High Court of Bombay

Pune Municipal Corporation Vs. Prudent Polyconsultants Pvt. Ltd.

MANU/MH/2571/2018

06.09.2018

Contract

No contract shall bind the Corporation if not made in accordance with the provisions of Act

The Pune Municipal Corporation has preferred present First Appeal against the money decree passed by the trial Court. The Learned Trial Judge, by the impugned judgment has held that, the Plaintiffs have proved their suit claim, having found that there was a concluded contract between the parties. The learned Trial judge held that, Corporation is bound to compensate the Plaintiffs by paying professional fees even thought the money has not reached to the Corporation and as such decree was drawn whereby the defendants were held liable to pay a sum of Rs. 7,08,50,000 towards professional charges alongwith future interest.

It is settled position of law that, where a Statute requires that a thing shall be done in a prescribed manner or format but does not set out any consequences of non-compliance, the question whether provision was mandatory or directory has to be adjudged in the light of the intention of the Legislature as disclosed by the object, purpose and the scope of the Statute. If the Statute is mandatory, the thing done not in the manner of the format prescribed could have no effect or validity, but if it is directory, penalty may be incurred for non-compliance but the Act or a thing done is recorded as a go.

Intention in enacting the provisions contained in Section 74 of the Bombay Provincial Municipal Corporations Act, 1949 is that, the Corporation should not be saddled with liability for unauthorised contracts and with that object provided that, contracts are executed on behalf of the Corporation, in the manner prescribed by authorised person. The Rules contained in Chapter-V Schedule-'D' appended to the Act and sub-section 2 of Section 74 of Act, makes it amply clear that, no contract shall bind the Corporation if not made in accordance with the provisions of this Act, that the said provisions are mandatory.

In the case in hand, admittedly no contract was executed between the Plaintiffs and the Corporation either in the prescribed form or otherwise. The Committee was well conscious of this fact even before granting approval to appoint the plaintiffs for procuring the loan and thus directed the Corporation to execute Agreement with the plaintiffs. Thus, in absence of the contract as required under Section 74 of the said Act, as well as, in terms of the Standing Committee Resolution, all further Acts even including the Mandate would not further the case of the Plaintiff.

Infact, letter dated 1st July, 2000 was conditional whereby Corporation communicated to the Finance Company that, it shall not be obliged to pay fees and if any of the said approvals could not be obtained for any reason beyond the control of the PMC. Further, the Corporation informed the Finance Company that the final letter of acceptance shall be issued on obtaining approval of the Standing Committee in its ensuing meeting. The Plaintiffs were appointed to arrange loan, but was subject to agreement. Admittedly, no agreement was executed. Appeal is allowed and the decree of the trial Court is quashed and set aside.

Tags : Money decree Loan Sanction

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