Article 298 of the Costitution of India with Case law
Here is a comprehensive explanation of Article 298 of the Constitution of India along with relevant case law:
🔷 Article 298 – Power to Carry on Trade, etc.
🔹 Text of Article 298:
"The executive power of the Union and of each State shall extend to the carrying on of any trade or business and to the acquisition, holding and disposal of property and the making of contracts for any purpose:
Provided that—(a) the said executive power of the Union shall, in so far as such trade or business or such acquisition, holding or disposal of property or the making of such contracts is not expressly provided by any law made by Parliament, be subject to such law; and
(b) the said executive power of a State shall, in so far as such trade or business or such acquisition, holding or disposal of property or the making of such contracts is not expressly provided by any law made by the Legislature of the State, be subject to such law."*
🔹 Key Features of Article 298:
| Aspect | Details |
|---|---|
| Applies To | Both Union and States |
| Scope of Power | Carrying on trade or business, acquiring, holding, disposing property, and making contracts |
| Executive Power | Enables governments to act like legal persons (companies or individuals) |
| Limitations | Subject to laws made by Parliament or State Legislature, as applicable |
🔹 Purpose of Article 298:
Grants constitutional authority to both Centre and States to:
Run commercial enterprises
Acquire and dispose of property
Make contracts for trade or other purposes
It ensures legal competence to enter into business transactions.
🔹 Historical Context:
Before the 7th Amendment Act (1956), only the Union had these powers.
The amendment extended this power to States, allowing them to also engage in business and property-related functions.
🔹 Example Applications:
Establishing Public Sector Undertakings (PSUs) like ONGC, BSNL, etc.
State governments running transport services, electricity boards, etc.
Entering MOUs or contracts with private parties.
🔹 Important Case Laws on Article 298:
✅ State of Bihar v. Majeed (1954 AIR 786; 1954 SCR 786)
Issue: Can the State carry on business (sale of foodgrains) without a specific legislative sanction?
Held:
Before the 7th Amendment, States had no constitutional authority to carry on trade without legislative backing.
Led to the amendment of Article 298, giving States such power explicitly.
Importance: Triggered the expansion of Article 298 to include States.
✅ Ramnath International Construction (P) Ltd. v. Union of India (2007) 2 SCC 453
Issue: Government contract disputes.
Held:
Government is bound by its contracts under Article 298, but it must follow the procedure of Article 299.
If contractual formalities under Article 299 are not followed, the contract is not enforceable.
Relation to Article 298: Reinforces that Article 298 permits making contracts, but Article 299 prescribes how.
✅ K.P. Chowdhary v. State of Madhya Pradesh (AIR 1967 SC 203)
Issue: Validity of disposal of forest rights by State.
Held:
A State can dispose of property (forest produce) under its executive power under Article 298.
Such actions must be within the limits of applicable laws.
✅ D.F.O. South Kheri v. Ram Sanehi Singh (AIR 1973 SC 205)
Issue: Government auction and contractual dispute.
Held:
Contracts made by government (under Article 298) must comply with Article 299(1) to be valid.
Otherwise, no legal enforceability exists.
🔹 Article 298 vs Article 299:
| Aspect | Article 298 | Article 299 |
|---|---|---|
| What it defines | Power to carry on business and make contracts | Procedure to make contracts |
| Applies to | Union and States | Union and States |
| Focus | Substantive power | Procedural formality |
| Legal Binding? | Grants authority | Ensures validity and enforceability of contracts |
🔹 Summary Table:
| Topic | Details |
|---|---|
| Article Number | 298 |
| Subject | Power to carry on trade, acquire property, and make contracts |
| Applies to | Union and States |
| Regulated by | Laws made by Parliament or State Legislature |
| Related Article | Article 299 (procedure for contracts) |
| Important Cases | State of Bihar v. Majeed, Ramnath Int’l, K.P. Chowdhary |
🔹 Conclusion:
Article 298 empowers both the Union and State Governments to act commercially — to trade, manage assets, and enter into agreements — essential for a modern, service-providing government. However, for legal validity, Article 299 must also be complied with in contractual matters.
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