Introduction
The liability of the State in torts and contracts is a fundamental aspect of administrative law, determining when and how the government can be held accountable for wrongful acts or contractual breaches. Unlike private individuals, the State enjoys certain immunities and privileges, but it is also expected to function fairly and lawfully.
In India, the doctrine of sovereign immunity has historically protected the government from lawsuits, but judicial decisions and statutory provisions have evolved to ensure that the State is not above the law.
Also Read: https://lexibal.in/administrative-tribunals/
This topic is broadly divided into two parts:
- State liability in torts (civil wrongs such as negligence, trespass, defamation)
- State liability in contracts (agreements entered into by the government)
Liability of the State in Torts
Meaning of Tort
A tort is a civil wrong that results in injury or damage to another person, entitling the injured party to compensation. Examples include negligence, defamation, trespass, and false imprisonment.
The liability of the State in tort arises when its actions, through its officers or employees, cause harm to an individual. However, the key question is whether the wrongful act was performed in the exercise of sovereign functions (which may be immune) or non-sovereign functions (which may be liable).
Doctrine of Sovereign Immunity
The principle that “the king can do no wrong” originated in English common law, granting immunity to the Crown (government) from being sued.
Under Indian law, this doctrine has been modified to suit a democratic system, and the State is now held responsible for non-sovereign functions.
Sovereign Functions (No Liability)
- Defense & national security
- Foreign affairs
- Law-making
- Administration of justice
- Taxation
Non-Sovereign Functions (Liability Exists)
- Commercial and industrial activities
- Public transport services
- Medical services
- Construction and maintenance of public infrastructure
Judicial Developments on State Liability in Torts
1. P & O Steam Navigation Co. v. Secretary of State for India (1861)
- First major case on State liability in India.
- The government was held liable for the negligent act of its employees in running a ferry (a commercial activity).
- Established the distinction between sovereign and non-sovereign functions.
2. Kasturi Lal v. State of Uttar Pradesh (1965)
- Plaintiff’s gold was stolen by a police officer.
- The Supreme Court ruled that the police’s actions were sovereign functions, so the State was not liable.
- Criticized for its regressive approach to sovereign immunity.
3. N. Nagendra Rao v. State of Andhra Pradesh (1994)
- The State was held liable for negligence in handling seized goods.
- The Court held that in a welfare state, sovereign immunity must be limited.
4. Common Cause v. Union of India (1999)
- Addressed negligence in government hospitals.
- State was held liable for medical negligence in public healthcare facilities.
5. State of Rajasthan v. Vidyawati (1962)
- A government driver negligently killed a pedestrian while driving an official vehicle.
- The Supreme Court held the State liable, as driving a vehicle was a non-sovereign function.
Liability of the State in Contracts
Legal Provisions
The Constitution of India, under Article 298 and Article 299, governs the contractual liability of the government.
1. Article 298: Power to Carry on Trade & Business
- The Union and State governments have the power to enter into contracts and carry on trade/business.
- The State can acquire, hold, and dispose of property just like any private entity.
2. Article 299: Manner of Execution of Contracts
- All government contracts must be executed in the name of the President (Central Government) or Governor (State Government).
- Such contracts must be signed by an authorized officer.
- If these conditions are not met, the contract is legally unenforceable.
Judicial Developments on State Liability in Contracts
1. Chatturbhuj Vithaldas v. Moreshwar Parashram (1954)
- A government contract was not signed in the President’s name, making it void.
- The Supreme Court ruled that compliance with Article 299 is mandatory.
2. K.P. Chowdhary v. State of Madhya Pradesh (1966)
- The petitioner sought enforcement of an oral contract with the government.
- The Court ruled that an oral contract with the government is void, as Article 299 requires written contracts.
3. State of Bihar v. Karam Chand Thapar (1962)
- A government contract was terminated arbitrarily.
- The Court ruled that the State is bound by contractual obligations and cannot act arbitrarily.
4. Union of India v. Rallia Ram (1964)
- Established that even if a contract is defective under Article 299, the claimant may recover compensation for services already rendered under quantum meruit (unjust enrichment).
5. D.G. & S.D. v. G.S. Rattan (1970)
- Reinforced that government contracts must be strictly in compliance with Article 299.
Distinction Between State Liability in Torts & Contracts
| Aspect | Torts | Contracts |
|---|---|---|
| Definition | Civil wrong causing injury to a person | Legally binding agreement between the government and a party |
| Legal Basis | Judicial precedents and common law | Articles 298 & 299 of the Constitution |
| Immunity | Sovereign immunity applies in some cases | No immunity—government contracts are legally enforceable |
| Procedure | Tort claims must be proven in court | Contracts must comply with Article 299 |
| Examples | Negligence by government hospitals, police brutality | Breach of contract in infrastructure projects |
Reforms & Suggestions
- Limit Sovereign Immunity – The government should not escape liability for arbitrary or negligent actions.
- Improve Clarity in Contracts – All government contracts must strictly follow Article 299, ensuring transparency.
- Compensation Mechanism – A structured mechanism should be in place to compensate victims of State negligence.
- Strengthening Judicial Oversight – Courts must ensure that State liability is fair and just.
Conclusion
The liability of the State in torts and contracts is an essential part of administrative law, ensuring that government actions are accountable and just. While the doctrine of sovereign immunity still applies in some areas, courts have progressively limited its scope, ensuring that the government is liable in cases of negligence and contractual breaches.
A balance must be maintained between protecting essential sovereign functions and holding the State accountable for wrongful acts, ensuring a just and fair legal system.
