Say the ratio out loud before you open Reasoning — recalling it unprompted is exactly what the exam pays for.
Why it matters
It is the constitutional check on the liberal rule in P.B. Ray. A Government contract, and with it any arbitration clause found in the correspondence, is only as good as the authority of the officer who made it.
Facts
An arbitration agreement was said to arise from a contract with the Government made by correspondence. The officer who conducted the correspondence was not authorised to contract on behalf of the Government.
Held
A contract by correspondence with the Government must be entered into by an officer duly authorised to contract on behalf of the Government under Art. 299 of the Constitution. A contract made by a person not so authorised is void.
Reasoning
Step one — Art. 299 is mandatory, not directory. It prescribes how the Union or a State contracts: in the name of the President or the Governor, and executed by a person authorised to do so. A contract that does not satisfy it does not bind the State.
Step two — a void contract carries nothing with it. If the contract is void for want of authority, there is no agreement out of which an arbitration clause can be spelt. The liberality about form in P.B. Ray cannot cure a defect of capacity.
Step three — the practical test. Before treating Government correspondence as an arbitration agreement, ask who signed it and under what delegation.
Exam use
It opens: Can an arbitration agreement be inferred from correspondence? — as the qualification that completes P.B. Ray.
In a drafting or office-procedure question about Government work, this is the authority for the file check: verify the authorisation before advising that an arbitration clause exists.
Contrast it with separability. Under Firm Ashok Traders and Olympus Superstructures the arbitration clause survives annulment of the main contract. That doctrine assumes the parties made an agreement; it does not help where the State never contracted at all for want of constitutional authority.
It does not decide whether the Government may be bound on some other basis, such as restitution, where a void contract has been acted upon; the case is about the validity of the contract and the clause within it.