Government contract formalities and proof of market rate govern enforceability and damages for breach.

A government contract required by statute to be executed in a prescribed form is unenforceable against the State unless that form is strictly complied with, even if the officer had authority to negotiate or enter the arrangement. For breach of such a contract, damages must be proved by evidence of the ruling market rate on the date of breach; a controlled price list alone is insufficient. On these principles, the claim failed both on enforceability and on proof of loss.

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Issues: (i) whether contracts for supply of foodgrains, not executed in the form prescribed by section 175(3) of the Government of India Act, 1935, could be enforced against the Government; and (ii) whether compensation for breach was proved in the absence of evidence of the ruling market rate on the date of breach.

Issue (i): whether contracts for supply of foodgrains, not executed in the form prescribed by section 175(3) of the Government of India Act, 1935, could be enforced against the Government

Analysis: Section 175(3) required contracts made in the exercise of executive authority to be expressed to be made by the Governor-General and executed on his behalf in the prescribed manner. The provision was enacted to protect the State from unauthorised liability and to ensure that public contracts were clear on their face. The Court held that compliance with the prescribed form was mandatory, not merely directory. Although the Divisional Superintendent had special authority to enter into the contracts, the purchase orders were not executed in the statutory form. The defect therefore went to enforceability against the Government.

Conclusion: The contracts could not be enforced against the Government, and the claim for compensation on that basis failed.

Issue (ii): whether compensation for breach was proved in the absence of evidence of the ruling market rate on the date of breach

Analysis: Damages for wrongful breach had to be measured by the difference between the contract price and the ruling market rate on the date of breach. The appellant did not adduce evidence proving that market rate. A controlled price list for the district did not establish the ruling market rate for the relevant date and circumstances. On the evidence, the claim for damages was not proved.

Conclusion: The appellant failed to establish the amount of compensable loss.

Final Conclusion: The dismissal of the claim was justified both because the contracts were not enforceable in the statutory form and because the alleged loss was not proved by reliable market evidence.

Ratio Decidendi: A contract with the Government that is required by statute to be executed in a prescribed form is unenforceable against the State unless that form is complied with, and damages for breach must be proved by evidence of the ruling market rate at the date of breach.

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