Facts

• The Appellant was the State of Uttar Pradesh, represented by the Government of Uttar Pradesh and three of its officials.
• The Respondent was a company that operates cold storage.
• The cause of action arose when the Respondent- Plaintiff reserved space for storing 4,000 maunds of potatoes as agreed upon with the Appellant- Defendants, but no potatoes were sent for storage.
• As a result, the Plaintiff sought to recover Rs. 21,000/- on account of rent or damages for the reserved but unoccupied storage space.
• The High Court set aside the decree against Defendants Nos. 2 and 4, maintaining it against Defendant No. 3.
• Hence, The appeal was raised before the Supreme Court.
  

Background/ Procedural Posture –

Trial Court Holding:

• The Trial Court upheld the State Government's objection that no contract compliant with Article 299(1) of the Constitution was entered into, leading to the dismissal of the suit against the State.
• The Trial Court held Defendants No. 2 (Deputy Director, Horticulture), Defendants No. 3 (Horticulturist in the Department of Agriculture), and Defendants No 4 (Assistant Development Commissioner, Planning Lucknow) were liable for the storage charges. (Page 2 )

High Court Holding

• On appeal by the Defendants, the High Court set aside the decree against Defendants Nos. 2 and 4 and maintained the decree against Defendant No. 3.
• The High Court found that the entire transaction was conducted by Defendant No. 3 on behalf of the Government.
• Since the State Government was not liable under Article 299 of the Constitution, Defendant No. 3 was held liable under Section 230(3) of the Contract Act. (Page 2 )
• An appeal was brought to the Supreme Court against the decision of the Allahabad High Court.
  

Main Issue: -

1. Whether there was a valid contract between Appellant and Respondent under Article 299(1) of the Constitution?
2. Whether the agent of the Government can be held liable under such a contract, as per Section 230(3) of the Indian Contract Act, 1872?