Estoppel and Government Contracts Under Article 299 of Indian Constitution

(2) 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.

As a general rule, when a contract between the government and a private person does not fulfil the requirements of Article 299(1), it can’t be enforced the state or government even by the invoking the doctrine of estoppel.

Supreme Court in Mulamchand v. State of MP AIR 1968 SC 1218, rule that :

A case involving a commercial contract, between the Union of India and a private individual, is not in the form required by Art. 299(1), it is void and it can’t be enforced against the government. Article 299 is mandatory and thus, estoppel could not apply.

In N. Ramanath Pillai v. State of Kerala AIR 1973 SC 2641, the state government after an appointing the petitioner to a civil post for a fixed tenure, but state government abolished the post before the expiry of his term. Supreme Court held that government can’t be estopped from abolishing the post. The case establishes the proposition that the government can’t be estopped from committing a breach of its constractual obligations.

In D.F.O v. Ram Sanehi Singh AIR 1973 SC 205 the court ruled that it was a well-established principle that id an official intended to pass any order to the prejudice of a party, involving civil consequence or attaching to pass any order to the party concerned should be told the case against him and he should be afforded a reasonable opportunity to represent his cases before the authority concerned. The Supreme Court had definitely laid down that a High Court in its extraordinary jurisdiction under Article 226 was empowered to enforce the equities arising in favour of the petitioner out of the representation amounting to a promise made by the government, and as a result of which the petitioner altered his position to his prejudice, even though a contract as envisaged by the relevant provisions had not come into existence.  Here the writ was issued because cancellation unilaterally by the government of a contract with a private party raised questions of estoppel and natural justice.

Reference:

M.P Jain & S.N. Jain, Principles of Administrative Law