State liability in tort and contract

1. Article 300: the text and its pedigree

Article 300(1) provides that the Government of India may sue or be sued by the name of the Union of India, and the Government of a State by the name of the State, and that they may sue or be sued in relation to their affairs in the like cases as the Dominion of India and the Provinces might have sued or been sued if the Constitution had not been enacted. The liability is therefore borrowed. It runs back through section 176 of the Government of India Act, 1935, section 32 of the 1915 Act and section 65 of the Government of India Act, 1858, which made the Secretary of State liable to the same extent as the East India Company.

Parliament can define the liability by law, as Article 300 itself contemplates. It has never done so. The First Law Commission (1956) recommended legislation, and the Government (Liability in Tort) Bills of 1965 and 1967 lapsed. The field has been left to the courts.

2. The starting point: P. & O. Steam Navigation Co. (1861)

In Peninsular and Oriental Steam Navigation Co. v. Secretary of State for India (1861), decided by the Supreme Court of Calcutta, a horse-drawn carriage of the company was damaged when workmen of a government dockyard, carrying an iron funnel across the road, negligently let it fall. Peacock C.J. held the Secretary of State liable. The East India Company had carried on trade as well as government, and it was liable for acts done in its commercial or private capacity, the kind of acts a private person could do. It was not liable for acts done in the exercise of sovereign powers, such as making war or peace. Maintaining a dockyard was not sovereign, so the claim succeeded. This is the origin of the sovereign / non-sovereign test.

3. Vidyawati and Kasturilal: the test applied both ways

In State of Rajasthan v. Vidyawati, 1962 INSC 38, AIR 1962 SC 933, the driver of a government jeep, used by the Collector of Udaipur, was taking it back from a repair workshop when he knocked down and killed a pedestrian. The State was held liable. Sinha C.J. said the State should be in no better position than a private employer for the tort of its servant in the course of employment, and that driving a jeep back from a workshop has nothing to do with sovereign power. The Court also remarked that the old immunity of the Crown had no place in a republic.

Three years later the Court went the other way. In Kasturilal Ralia Ram Jain v. State of Uttar Pradesh, 1964 INSC 199, AIR 1965 SC 1039, a partner of a jewellery firm was arrested at Meerut and gold was seized from him and kept in the police malkhana. A head constable absconded with it. The police were negligent in keeping the property, but the Court held the State not liable: the power to arrest, search and seize is a sovereign power that cannot be exercised by a private person, and the negligence occurred in its exercise. Gajendragadkar C.J. accepted that the result was harsh and urged Parliament to legislate.

Read together, the two cases make the question turn on the nature of the function in the course of which the tort occurred, not on the gravity of the wrong.

4. The retreat from Kasturilal

• N. Nagendra Rao & Co. v. State of Andhra Pradesh, 1994 INSC 360, (1994) 6 SCC 205. Fertiliser seized under the Essential Commodities Act was allowed to deteriorate. The State was held liable. The Court confined immunity to primary and inalienable functions such as defence, administration of justice and the power to legislate, and said that the welfare State cannot claim immunity for the negligence of its officers in ordinary statutory functions. Kasturilal was distinguished and its reasoning doubted.
• Common Cause, A Registered Society v. Union of India, 1999 INSC 299, (1999) 6 SCC 667. The Court observed that the doctrine of sovereign immunity as stated in Kasturilal stands considerably eroded and has not been followed in later decisions.

5. Constitutional tort: compensation under Articles 32 and 226

A parallel line of cases treats compensation for violation of fundamental rights as a public law remedy, to which sovereign immunity is no answer.

• Rudul Sah v. State of Bihar, 1983 INSC 85, (1983) 4 SCC 141. The petitioner stayed in jail for over fourteen years after his acquittal. The Court awarded compensation in a habeas corpus petition under Article 32, holding that release alone would make Article 21 an empty promise.
• Nilabati Behera v. State of Orissa, 1993 INSC 113, (1993) 2 SCC 746. A young man died in police custody. The Court held that liability for violation of fundamental rights is strict and that sovereign immunity applies only to private-law claims in tort, not to the public law remedy under Articles 32 and 226. Kasturilal was distinguished on that ground.

6. Liability in contract: Article 299

Article 298 gives the Union and the States power to carry on trade and to make contracts. Article 299(1) prescribes the form. A contract made in the exercise of the executive power of the Union or a State must be:

• expressed to be made by the President or the Governor, as the case may be;
• executed on behalf of the President or Governor; and
• executed by such persons and in such manner as he may direct or authorise.

Article 299(2) adds that neither the President nor the Governor, nor the officer who executes the contract, is personally liable on it. The formalities protect public money against unauthorised commitments by officials.

In Chatturbhuj Vithaldas Jasani v. Moreshwar Parashram, 1954 INSC 15, AIR 1954 SC 236, the Court held that contracts not executed in the prescribed form could not be enforced against the Government, but were not void in the sense of being illegal, so the Government could accept them. In State of Bihar v. Karam Chand Thapar & Bros., 1961 INSC 141, AIR 1962 SC 110, it held that Article 299 does not require a single formal document: a contract may be concluded by correspondence, provided the acceptance is by an authorised officer and expressed in the name of the Governor. Later, in Mulamchand v. State of Madhya Pradesh, 1968 INSC 43, AIR 1968 SC 1218, the Court treated the requirements as mandatory: a contract that does not comply is void, cannot be ratified, and does not bind either side.

7. Article 299, estoppel and section 70

Because a non-compliant contract is void, the Government cannot be held to it by estoppel: there can be no estoppel against a constitutional provision. The contractor is not left without remedy. Where goods have been supplied or work done, not gratuitously, and the Government has enjoyed the benefit, it must pay compensation under section 70 of the Indian Contract Act, 1872: State of West Bengal v. B.K. Mondal & Sons, 1961 INSC 333, AIR 1962 SC 779, followed in Mulamchand.

Promissory estoppel is a separate matter. Where the Government makes a clear promise outside the contract form, intending it to be acted on, and the promisee alters his position, the Government may be held to it in equity: Union of India v. Indo-Afghan Agencies Ltd., 1967 INSC 267, AIR 1968 SC 718. The doctrine does not operate against a statute or to compel the Government to do something the law forbids.

8. Problem

An army truck is carrying a football team of jawans to a match. The driver drives negligently and kills a pedestrian. Can his widow sue the Union of India?

Issue. Whether the Union is vicariously liable for the negligence of a military driver, or whether the act falls within sovereign functions for which immunity is claimed under Kasturilal.

Law. Article 300 makes the Union liable in the cases in which the Dominion and, before it, the East India Company would have been liable. The test since P. & O. Steam Navigation is whether the act was done in the exercise of a sovereign power. In Vidyawati the State was liable for a government driver's negligence because driving a vehicle is not a sovereign act. In Kasturilal immunity was allowed because arrest and seizure are powers no private person has. Nagendra Rao confines immunity to primary and inalienable functions such as defence.

Application. The Union will argue that the army is maintained for defence, a sovereign function, and that the truck was an army vehicle driven by a soldier on duty. The answer is that the test looks at the particular activity, not at the department. Carrying a football team to a match is a recreational activity; a private bus operator could do exactly the same thing. It has no connection with the conduct of war or the defence of the country. High Courts have taken this view of military vehicles on non-military errands (for example, the Delhi High Court in Satyawati Devi v. Union of India, 1967, where an Air Force vehicle carrying a hockey team caused an accident). Driving on a public road also attracts the ordinary duty of care owed by every driver. The case is on the Vidyawati side of the line.

Conclusion. The widow can sue the Union of India for damages under Article 300 read with the law of tort. As a practical matter she would claim compensation before the Motor Accidents Claims Tribunal under section 166 of the Motor Vehicles Act, 1988, where the Union, as owner of the vehicle, is answerable for its driver. The driver may separately be prosecuted for causing death by negligence under section 106 of the Bharatiya Nyaya Sanhita, 2023. If the truck had been moving ammunition to a forward post during hostilities, the Union's plea of sovereign function would be much stronger, and that contrast is worth one sentence in the answer.

How this is examined

As an essay: “Discuss the tortious liability of the State” or “Examine the doctrine of sovereign immunity in India with the help of decided cases.” The order is Article 300, P. & O., Vidyawati, Kasturilal, Nagendra Rao, Common Cause, then the constitutional tort cases, ending with a line on the need for legislation. The military truck problem has been set in recent papers and is answered as above. As a short note: Article 299 and government contracts, or Kasturilal alone.