Contractual and Tortious Liability of the Government

The concept is that the King must be under the law because the law makes the King. In India, the doctrine that "The King can do no wrong" was never accepted. The Union and the States are legal persons; therefore, they can be held liable for breach of contract and torts.

A. Contractual Liability

1) The contractual liability of the Union and the States is recognized by the Constitution itself: Article 298: Expressly provides that the executive power of the Union and States extends to carrying on any trade or business.

2) Article 299: Prescribes the mode and manner of executing such contracts.

Conditions under Article 299(1):

a)Every contract must be expressed to be made by the President or the Governor (i.e., must be in writing).

K.J. Somaiya v. State of Bombay: The words "expressed to be made" mean there must be a formal written contract executed by an authorized person.

b)Every contract must be executed by a person authorized by the President or Governor.

Union of India v. N.K. (P) Ltd.: A Director was authorized to enter into contracts on behalf of the President, but the contract was executed by a Secretary. The contract was held invalid.

c)Every contract must be expressed to be made in the name of the President or the Governor.

4)The provisions of Article 299(1) are mandatory, not directory, to protect the public exchequer from unauthorized contracts.

5)Section 70 of the Indian Contract Act, 1872: Where goods delivered are accepted and enjoyed voluntarily, the government is liable to pay compensation under the principle of quantum meruit / unjust enrichment.

6)In appropriate cases, the Supreme Court under Article 32 and High Courts under Article 226 can entertain writ petitions involving contractual disputes with public authorities.

B. Tortious Liability

1)since, the State is an artificial legal person and acts through human agents, it is held vicariously liable for torts committed by its servants.

2)Based on two Maxims:

a)Respondeat superior (Let the principal be held liable)

b)Qui facit per alium facit per se (He who acts through another does the act himself)

3)294(b): Liability of the Union or State may arise out of "any contract or otherwise". The expression "or otherwise" covers liability in tort.

4)State of Rajasthan v. Vidyawati (1962): A government driver negligently knocked down a pedestrian, leading to his death. The widow sued the driver and the State for damages. The Supreme Court awarded compensation, holding the State vicariously liable, and ruled against expanding immunity under the guise of sovereign functions.

5)Law Commission Recommendation: The Law Commission of India recommended that the archaic distinction between sovereign and non-sovereign functions should no longer be invoked to determine the tortious liability of the State.