of Article
14 of constitution of India”.

However, the Supreme Court classified the requirement in NIT into two categories, those
which lay down the essential conditions of eligibility and others which are merely ancillary or
subsidiary to the main object to be achieved by this condition. If there are essential tender
conditions, the same must be adhered to and in other cases it must be open to the state or its
instrumentality to deviate from and not to insist upon strict compliance. In the case ofPoddar
Steel Corporation Vs. Ganesh Engineering Works (1991 (3) Sec. 273) the question arose
concerning conditions of the tender as the successful bidder made payment of the earnest
money by sending a cheque drawn on Union Bank of India not of State bank of India. The
Supreme Court held that ‘as a matter of general proposition it cannot be held that an authority
inviting tenders is bound to give effect to every terms mentioned in the notice in meticulous
detail and is not entitled to waive even a technical irregularity of little or of no significance”.

If the action complained of is shown to be violative of constitutional or mandatory statutory


provisions or is initiated due to mala fides or patent arbitrariness, the Court has always
interfered with such decision and laid limitation on judicial review while reviewing the
decision making process and not just the merits of the decision. The Hon’ble Supreme Court
after considering the Judgment on the subject held in TATA Cellular Vs. Union of India
(1994 (6) SCC 651) held.

“It cannot be denied that the principles of judicial review would apply to the exercise of
contractual powers by Government bodies in order to prevent arbitrariness and favoritism.
However, it must be clearly stated that there are inherent limitations in exercise of that power
of judicial review. Government is the guardian of the finances of the state. It is expected to
protect the financial interest of the state. The right to refuse the lowest or any other tender is
always available to the Government. But the principle laid down in article 14 of the
Constitution have to be kept in view while accepting a refusing a tender. There can no
question of infringement of Article 14 if Government tries to get the best person a best
quotation. The right to choose cannot be considered to be an arbitrary power. Of course, if
said power is exercised for any collateral purpose the exercise of that power will be struck
down”.

Subsequent to the above, the Hon’ble Supreme Court in Asia foundation and Construction
Ltd.Vs. Trafalgas House Construction (I) Ltd. (1997 (1) SCC 738) held that “Though the
principle of Judicial review cannot be denied as far as exercise of contractual powers of
Government bodies are concerned but it is intended to prevent arbitrariness or favoritism and
is exercised in the larger public interest and is brought to the notice of the court if the power
has been exercised for any collateral purpose.”

In Raunaq International Ltd. Vs. I.V.R co ltd . (1999 (1) SCC 492) the Supreme Court further
laid down propositions that are to be considered while evolving the case on hand. The
Supreme Court further held that the court is entitled to examine whether these requirements
have been considered. The court held that “if any relaxation is granted for bona fide reasons,
the tender conditions permits such relaxation and the decision arrived at for legitimate after
fair consideration of all offers, the Court should hesitate to intervene.”
In B.S.N. Joshi & Soni Ltd. Vs. Nair Coal Services Ltd. (2006 (11) SCC 548) the Hon’ble
Supreme Court after reviewing the judgment on the subject laid down the legal principles are
applicable to the award of Government contract/tenders.
Further the Hon’ble Supreme Court in Jagdish Mandal Vs. State of Orissa (2007 (14), SCC
517) further held that “If the decision relating to award of contract is bonafide and is in public
interest, the courts will not, in exercise of power of judicial review, interfere even if a
procedural aberration or error in assessment or prejudice to a tender, is made out.”
In view of the same it can be stated that the aggrieved person can invoke the jurisdiction of
the High Court under Article 226 of Constitution of India in the matter of contractual
transactions between the state and persons who are dealing with the State or its
instrumentalities
CONCLUSION

Contract is basically a matter of private law, however the law relating to the Government
contracts in the modern times becoming distinct from to the private Contract. In this area
there is a need to protect public interest and also to protect individuals against unfair exercise
of administrative power. It is axiomatic that the government or any of its agencies ought not
to be allowed to act arbitrarily and confer benefits on whomsoever they want. Therefore there
is a necessity to develop some norms to regulate and protect individual interest in such wealth
and thus structure and discipline the government discretion to confer such benefits. Many a
time, the standard forms of contract are used in which the individuals have no choice but to
sign on the dotted line and the terms and conditions of the so-called ‘Contract’ are dictated by
the monopolistic state authority concerned and the individuals has very little say in the
matter. The whole jurisprudence of Government Contract is governed by Article 299 of the
Constitution of India. In India we can say that law regarding to the Government Contract is
still in the evolution phase. While in French Jurisprudence, a distinct branch of law contract
administratifs, has arisen to take care of the distinctive features of government contracts. In
U.S.A the law relating to Government contract is also quite sophisticated. In order to protect
the public and individual interest and to ensure impartiality, fairness and non arbitrariness in
Government contract there is a need to pass a new law which will provide norms and
regulations to protect public and individual interest in Government Contracts.
REFERENCES

 Basu, D. D., Administrative Law, 6th Ed., Kamal Law House, Kolkata
 Avatar Singh, Contract and Specific Relief, 10th Ed., Eastern Book Company,
Lucknow,2008
 Jain, M. P., Outlines of Indian legal & Constitutional History by M.P. Jain,Wadhwa
and Co. Nagpur, New Delhi, 2006
 http://www.manupatrafast.com/articles/PopOpenArticle.aspx?ID=a4122e98-7362-
4e05-87ce-bed7af3b9b2f&txtsearch=Subject:%20contract
 http://thestudentlawyer.com/2013/08/30/judicial-review-and-remedies-in-public-law/
 https://indiancaselaws.wordpress.com/2015/03/01/difference-between-private-law-
and-public-law-remedy/
 http://www.slideshare.net/hinashahid/public-lawremediesprerogativewrits
 http://www.lawyersclubindia.com/articles/A-Note-on-Tenders-and-Public-Law-
Remedy--4334.asp
 http://www.legalserviceindia.com/article/l42-Government-Contracts.html