June 2023 | Article 299 of the Constitution: Government Contracts

Recent Supreme Court Ruling on Government Contracts under the President’s Name

The Supreme Court’s ruling on May 31, 2023, clarified the legal aspects of government contracts made under the President’s name. The case involving Glock Asia-Pacific Limited and the Centre resulted in a judgment stating that contracts made in the President of India’s name do not grant immunity from statutory regulations. 

This ruling sheds light on the interpretation of Article 299 of the Constitution and its implications for government contracts. Additionally, the court emphasized that Article 299 does not prevent legal action against the government for contract breaches, and the government cannot evade liability by invoking sovereign immunity.

Introduction to Government Contracts

Government contracts encompass agreements undertaken by the government for various purposes, such as construction, management, maintenance, repairs, manpower supply, and IT-related projects. These contracts involve either the central government, a state government, or a government body as one party and a private individual or entity as the other party. 

Government contracts must adhere to prescribed formalities and safeguards outlined in Article 299 of the Constitution of India. Furthermore, these contracts are subject to public scrutiny and accountability, governed by fairness, transparency, competitiveness, and non-discrimination principles.

Understanding Article 299 of the Constitution

Article 299 of the Constitution outlines the manner and form of contracts made on behalf of the government of India or any state government. This article was adapted from the Crown Proceedings Act of 1947, which contributed to its formulation. Its primary objective is establishing a procedure that safeguards public funds and prevents unauthorized or illegitimate contracts.

Expression and Execution Requirements

According to Article 299(1), contracts must be expressed in writing and executed by an authorized person on behalf of the President or the Governor. The expression and execution of contracts should align with the rules established by the President or the Governor, as outlined in Article 77(3) or Article 166(3), respectively. Additionally, contracts must comply with any other applicable laws related to such agreements.

Immunity of the President/Governor and Government Liability

While Article 299(2) states that the President or the Governor cannot be held personally liable for contracts, it does not grant the government immunity from legal provisions associated with the contract. In India, the government (Union or state) can be sued for breach of contract or civil wrongs committed by its officials. The government cannot evade liability by invoking sovereign immunity or claiming public interest.

Implications for Government Contracts

A government contract that adheres to Article 299 is valid and enforceable by or against the government. Conversely, a contract that does not comply with Article 299 is void and not binding on or enforceable by the government. However, a third party who acted in good faith and without knowledge of any defect in the contract may still enforce it.

Similarly, a contract that violates any statutory provision is also void and not enforceable by or against the government. Yet, a third party who acted in good faith without knowing of any violation may still enforce it. Furthermore, a contract contravening any constitutional provision is void and not enforceable by or against the government. However, if a third party acted in good faith without knowledge of infringement, they may still enforce the contract.

Summary

Article 299 of the Constitution provides a clear and specific procedure for the creation and execution of government contracts. Its purpose is to safeguard public funds and prevent unauthorized or illegitimate agreements. Compliance with Article 299 ensures the validity and enforceability of government contracts while maintaining transparency and accountability.