Legal Services and Laws of Sri Lanka

SLR - 1978-79-80 Vol.1- P 41

SLR - 1978-79-80 Vol.1, Page No - 41

AUGUST 6, 9, 10, 13, 14, 15, 1979.

Corporations-Whether such contracts had been terminated at time of election-Mode of terminationofacontract-Renunciation
by one party-Election law applicable-ElectionOrder-in-Council,1946(Cap.381)ConstitutionofSriLanka,1972-Ceylon
(Constitution) Order-in-Council (Cap.379), section 13(3) (c).

Public Corporation-Ceylon Petroleum Corporation Act, No. 28 of 1961Nationalization of industry byState-Distinctionbetween
such Corporation and Company incorporated under Companies Ordinance-Corporation investedwithjuristicpersonalitytodo
State business-Agent of State when entering into contracts for services for sale and distribution of petroleum.
The 1st respondent had been an Agent of the Insurance Corporation at Galle and also a dealerofthePetroleumCorporation
for the sale and disposal of petroleum at a Depot in Galle. The appellant sought a declaration that the election ofthe1st
respondent to the electorate of Galle was void for thereason thatatthetimeofelection,the1strespondentheld
contracts with the Petroleum Corporation of Sri Lanka and Insurance Corporation of Ceylon and wastherebydisqualifiedfor
election as a Member of Parliament in terms of section 77(c) of the Ceylon Parliamentary Elections Order inCouncil,(1946)
Cap. 381. Clause 12B of the 1st respondent's contract with the Petroleum Corporation provided that a dealer wasentitledto
terminate the agreement "after three months notice in writing given to the Corporation". The said period of three monthswas
to run from the date on which the Corporation acknowledged the dealer's written notice.The1strespondentwrotetothe
Corporation that he had "decided to terminate" the contract by a letter dated 27.5.1977 and thereafter also sentatelegram
on 5.6.1977 the daybefore nomination day purporting to unilaterally terminate the contract. This telegram wasfollowedup
by a letter of the same date in the same terms, The Corporation did notterminatethecontract nordiditacceptthe
unilateral termination sought to be made by the 1st respondent by the said telegram andletter.The1strespondentwas
elected to represent the Galle electorate as a Member of the National State Assembly on 21.7.77.
It was held by the Election Judge who heard the petition that the respondent did not hold any of the saidcontractsonthe
day of election, namely, 21st July, 1977, and the petition was therefore dismissed.Thepetitionerwasgrantedleaveto
appeal to the Supreme Court.

Held :
(1) The petitioner had no contract with the insurance Corporation at the time of election inasmuch as hehadwrittenprior
to nomination day which was 6th June, 1977, requesting that his agency with theCorporationbeterminatedwithimmediate
effectand by letter dated 6th July, 1977 the Insurance Corporation
informed him that his resignation had been accepted accordingly, although in terms of the contract it could have insistedon
a month's notice. Thus there had been a termination effected by mutual consent and the contract ceased to be bindingonthe
parties by nomination day. The 1st respondent wastherefore not disqualified on this ground.
(2) On the evidence led at the inquiry the respondent hadtakenunilateralactiontoterminatethecontractwiththe
Petroleum Corporation but the Corporation did notacceptthisunilateralactiononthepartofthe1strespondent.
Renunciation by one party alone was insufficient and the contract therefore subsisted.
(3) Section 75 of the Constitution of 1972 kept alive the election laws that were in operation on 21st May, 1972,untilthe
National State Assembly provided for the matters referred to in the section. As no such provision had been made therelevant
provisions of such laws, namelysection 13(3) (c) of the Ceylon (Constitution) Order in-Council, 1946{Cap. 379)hadtobe
considered for any disqualification by reason of contract. This section provided for such disqualification if apersonheld
or enjoyed any right or benefit under any contract made by or on behalf of the Crown.
(4) An examination of the provisions of ActNo.28of1961whichestablishedthePetroleumCorporationandofthe
circumstances in which the Corporation was created showed that such alegal entitycarryingonmonopolisticcommercial
transactions for the State must necessarily be the agent of the State and when the Corporationenteredintocontractsfor
services for the sale and distribution of petroleum products it did so asanAgentoftheState.The1strespondent's
agreement with the Petroleum Corporation (P1) fell ,into this category. Accordingly, the 1st respondent being at the timeof
his election a party to a contract entered into with him by the Petroleum Corporation on behalf of theState,hiselection
was void as he was disqualified from being so elected to the electorate of Galle on 25th July, 1977.

Cases referred to

(1) Johnstone v. Milling, (1886 16 Q.B.D. 460 55 L.J. (QB.) 162, 54 L. T. 6292 T.L.R.

(2) Hirji Mulji v. Cheong Yue Steamship Co., (1926) A.C.497(1926) All E.R. Rep. 51

134 LT. 737, 42 T.L.R. 359.
(3) Heyman v. Darwins, (1942) 1 All ER. 337(1942) A.C. 356 166 L. T. 306, 58
T.L.R. 169.
(4) White & Carter (Councils) Ltd., v. McGregor Ltd., (1961) 3 All ER. 1178 H.L.

(1962) A. C. 413, (1962) 2 W.L.R. 17.
(5) Motion v. Michaud, (1892) 8 T. L. R, 253.
(6) Martin-Baker Aircraft Co. Ltd., and Another v. Canadian Flight Equipment, Ltd.,

(1955) 2 All E.R. 722(1955) 2 Q.B. 556.
(7) Dahanayake v. Pieris, (1944) 45 N.L.R. 385.

(8) Rahimtoola v. Nizam of Hyderabad, (1957) 3 All ER. 441, H.L.(1958) A.C. 379
(1957) 3 W.L.R. 884.
(9) Trendtex Trading Corporation v. Central Bank of Nigeria, (1976) 3 All ER. 437
(1976) 1 W.L.R. 868.
(10) Amalgamated Society of Engineers v. Adelaide Steamship Co. Ltd., 28 C.L.R.
(11) Queen v. Liyanage, (1965) 67 N.LR. 193.
APPEAL from an order of the Court of Appeal.
Petitioner in person.
Mark Fernando, with B. T. Eliatamby and Miss A.E. Wickremasinghe, for the 1st respondent.
G.P.S. de Silva,Additional Solicitor-General, with Sarath Silva. Deputy Solicitor-General and S. Ratnapala, StateCounsel,
as amicus curiae.
Cur. adv. vult
September 10, 1979.
The appellant was a candidate for election to the electorate of Galle at the General Election held on the21stJuly,1977.
The first respondent who was also a candidate was declared elected by a majority of 5,009 votes.Theappellantthenfiled
this petition challenging the validity of the saidelection.Hesoughtadeclarationthatthesaidelectionofthe
respondent was void for the reason that at the time of election thefirstrespondentheldcontractswiththePetroleum
Corporation of Sri Lanka and the Insurance Corporation of Ceylon and was thereby disqualified for electionasamemberin
terms of section 77 (e) of the Ceylon (Parliamentary Elections) Order in Council 1946 (Cap. 381). Cader,J.whoheardthe
petition dismissed the petition for the reason that on the day of election,viz., 21.7.77, the respondent did notholdany
of the contracts mentioned above. In accordance with the order of Cader. J. who has granted the petitioner leavetoappeal,
the appeal before us is limited to the following points:-
"(1) Whether the day of the election is the day of nomination or the day of contest
(2) Whether the provisions 70, 73 and 75, read with Section 12 of the Constitution of Sri Lanka, create adisqualification
for a person who has been holding ' a contract with any Corporation
(3) Whether in terms of the provisions of the 1972 Constitution, the petitioner is entitled to invokethedisqualifications
that had been set out in the Soulbury Constitution
(4) Whether there had been a legal termination of the two contracts by the 1st respondent
(5) Whether the two Corporations are Government institutions and/or whether they are departments of Stateand
(6) Whether the 1st respondent is entitled to unilaterally terminate the contracts with the Corporations."
It is specifically stated that no leave has been granted in respect of the relief claimed in this petitionprayingthathe
be declared elected in place of the first respondent.
I will deal with the facts first. By letter dated 4.6.67 (P5) the first respondentwasappointedAgentoftheInsurance
Corporation of Ceylon at Galle. It contained the terms and conditions bindingonthepartiesduringtheperiodofthe
agency. By writing dated 10.6.1967 (P6) the first respondent agreed to abide by the termsandconditionssetoutinP5.
These two documents constitute the contract between the parties. Clause 6 ofP5providedthattheappointmentcouldbe
terminated by-one party with one month's notice to the other. Nomination day for theGalleElectoratewasfixedfor6th
June, 1977. On 1st June, 1977 (P7) the first respondent wrote to the Life Manager of the Corporation inter alia as follows:-

"Please terminate my agency as from 1st June, 1977, since I am contesting Galle Seat as a candidate. Also thisistoavoid
an election petition."
It is obvious that the first respondent himself considered that the contract in question couldbeadisqualification,and
therefore requested termination. By letter dated 6.7.77 (P8) the Insurance Corporation replied-
"You are hereby informed that your letter of resignation is accepted accordingly."
This can only mean that the Corporation acceded to the request in P7 and released thefirstrespondentfromthecontract
although the Insurance Corporation could have insisted on a month's notice. This terminationhasbeeneffectedbymutual
consent and not unilaterally. The contract thus ceased to be binding on the parties by nomination dayandthereforecannot
be a disqualification for election as a member.
The other contract is with the Ceylon Petroleum Corporation. It wasproducedmarkedP1.Thiswassignedbythefirst
respondent on 11.12.67 and by the Corporation on 8.9.68. By it, the Corporation appointed thefirstrespondentitsDealer
for the sale and disposal of petroleum at the Depot situated at No. 30, Cripps Road, Galle, and the firstrespondentagreed
to/act as dealer subject to the terms and conditions set out in P1. Clause 12B of the Contract statesthattheDealer"is
entitled to terminate this Agreement after three months' notice in writing given to the Corporation. The three monthsnotice
by the Dealer shall commenceto run from the date on which the
Corporation acknowledges the Dealer's written notice". By letter dated 27th May, 1977 (P2) the first respondent wrote tothe
Chairman of the Corporation that he had "decided to terminate" the contract and requested that the Dealership betransferred
to his wife, and the Chairman has by a minute called for the recommendation ofthe Marketing Manager. This request hadalso
been orally made to the Regional Manager (South) and this officer by letter of 3.6.77 (1R2)informedthefirstrespondent
that "suitable steps to expedite that transfer" would be taken if and when the land on which the equipmentwassituatewas
transferred to the first respondent's wife. It is obvious thatthefirstrespondentcouldnotwaituntilsuchmutual
termination of the contract was effected, as nomination day was fixed for 6thJune,1977.Hetookunilateralactionon
5.6.77 in an attempt to meet the situation. On this day he sent a telegram (1 R1) which was received bytheCorporationon
the next day in these terms:-
He also wrote a letter dated 5.6.77 (1 R3) stating inter alia "IherebyterminatetheagreementwiththeCorporation".
Neither the telegram nor the letter is a notice of termination of the contract by the firstrespondentinaccordancewith
Clause 12B of P1. The Corporation for its part did not terminate the contract in terms of the contract,nordiditaccept
the unilateral termination sought to be made by the first respondent in 1 R1 and 1R3.ByminuteP38dated23.6.77the
Marketing Manager informed the Chairman that he would put up papers for transfer of the Dealership to the firstrespondent's
wife. The Chairman then made the following minute (P3C) to the Marketing Manager.
"That is not the point. He gave up the Dealership without any notice. Please Spk. Is anyone operating the outlet now?"
On the 28th June, this officer has made the following minute (P3D):
Spoke to Ch. Await Developments."

The next development was that the first respondent was elected on
21.7.77 to represent the Galle Electorate. He contends that the contract P1 was validly terminated by the notices 1 R1 and1
R8. Cader, J. so holds but I find somedifficultyinfollowinghisreasoningforthisconclusion.Hecommencesthe
penultimate paragraph of his judgment with the statement that the respondent had clearly taken all stepsthathecouldto
terminate the contract." It seems to me that the relevant consideration was not what he "could" but whathe"should'under
the contract. He then goes on to state that no business was done because the first respondent abandoned the Sales Depot,and
thereby,his Dealership. This cannot by any kind of reasoning constituteaterminationinlaw.Hethenconcludesthe
paragraph with this statement:

"One should keep in mind that the respondent was taking this step because he was a candidate for an electionandheshould
not be punished for the reason that the Corporation was delaying the termination ofthecontractthoughitbeforgood
reasons, namely, to serve the public."
This is the very antithesis of his first statement: In effect it is a finding that action on the part of the Corporationwas
necessary to bring about the termination of the contract. There is noevidenceonrecordtoshowthattheCorporation
terminated this contract on or before 21st July, 1977, nor is it the case of the first respondent thattheCorporationdid
so. In view of this confusion it is necessary for this Court to go into the facts and come to a findingastowhetherthe
contract was terminated so as to absolve the respondent from a disqualification in election law. It is possible to come toa
decision on this matter based primarily on the documentary evidence.

It is clear that the Corporation did not accept the unilateral termination of the contract by the first respondent.Infact
the minute P3B indicates that the Chairman of the Corporation was not prepared to agree to such termination. The evidenceof
Mr.Wirnalasena the present Chairman of the Corporation is that the Corporation took no action "toterminateornot".Mr
Coomaraswarhy, who was Chairman prior to and up to election day,statedthatneitherhenortheBoardterminatedthe
contract. It was not the kind of termination permitted by the contract. The only validtermination,unilaterally,ifthat
term could be used, is by the first respondent giving 3 months' notice. On the expiration of thisperiodof3monthsthe
contract ceases to be of any further effect as far as the business is concerned. It is a well recognised rule that whereone
party contrary to ' the terms of contract seeks to terminate it the other party is not bound to accept it and is entitledto
hold the first party to the contract. The contract then subsists despite the unilateral attempt at termination. It takestwo
(at least) to make contract and it takes two to end it. Renunciation by one party alone is insufficient:
"Such a renunciation does not of course amount to a rescission of
the contract, because one party to a contract cannot by himself rescind it, but by wrongfully making suchrenunciationof
the contract he entitles the other party, if he pleases, to agree to the contractbeingputanendto,subjecttothe
retention by him of his right to bring an action in respect of such wrongful rescission.Theotherpartymayadoptsuch
renunciation of the contract by so acting upon it as in effect to declare that he too treatsthecontractasatanend,
except for the purpose of bringing an action upon it for the damages sustained by him in consequenceofsuchrenunciation.
He cannot, however, himself proceed with the contract on the footing that it still exists for other purposes, and alsotreat
such renunciation, as an immediate breach. If he adopts the renunciation, the contract isatanendandexceptforthe
purposes of the action for such wrongful renunciationif he does not wish to do so, he must wait forarrivalofthetime
when in the ordinary course a cause of action on the contract would arise. He must elect which course he will pursue."
per Lord Esher M.R. in Johnstone v. Milling (1) at 467.
"Rescission (except by mutual consent or by a competent Court) is the right of one party, arising upon conduct by theother,
by which he intimates his intention to abide by the contract no longer. It is a right to treat the contract as at anendif
he chooses, and to claim damages for its total breach, but it is a right in his option...................."
per Lord Sumner in Hirji Mulji v. Cheong Yue Steamship Co. (2) at 509. Vide also Heyman v. Darwins (3) at340.InWhite&
Carter, Ltd, v. McGregor (4) the respondent's Sales Manager entered into a contract with the appellantsforadvertisingon
the litter bins made by the appellants which theysuppliedtolocalauthorities.Thecontractwasfor3years.The
respondent heard about it on the day the Contract was entered into and wrote to the appellants to cancel it. Theappellants,
who had not yet taken any steps to carry out the contract refused to accept the concellation and proceeded toadvertisefor
the next three years. The respondent contended that since he repudiated the contract before anything was done underit,the
appellants were not entitled to go on and carry out-the contract and sue for the contract price.TheHouseofLordsheld
that the appellants were entitled to sue for the contract price. Lord Reid set out the principle as follows:-
"The general rule cannot be in doubt. It was settled in Scotland at least as early as 1848 and ithasbeenauthoritatively
stated time and again in both Scotland and England. If one party to a contract repudiates it in the sense of making itclear
to the other party that he refuses or will refuse to carry out his part of the contract, the
other party, the innocent party, has an option. He may accept that repudiation and sue for damagesforbreachofcontract
whether or not the time for performance has comeor he may if he chooses disregard or refuse toacceptit,andthenthe
contract remains in full effect." (p 1181).
This general rule is a rule of our law too. There is nothing on record to show that the Corporation accepted therepudiation
by the first respondent. It was faced with a fait accompli, an abandonmentoftheoutletbythefirstrespondent,and
decided to watch developments.

It was contended by the Solicitor-General that this being a contract of agency it could be terminatedunilaterally.Counsel
for the first respondent argued that in such circumstances no Court would grant specific performance ofthecontract.This
by itself, he said, indicated that thecontractwasatanendandterminatedforallpurposes.Enforceabilityand
subsistence of the contract are two different things altogether. One party to the contract may well holdtheothertothe
contract but still be unable to enforce specific performance of it in a Court. If this contract was a pureagencyagreement
and nothing more I would agree that it is summarily determinable at any moment and the contract would then be at an end.The
case of Motion v. Michaud (5) is a clear illustration of it. In that case the plaintiff was an independentmerchantselling
wines and liquors of various manufacturers, for his own profit, and he was not bound to any of them by contract. ContractP1
is of a different kind. It provided for notice of 3 months' duration should the respondent wish toterminatehisservices.
The Corporation had installed its own equipment of considerable value on the land onwhichtheoutletstood.Theywould
normally take considerable time to remove. Till such time they stood at the risk of the first respondent. Infacttheyhad
not been removed even on election day. The contract prohibits the firstrespondentfromselling,stocking,orotherwise
dealing with products other than those of the Corporation unless prior consent in writing has been obtained. the period of3
months notice is stipulated to run from the date the Corporation acknowledges receipt of the first respondent's notice.This
is understandable, for the Corporation must be given sufficient and reasonable time to find a dealerandestablishanother
outlet so as not to disrupt a service essential to the life of the community. Some effect must be giventothisprovision.
Agreements of this nature must, as stated by McNair, J. in Martin Baker Aircraft Co. Ltd.andAnotherv.CanadianFlight
Equipment, Ltd. (6) at 735 be "looked at as a whole and the whole of its contentsconsidered".Theyarenotdeterminable
summarily. Furthermore it is an
agreement which stood honoured for a continuous period of 10 years. Counsel for the first respondent relied ontheevidence
of the Chairman who stated that the Corporation was powerless in the face of the first respondent'srepudiation.Indeedit
had no choice. It must have been left gaping and looking foolish too. I am of opinion that the Corporation wasjustifiedin
refusing to accept the first respondent's unilateral act and it was entitled to hold himtothecontractunlessproperly
terminated by giving the Corporation 3 month's notice. 1 hold that the contract P1 had not been terminateduptothetime
the respondent was declared the winner in the poll.

The next question I have to consider is whether a contract between an elected M.P. and the State entails adisqualification.
This election was held under the provisions of the Constitution adopted in 1972. The Solicitor-General andcounselforthe
first respondent both contended that such a disqualification can only be imposed by the Constitution ofSriLanka(Ceylon)
of 1972 (hereinafter referred to as the 1972 Constitution) and by no other enactment. They referred to Section 70 (1) (d)of
the 1972 Constitution which reads as follows:
"(d) if he has any such interest in any such contract made by or on behalf of the State or a publiccorporationasmaybe
prescribed by or under a law of the National State Assembly "

It is an admitted fact that the National State Assembly did not, during the whole of the period thatitwasinexistence,
specify by law "such interest" in any "such contract" for the purpose of the disqualification contemplated by section 70(1)
(d). The National State Assembly was empowered to do this by the provisions of section73(f)butchosenottodoso.
Therefore, counsel contend, the question of disqualification by reason of contract does not arisefordecision.Itisas
simple as that. A provision such as the one in section 70(1) (d) is onethatisenactedfor"securingtheFreedomand
Independence of Parliament" (Vide 22 Geo. III c. 45 of 1782) and to, secure "the independence of members oftheLegislature
and their freedom from any conflict between their duty to the public and their privateinterests"(
Dahanayake vs. Pieris (7) at 394.) That the National State Assembly deliberately left wide open the doors ofcorruptionfor
its members is not a proposition we can lightly entertain. We havehadahealthytraditioninthisregardanditis
unthinkable that any fundamental
departure from this tradition of maintaining honesty and purity in public life has been made inthe1972Constitution.By
1972 numerous State Corporations had come into existence regulating andservicing wide areas ofpubliclife.Sincetheir
activities touched the lives of the people at many points, sometimes even bringing about contractual relations in respectof
their ordinary day to day activities, there was undoubtedly a need for a clear-cut decision as towhatcontractsandwhat
interests should or should not constitute a disqualification for candidates to Parliament. If there was any intentiontodo
away with this particular disqualification, we would nothaveexpectedtofindaprovisionlikesection70(1)(d)
incorporated in the Constitution. This section, far from doing away with such a disqualification, appears tohaveaddedto
its ambit and now contains the twin concepts of State and Corporation, where previously only one term "Crown"existed.What
appears to have been left to the Legislature, considering the wider context of State regulationnowinexistencewasthe
duty to demarcate the limit beyond which such contractual relations should constitute a disqualificationformembershipin
the House. Over seven years have passed, and two successive Parliaments have still not addressed their minds to thismatter.
It is against this background that we have to consider the arguments as to whether the draftsman of the Constitutionlefta
vacuum in this respect or whether the transitional provisions contained in section 75 are adequatetotakechargeofthe
situation until such time as Parliament decides to lay down afresh the necessary criteria.

Section 75 states, "until the National State Assembly, provides forthemattersreferredtoinsection73,suchlaws
relating to or connected with the election of members of the Parliament and the determination of disputed electionsaswere
in force immediately before the commencement of the Constitution shall, subject to the provisions contained intheChapter,
be applied mutatis mutandis to the said matters."
It was sought to be argued by the respondent that section73appliedtoproceduralmattersanddidnotdealwitha
substantive matter like a disqualification which is already dealt with inthe Constitution in Article 70, and henceneither
section 73 nor section 75 can be invoked in this case. As against this, we find that certain items in section73seems to
support the petitioner's arguments. Two of the items in respect of which laws can be

made by the National State Assembly are
"(e) the grounds for avoiding an election, and
(f) such other matters as are necessary or incidental to the election of members to the National State Assembly,"
"provided, however, that the law made under this section shall not add to the disqualifications enumerated in section 70."
The petitioner referred us to the provisions of section 77 of the ElectionsOrderinCouncil1946whichreferstothe
grounds for the avoidance of elections and which provision is admittedly in force now. Paragraph (e) ofthissectiongives
the disqualification for election as one of the grounds. More significantthanthisisthespecificreferencebackto
section 70, in the proviso to section 73.Theprohibitioncontainedintheprovisoisinregardtoaddingtothe
disqualifications. The reference to section 70, contained in section 73 andthechoiceoflanguage,indicatesthatthe
draftsman of the Constitution had precisely this in mind, namely, necessary action to implement the provisions of section70
(1) (d), but making sure that that should not involve any fundamental alteration of that section.Theworkingoutofthe
details within the framework given in section 70 (1) (d) can by no means be regarded as anadditiontothesection.This
matter could also be viewed in another way. Section 70 (1)(d)canberegardedasanempoweringprovisionwhilethe
machinery and procedure for making the necessary laws is contained in section 73. This is acommonfeatureinlegislation
where there is a rule making section enabling rules to be made in respect of matters prescribed bytheothersections.In
this context it would be observed thatthelegislationcontemplatedbothbysection70andsection73isordinary
legislation similar in content and quality and in no way amounts to a constitutional amendment. Counsel also argued thatthe
words "subject to the provisions in this Chapter" in section 75 bring into operation the provisions ofsection70.Section
70 (1) (d) however is inchoate and inoperative, he said. How can one therefore give any effect to section 70(1)(d)?It
was inanimate then. It is a dead letter now. It cannot operate to disqualify anyone. Secondly, itisarguedthattogive
operative effect to section 75 one has to bringintooperationtheprovisionsofsection13(3)(c)oftheCeylon
(Constitution) Order in Council (Cap. 379) (hereinafter referred to as the Soulbury Constitution) which theysay,hasbeen
repealed by section 12 (1) of the 1972
Constitution (vide schedule A). It reads thus:
"12 (1) Unless the National State Assembly otherwise provides, all laws, written and unwritten, in forceimmediatelybefore
the commencement of the Constitution, except such as are specified in Schedule 'A' shall, mutatismutandis,andexceptas
otherwise expressly provided in the Constitution, continue in force. The laws so continuing in force are referred tointhe
Constitution as 'existing law'."

But there is a second exception by the words "except as otherwise expressly provided in the Constitution".Section75does
just that. It keeps alive election laws that were in operation on 21st May, 1972, until the National State Assemblyprovides
for matters referred to in section 73. The Soulbury Constitution is one of those. I am therefore of the opinion thatsection
13 (3) (c) of the Soulbury Constitution has to be considered for any disqualification by reason of contract.
Section 13 (3) (c) of the Soulbury Constitution reads as follows:
"13 (3) A person shall be disqualifiedforbeingelectedorappointedasaSenatororaMemberoftheHouseof
Representatives or for sitting or voting in the Senate or in the House of Representatives-
(c) if he, directly or indirectly, by himself or by any person or on his behalf or for his use orbenefitholdsorenjoys
any right or benefit under any contract made by or on behalf of the Crown in respect of the Government of the Island forthe
furnishing or providing of money to be remitted abroad or of goods or services to be used or employed in the serviceofthe
Crown in the Island "
The agreement P1 is a contract for services entered into with the Petroleum Corporation which was established by ActNo.28
of 1961 to carry on the business of importer, exporter, seller, supplier or distributor of petroleum. Itisalsoempowered
to carry on the
business of exploring for, exploiting, producing and refining, petroleum and theCorporationisnowactivelyengagedin
these activities. For some time thereafter private Companies had the business of bunkering in the Port ofColombobutthis
too has been completely taken over by the Corporation. It now has the monopolyinthebusinessoftradinginpetroleum
products in Sri Lanka. Political ideology at thetimeconsideredthat,petroleumbeinganessentialserviceforthe
community, it should be the responsibilityof and the sole business of the Government of the country. Oil,in themodern
world is a major economic factor in the planning progress and even the viability of bothindustrialstatesanddeveloping
countries. Petroleum has ceased to be a mere consumer item of private trade and is now, the concern ofgovernmentsatboth
national and international levels. The PetroleumCorporationwhichnationalisedthis industrycontainsthenecessary
framework for placing petroleum and those activities connected with it, solely at the disposal of the State as itsmonopoly.
For the purpose of providing this essential service the Government createdthisCorporation.ItisrunbyaBoardof
Directors consisting of five members all. of whom are appointed by the Minister (section 8) who has power togivegeneral
or special directions to the Board which they must obey (section 7(1)). A member of Parliament wouldbedisqualified.from
being a, Director of the Board. (Section 8). The Minister may also call for accounts and reports respecting the business,of
the Corporation (section , 7(2) and may order investigations of the activities oftheCorporation(section7(3)).Most
significant is the fact the Minister has the power to fixpricesatwhichpetroleumproductsshallbesoldandalso
prescribe other conditions for sale (section 66). In short the Corporation does not act like otherCorporationswhoengage
in business. Its business is mainly, if not wholly, controlled by the Minister and therefore the State. Itdoesnothave
that independence in matters of business which is enjoyed by Companies formed under the Companies Ordinance.Itisawell
known fact that this is a monopoly business acquired by the State which is also compelledtosubsidizesomepartofits
business for the welfare of the community. The Corporation's initial capital was wholly supplied bytheStateandithas
therefore no shareholders nor is there an issue of share scripts.Its accounts are audited by an auditorappointedbythe
Minister (section 31). It can even cause immovable property required for its needs tobecompulsorilyacquiredunderthe
provisions of the Land. Acquisition, Act. It is a legal hybrid bred by the Government to enable it toengageincommercial
business-tailor made to suit its style of business. It is a Government creation clothed with juristic personality so as to
give it an aura of independence, but in reality it is just a business house doing only theState'sbusinessforandon
behalf of the State. . Such a legal entity carrying on monopolistic commercial transactions for theStatemustnecessarily
be the Agent of the State. It is however not always necessary that an agentoftheSateshouldbeanAlterEgoora
department of the State. Rahimtoola v. E. H. H. Nizam of Hyderabad (8). This does not prevent the agentfromenteringinto
private contracts of service for the purpose of engaging employees to run its agency house.Forexampletheofficersand
servants of the Central Bank, admittedly an agency of the State, are by no means public officers within themeaningofthe
Constitution. Vide also Trendtex Trading Corporation v. Central Bank (9). However when it enters into contracts forservices
for the sale and distribution of petroleum products it does so as agent of the State. Agreement P1isofsuchakind.I
therefore hold that at the time of his election the first respondent was a party to a contract entered into with himbythe
Corporation on behalf of the State.

The petitioner stated that when section 13(3)(c) is read after the necessary changes (mutatis mutandis) the words"Stateor
Public Corporation" must be read into the section. Therefore the words "Crown in respect of theGovernmentoftheIsland"
must be replaced by the words "State or Public Corporation in respect ofGovernment of theIsland"andinplaceofthe
words "Crown in the Island" must be read "State or Public Corporation in the Island". This would be doing greatviolenceto
the section. Government by the Crown in 1946 has been replaced by theStatein1972.The"Crown"wasreplacedbythe
"Republic of Sri Lanka", and in my view that is the only change that is permitted. Counsel for thefirstrespondentsought
to give a restricted meaning to the words "in respect of the Government of the Island". He stated that thisrefersonlyto
the Executive Government. If that be so there was 'no reason to' include the word "Crown". It must be borne in mind thatthe
Soulbury Constitution was drafted in 1946 at a time when the "Crown" was one and indivisible andwasubiquitousthroughout
the British Empirebut with varying powers or attributes. It was therefore necessary to distinguish the Crown in respectof
the Government of one country in the British Empire from the Crown in respect of the Government ofanothercountryinthe
same Empire. "The first step in the examination of the Constitution is to emphasise the primary legal axiomthattheCrown
is ubiquitous and indivisible in the King's: Dominions". per Isaacs J.inAmalgamatedSocietyofEngineersv.Adelaide
Steamship Co. Ltd., (10). The concept became obsolete inCeylonwhenCeylonbecameaFree,SovereignandIndependent
Republic" called the "Republic of Sri Lanka" by the Constitution of 1972. I do not agree that the
words "in respect of the Government of the Island" was included to mean the Executive Government of the Island. In Queeenv.
Liyanage (11) the Court dealing specifically with these words said:thattheWord"Government"-wasquiteobviouslynot
intended to refer to the Cabinet of Ministers. Those words were used for the purpose of restricting thedisqualificationto
contracts made-with the Government of Ceylon for its purposes in the Island and to eliminate contracts madewiththeCrown
in other Governments of the British Empire. In that view of the matter I see no difficultyinholdingthatAgreement.P1
was: a contract for-services with the Republic of Sri Lanka and the first respondentwastherebydisqualifiedfrombeing
elected to the electorate of Galle on the 21st July, 1977. The said electionofthefirstrespondentisvoid.Iwould
therefore set aside the order of Cader, J. and direct that a certificate beissuedtothateffectintermsofsection
82(B)(2) of the Ceylon (Parliamentary Elections) Order in Council (Cap. 381). The petitioner will be entitledtoasumof
Rs. 1,500 as costs of inquiry in the Court of Appeal and a further sum of Rs. 500 as costs in this appeal. Finally I wishto
record our thanks for the assistance given to this Court by the Additional-Solicitor-General who appearedasamicuscuriae
on notice by this Court.


WANASUNDERA, J. - I agree.

Appeal allowed.

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