Detailed Study Notes for Unit IV

Unit-IV: Liability of State in Torts and Contracts, Inter-State Trade & Public Services

Constitutional Mandate (Article 299): All contracts made in the exercise of executive power of the Union or a State shall be expressed to be made by the President or the Governor, and executed by authorized persons in such manner as directed.
Key Requirements for State Contracts:
1. Must be expressed to be made by the President/Governor.
2. Must be executed by an authorized officer.
3. Must be executed in writing.
Consequences of Non-Compliance: Unlike private contracts under the Contract Act, Article 299 is mandatory. If these formal requirements are not met, the contract is void and cannot be enforced against the government, and the government cannot ratify it (though the doctrine of quantum meruit or promissory estoppel may apply in limited equitable circumstances).

Constitutional Position (Article 300): The Government of India or a State may sue or be sued by the same name as the Dominion of India and the Provinces could have sued or been sued before the commencement of the Constitution, subject to statutory enactments by Parliament or State Legislatures.
The Sovereign vs. Non-Sovereign Functions Distinction:
- Sovereign Functions: Traditional acts of state power (defense, military operations, maintenance of law and order) enjoy sovereign immunity, and the state is not liable for torts committed by its servants (State of Rajasthan v. Vidyawati).
- Non-Sovereign Functions: Commercial, welfare, or administrative activities (running railways, factories, or transport) do not enjoy immunity, and the state is fully liable for negligence of its employees like any private employer.
Evolving Jurisprudence: Modern Supreme Court judgments increasingly narrow down sovereign immunity, awarding constitutional tort compensation for violations of Article 21 irrespective of traditional immunity claims (Nilabati Behera v. State of Orissa).

General Principle (Article 301): Trade, commerce, and intercourse throughout the territory of India shall be free.
Regulatory Power and Exceptions:
- Parliament’s Power (Article 302): Parliament may impose restrictions in the public interest.
- State Discrimination Ban (Article 303): State legislatures cannot give preference to one state over another or discriminate between states.
- Taxation by States (Article 304(a)): States can impose non-discriminatory taxes on goods imported from other states if similar goods manufactured within the state are taxed.
- Regulatory / Reasonable Restrictions (Article 304(b)): States can impose reasonable restrictions in the public interest, subject to prior sanction of the President.
Regulatory vs. Restrictive Acts: Non-discriminatory regulatory measures (such as traffic rules, licensing, or health inspection fees) do not violate Article 301, whereas fiscal barriers or heavy transit tolls that obstruct movement constitute unconstitutional restrictions (Atiabari Tea Co. v. State of Assam).

Doctrine of Pleasure (Article 310): Except as expressly provided by the Constitution, every person who is a member of a defense service, civil service of the Union, or an all-india service holds office during the pleasure of the President, and civil servants in states hold office during the pleasure of the Governor.
Constitutional Safeguards (Article 311): The absolute scope of the doctrine of pleasure is curtailed by Article 311, which provides that no civil servant can be dismissed or removed by an authority subordinate to that by which they were appointed, nor dismissed without being given a reasonable opportunity of being heard (inquiry).

All-India Services (Article 312): Parliament can create All-India Services (IAS, IPS, IFS) common to both Union and States if the Rajya Sabha passes a resolution supported by two-thirds of members present and voting.
Public Service Commissions (Articles 315 to 323): Establishment of Union Public Service Commission (UPSC) and State Public Service Commissions (SPSC) to conduct civil service examinations and advise governments on disciplinary matters.

Case Title: State of Rajasthan v. Vidyawati
Citation & Court: AIR 1962 SC 933 (Supreme Court of India)
Related Constitutional Provisions: Article 300 of the Constitution and Tort Law.
The Story & Real-Life Background: A government jeep owned by the State of Rajasthan and driven recklessly by a government employee ran over a pedestrian, causing his death. The widow filed a suit for damages against the State of Rajasthan. The State claimed sovereign immunity, arguing that driving a jeep for official administrative duties is a sovereign act.
Legal Issues Involved: Whether driving a government vehicle for official transport constitutes a sovereign function exempt from tortious liability.
Final Judgement & Ratio Decidendi:
- Ruling: The Supreme Court held that the State is liable for the tortious acts of its servants committed during non-sovereign functions. Driving a government vehicle is not an act of state sovereignty (like declaring war or maintaining defense). Therefore, the State was held vicariously liable to pay compensation.
- Ratio: Sovereign immunity is restricted to traditional sovereign acts of state; welfare and administrative functions attract standard vicarious tort liability.

Case Title: Atiabari Tea Co. Ltd. v. State of Assam
Citation & Court: AIR 1961 SC 232 (Supreme Court of India, 5-Judge Constitution Bench)
Related Constitutional Provisions: Articles 301 and 304 of the Constitution.
The Story & Real-Life Background: The State of Assam enacted a taxing statute levying a carriage tax on tea transported through inland waterways and roads within the state. Tea companies challenged the tax, arguing that it violated the constitutional freedom of inter-state trade under Article 301.
Legal Issues Involved: Whether a state tax on goods moving in inter-state commerce violates Article 301 freedom.
Final Judgement & Ratio Decidendi:
- Ruling: The Supreme Court held that Article 301 ensures free flow of trade without direct and immediate restrictions. A tax that directly impedes, obstructs, or restricts the free movement of goods violates Article 301 unless validated under Article 304.
- Ratio: Taxes or tolls that directly burden the movement of goods in inter-state trade infringe Article 301 unless protected by specific constitutional exceptions.

Unit Number	Topic / Concept Name	Relevant Constitutional Scope	Core Description / Subject Matter
Unit-IV	State Contracts	Article 299	Mandatory requirements for government contracts (written, expressed by President/Governor).
Unit-IV	Tortious Liability	Article 300	Vicarious liability of state for non-sovereign acts vs. sovereign immunity exceptions.
Unit-IV	Inter-State Trade	Articles 301 to 304	Freedom of trade and commerce throughout India, subject to reasonable public interest restrictions.