Article 299

Article 299 of the Constitution of India lays down the procedure and legal framework for contracts made by the Government of India or the State Governments. It ensures that all such contracts are executed with constitutional validity, transparency, and accountability, thereby safeguarding public funds and protecting government officials from personal liability.

Constitutional Context and Objective

Article 299 complements Article 298, which empowers the Union and State Governments to carry on trade or business and to make contracts for any purpose. While Article 298 confers the power, Article 299 prescribes the manner and form in which such contracts must be executed.
The primary objective of this provision is to prevent unauthorised or informal contracts that could bind the Government to financial obligations without proper sanction, and to ensure that only duly authorised officials enter into contracts on behalf of the Government.

Text and Structure of Article 299

Article 299 contains two key clauses that define the form, execution, and liability associated with government contracts:
Clause (1): Form and Execution of Government ContractsAll contracts made in the exercise of the executive power of the Union or of a State must:

• Be expressed to be made by the President (for the Union) or the Governor (for the State).
• Be executed on behalf of the President or the Governor by a person authorised by them.

This clause ensures that no contract binds the Government unless it is made in the name of the constitutional head and executed by a duly authorised person in the prescribed manner.
Clause (2): Protection from Personal LiabilityThe President, Governor, or any person acting on their behalf is not personally liable for any contract made or executed in the exercise of the Government’s executive power.
This clause provides immunity to constitutional heads and their authorised representatives, ensuring that liability attaches to the Government as an institution rather than to individuals.

Key Features of Article 299

1. Contracts Must Be in the Name of the President or Governor: Every contract entered into by the Union or State Government must explicitly state that it is made by the President or the Governor, ensuring formal recognition of executive authority.
2. Proper Authorisation: Contracts must be signed and executed only by persons who are duly authorised under rules framed by the President or the Governor. Contracts signed by unauthorised individuals are void and unenforceable.
3. No Personal Liability: Neither the President, the Governor, nor their authorised agents can be held personally responsible for obligations or losses arising from such contracts.
4. Application to Property Assurances: Article 299 applies not only to formal trade or business contracts but also to assurances, conveyances, and transfers of property made by the Government.
5. Constitutional Safeguard: The article acts as a constitutional protection against misuse of executive power, ensuring that all contracts involving public funds are made transparently and with proper legal authority.

Purpose and Importance

The framers of the Constitution incorporated Article 299 to achieve three major purposes:

• To ensure legality and uniformity in the making of government contracts.
• To protect the Government from being bound by unauthorised or fraudulent contracts.
• To protect officials from personal liability when acting in their official capacity.

By mandating a formal process, Article 299 prevents arbitrary or secret contracts and ensures that public money is spent only through properly sanctioned agreements.

Judicial Interpretation and Case Law

The judiciary has played a significant role in interpreting and reinforcing the constitutional principles enshrined in Article 299. Several important decisions have clarified its scope and implications:

• State of West Bengal v. Kesoram Industries Ltd. (2004): The Supreme Court held that contracts made by the Government must strictly comply with Article 299(1); failure to do so renders them void. The Court emphasised that such compliance is not merely procedural but a mandatory constitutional requirement.
• Union of India v. S.S. N. Subramanian (2000): The Court reiterated that only contracts made and executed in accordance with Article 299 are valid and enforceable. Any deviation or lack of authorisation renders the contract unenforceable against the Government.
• K.P. Chowdhry v. State of Madhya Pradesh (1966): It was held that contracts not made in conformity with Article 299 cannot be enforced either by or against the Government, even if benefits were received under such contracts.
• Bhikraj Jaipuria v. Union of India (1962): The Court recognised that though non-compliance with Article 299 renders a contract void, the Government may still be liable to make restitution under Section 70 of the Indian Contract Act, 1872, if it has benefited from the transaction.
• State of Rajasthan v. A.S.M. (2000): The Court highlighted the importance of following the prescribed manner of execution and authorisation, reaffirming that Article 299 serves as a constitutional safeguard against misuse of public funds.

Through these rulings, the courts have consistently maintained that strict compliance with Article 299 is essential for the validity of government contracts.

Relationship with Article 298 and Article 300

• Article 298 empowers both the Union and the States to make contracts and carry on trade or business.
• Article 299 prescribes the procedure and form for executing such contracts.
• Article 300 grants the Government the legal personality to sue and be sued in relation to such contracts.

Together, these provisions form the constitutional foundation for government contracts and the legal accountability of the State in commercial matters.

Practical Implications

Article 299 has wide-ranging practical applications in the governance and administration of India:

• Public Sector Undertakings (PSUs): Contracts for procurement, construction, and services must comply with Article 299 to be valid.
• Public Procurement: Government tenders, supply agreements, and development contracts are executed under its framework.
• Land and Property Transactions: Transfers, leases, and acquisitions by the Government must be made in the name of the President or Governor.
• Protection of Officers: Civil servants executing government contracts under proper authority are protected from personal financial liability.

Administrative Safeguards and Procedures

To ensure compliance with Article 299, detailed procedures and delegation of powers are framed under financial and administrative rules, such as:

• General Financial Rules (GFRs) of the Government of India.
• Delegation of Financial Powers Rules.
• Manuals on Procurement and Contracts Management.

These administrative frameworks ensure that:

• Only authorised officers can enter into contracts.
• Contracts are executed in the name of the President or Governor.
• All contracts are properly recorded, audited, and monitored.

Limitations

While Article 299 provides the framework for government contracts, it also imposes certain limitations:

• Contracts made without proper authorisation or without using the prescribed form are void and unenforceable.
• The Government cannot be bound by informal or implied contracts, even if performed in good faith.
• Individuals dealing with the Government are presumed to know the requirements of Article 299 and cannot plead ignorance if the contract is defective.
• The article does not confer any special privileges upon the Government to act outside the law of contracts.

Significance in Public Administration

Article 299 plays a vital role in ensuring transparency, legality, and accountability in government transactions. It protects the public exchequer from losses arising out of unauthorised actions and reinforces the rule of law in public contracting.By defining the constitutional procedure for executing contracts, it also provides confidence to private parties dealing with the Government, knowing that all contracts are subject to formal legal scrutiny and approval.