Bengal Coal Co. Ltd. vs The Union Of India: Case Analysis

Equivalent citations: AIR 1971 Cal 219 

Bench: S Chakravarti, S Datta 

FACTS

In this case, the plaintiff supplied a certain quantity of coal to the Union Of India. The plaintiff claimed a sum of Rs. 10,901alleged to be due for the supply of coal together with a sum of Rs. 6540 by way of interest.  

The Union of India contested the claim denying the supply and stating that there was no valid contract between them and the plaintiff under Section 175 of the Government of India Act,  1935 read with Article 299 of the Constitution claiming that it is barred by limitation and there was no further notice under Section 80 of the Code of Civil Procedure.  

ISSUES

• Whether the plaintiff entitled to the amount of unpaid amount from the defendant for the coal which he supplied? 

JUDGEMENT

SUBORDINATE COURT 

The Subordinate Judge was satisfied that the goods have been delivered and the price claimed would be due from the defendant but he also found that no valid notice under Section 80 of the  Code of Civil Procedure was served and further that the claim was barred by limitation. Also, the contract will not bind the Union of India under Section 175 of the Government of India  Act. The plaintiff decided to file an appeal. 

HIGH COURT 

The plaintiff contended that the learned Subordinate Judge found that the supply of coal was made. The suit was started with a fresh trial and directed the Subordinate Judge to consider the question of limitation again based on bills presented by the plaintiff which have been checked and verified by the defendant.  

The Subordinate Judge held that Section 70 of the Indian Contract Act was not applicable and but he found that interest should be paid and dismissed the suit. So plaintiff decided to file an appeal. 

Mr Joy Gopal Ghose, the Advocate for the appellant said that there was an error on the part of the Judge holding that there had not been any ratification at all. The pleader of the respondent relied on the decision of the Supreme Court in Mulam Chand v. State of Madhya Pradesh and tried to show the court that the question of ratification cannot be considered in cases where a contract is a void contract. He also relied on the judgement of Chatturbhuj Vithaldas Jasani  v. Moreshwar Parashram.

The court accepted the contention of Mr Das Gupta that the question of ratification will not arise in the proceeding of a void contract. The Trial Judge misdirected himself when he found that there was no ratification and also found that the goods had been delivered to the Union of India. This finding was arrived at by both the trial courts. 

It also found that the Engineers had acted on the basis that supply and it was duly made to the  Union of India. Mr Ghose then contended that the Judge was wrong in the manner that Section  70 of the Contract Act does not apply. In Mulam Chand's case, the Supreme Court observed that even in the case of a void contract under Section 175(3) of the Government of  India Act the provision of Section 70 can be invoked by the aggrieved party to a void contract.  

The condition to be satisfied is that a person should lawfully do something for another person or deliver something to him and secondly that in doing the said thing, he must not do it gratuitously and finally that the other person to whom something is delivered must enjoy its benefit. If these conditions are satisfied under Section 70 it imposes liability on that person to make compensation to the former regarding restoring the thing so delivered.  

The Subordinate Judge was wrong in stating that delivery must be made lawfully. Even if the contract was void, as in the case Union of India, the evidence clearly shows, which was also accepted by both the trial Judges, and supply was made to the Union of India and it was also used them.  

There was no question before the Court that the plaintiff intended to make the supply of coal gratuitously. The last condition was also fulfilled as the Union of India enjoyed the benefits of the supply of coal made to it. So, the Union of India was made liable to compensate the plaintiff for the price of the goods sold or for the sum of Rs. 10,901. 

The trial Judge held in its decision that the plaintiff would get interested at the rate of 6 per cent per annum provided his claim was made maintainable. Mr Das Gupta has contended that the plaintiff is not entitled to get the interest from 1944 to the 20th of October, 1953 when the cause of action arose. 

The Court directed that the plaintiff would get interested only at the rate of 4 per cent from the  20th October 1953, up to the date of final realisation of the money. The amount in the claim ought to be paid within six months from the date of order. 

The order Subordinate Judge was set aside and the suit was decreed for the sum of Rs. 10,901 with costs and the sum will carry interest at the rate of 4 per cent per annum from the 20th of  October,1953 up to the date of final realisation of money.  

LEGAL PRINCIPLE INVOLVED 

Section 2(h) of the Indian Contract Act, 1872, defines the term contract. According to the  Section, a contract is an agreement enforceable by law. Therefore, according to the Section,  there are two essentials for the formation of a contract.  

• Firstly, there should be an agreement to do or abstain from doing an act; and • Secondly, the agreement should be enforceable by law. 

Therefore, the law of contracts is that branch of law which decides the circumstances in which the promise made by a person shall be legally binding on the person who makes the promise.  While all the contracts are agreements but not all agreements are contracts. An agreement, to turn into a contract, should have its legal enforceability.  

The agreements which are not legally enforceable are not contracts but are mere void agreements which are not enforceable by law or are voidable at the option of one party. 

Section 10 of the Indian Contract Act enlists the conditions which are essential for a valid contract. The essential conditions for a valid contract are as follows: 

• Offer: Section 2(a) of the Indian Contract Act defines the meaning of the term offer or proposal. According to the Section an offer or proposal is said to be made by a person who  signifies to the other person his willingness to do or abstain from doing an act to obtain the assent of the other person;  

• Acceptance: Section 2(b) of the Indian Contract Act talks about “acceptance”. According to  the Section, when the person to whom an offer is made gives his assent thereto is said to have  accepted the offer;  

• Consent: Section 13 of the Indian Contract Act defines the term consensus, as the agreement of the parties to the contract upon the same thing in the same sense. For the formation of a valid  contract, they must have “consensus ad idem” i.e. they should agree to the  same thing in the same sense;  

• Capacity to contract: Section 11 lays down the criteria for competency to contract. To enter  into a valid contract, the parties entering into a contract should have the capacity to enter into  a contract; 

• Lawful consideration: Consideration essentially means ‘quid pro quo’ which means something done in the return of the other. It is the compensation for the act or omission  committed by a person for the fulfilment of the terms of the contract;  

• The agreement should not be expressly declared void: The agreement which is entered into by the parties should not be expressly declared void or illegal by any law in force. https://indiankanoon.org/doc/888426/