Article 299: Historical Context of President's Name in Contracts -written by Poonam Chanchlani (BCA, Data Science)

Introduction:

In a significant legal development, the Supreme Court has clarified that including the President's name in a contract does not provide immunity against the application of the law. The court's verdict came in response to a petition filed by Glock-Asia Pacific Limited against the Union government. The case revolved around the appointment of an arbitrator for a tender dispute.
 

Contracts and Legal Obligations:

The court emphasized that a contract involving the President of India does not exempt it from adhering to statutory prescriptions. It established that the government's decision to enter into a contract cannot evade the application of laws imposing conditions on parties involved. This verdict aligns with Article 299 of the Constitution, which stipulates that contracts made by the Union or State in the name of the President or Governor do not empower the government to bypass statutory law.
 

Impartial Arbitrator Selection:

The ruling also emphasized the importance of impartiality in arbitrator selection. It highlighted that an arbitrator should have no professional ties to any party involved, past or present, to ensure unbiased decision-making. The court called for stringent scrutiny in choosing arbitrators, especially when the state is involved. In this context, the court addressed a clause enabling the Home Secretary to appoint an officer in the Ministry of Law as the sole arbitrator. This clause was deemed a violation of Section 12(5) of the Arbitration Act, which prohibits the appointment of individuals with prior or current relationships with any party to the arbitration.

 

Application of Immunity and Legal Obligations:

The court's ruling clarified that while contracts entered in the President's name enjoy immunity, this immunity cannot override statutory law. It upheld that immunity arising from Article 299 does not exempt the government from adhering to prescribed legal conditions.
 

Appointment of Impartial Arbitrator:

The verdict affirmed that when a state entity appoints an arbitrator, the obligation to ensure impartiality and independence becomes more pronounced. The court appointed former Supreme Court judge, Justice Indu Malhotra, as the sole arbitrator in the case, highlighting the need for a neutral adjudicator in dispute resolution.
 

Conclusion:

The Supreme Court's ruling reinforces the principle that contracts, even those involving the President, are subject to legal obligations and conditions. It underscores the importance of impartial arbitrator selection, ultimately ensuring fairness and integrity in the resolution of disputes.