Rights and Liabilities of the Government: Article 299's Mandatory Formalities

Articles 298 to 300, in Part XII of the Constitution, govern the government's own capacity to trade, to contract, and to sue and be sued. This short chapter's real exam value is a single, precisely-tested rule: a government contract is not made the way an ordinary private contract is, and getting the formalities wrong voids the contract entirely, with no exceptions courts have been willing to carve out.

Article 298: the power to carry on trade and hold property

Article 298 extends the executive power of the Union and of every state to carrying on any trade or business, and to the acquisition, holding, and disposal of property, and the making of contracts for any purpose, the same executive power Articles 73 and 162 already establish more generally for the Union and the states.

Article 299: how a government contract must actually be made

Article 299(1) lays down the formalities: every 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 by the Governor of the state, as the case may be, and must be executed on behalf of the President or Governor by a person and in a manner the President or Governor directs or authorises. Article 299(2) then insulates the individual signatory and the head of state personally: neither the President nor the Governor is personally liable in respect of any such contract, and nor is the person who executes the contract on their behalf, precisely because the contract is always, in law, the Union's or the state's own contract, never a personal one.

Why the formalities are mandatory, not a mere formality

In K.P. Chowdhary v State of Madhya Pradesh (1966), the Supreme Court held that Article 299(1)'s requirements are mandatory, not directory, and exist specifically to protect the government against unauthorised contracts entered into in its name. The Court's most consequential holding: a government contract cannot arise by implication the way an ordinary private contract can from conduct alone; it must be express, in the form Article 299(1) itself specifies. A contract that fails to comply with Article 299(1) is treated as no contract at all, void and unenforceable by either side, and this defect cannot be cured by estoppel or by one party having already performed part of its own obligations under the defective arrangement. The practical effect is asymmetric in a way worth holding precisely: a private party dealing with the government bears the risk of checking that the government's own side observed these formalities, since the government cannot be held to an improperly-formed contract no matter how much the other party may have relied on it.

Article 300: suits by and against the government

Article 300(1) allows the Government of India to sue and be sued by the name of the Union of India, and a State Government to sue and be sued by the name of the State, in relation to their respective affairs, in the same manner the Dominion of India and the corresponding Provinces could before the Constitution came into force, subject to any law a competent legislature may make. This is the constitutional basis for the government appearing as an ordinary litigant, "Union of India" or a named state, rather than enjoying a blanket immunity from being sued at all.

Quick revision points

• Article 298: executive power extends to trade, business, acquiring/holding/disposing of property, and contracting, for the Union and every state.
• Article 299(1): a government contract must be expressed to be made by the President/Governor and executed by a person they authorise, in the manner they direct.
• Article 299(2): neither the President/Governor nor the executing officer is personally liable on such a contract.
• K.P. Chowdhary v State of Madhya Pradesh (1966): Article 299(1)'s formalities are mandatory; a government contract cannot be implied from conduct, and non-compliance makes the contract void and unenforceable by either party, with no cure through estoppel.
• Article 300(1): the Union sues/is sued as the "Union of India," a state as the "State," continuing the pre-constitutional suability of the Dominion and the Provinces.

The chapter's single most reliable trap: assuming a government contract, like a private one, can be inferred from the parties' own conduct. Article 299 and K.P. Chowdhary together rule that out entirely.