Constitution of India
Article 298: Power to carry on trade, etc.
Part XII — Finance, Property, Contracts and Suits (Chapter III — Property, Contracts, Rights, Liabilities, Obligations and Suits)
Article 298 — Main Text
WHAT IT SAYS: The executive power of the Union and of each State extends to carrying on any trade or business, acquiring/holding/disposing of property, and making contracts for any purpose. WHAT IT MEANS: Both Union and State governments can act as commercial entities — run businesses, own property, and enter contracts — without needing specific legislative authorisation. KEY DOCTRINE: Doctrine of Executive Competence in Trade — executive power to trade exists independently and does not require prior legislation (Rai Sahib Ram Jawaya Kapur, 1955).
Proviso (a) — Union's executive power subject to State legislation
WHAT IT SAYS: Union's executive power in trade/business/property/contracts, in so far as the matter is not one on which Parliament may make laws, is subject in each State to legislation by that State. WHAT IT MEANS: Where a subject falls outside Parliament's legislative competence (i.e., State List matters), the Union's executive action in that area within a State must comply with that State's laws. KEY DOCTRINE: Federal balance in executive commercial powers — prevents Union from overriding State legislation in State-exclusive subjects.
Proviso (b) — State's executive power subject to Parliamentary legislation
WHAT IT SAYS: A State's executive power in trade/business/property/contracts, in so far as the matter is not one on which the State Legislature may make laws, is subject to legislation by Parliament. WHAT IT MEANS: Where a subject falls outside the State Legislature's competence (i.e., Union List matters), the State's executive action must comply with Parliamentary law. KEY DOCTRINE: Supremacy of Parliamentary legislation in Union List subjects over State executive action in commercial matters.
Constitutional Inspiration
SOURCE(S): 1. Government of India Act, 1935 — Section 175 ('Power to acquire property and to make contracts') Original provision: Section 175 empowered the Crown's government in India to acquire, hold, and dispose of property and make contracts, with Section 175(3) prescribing formal requirements for government contracts. What India kept: India retained the substance of property/contract powers in Article 298 and the formal requirements for contracts in Article 299. INDIA'S SPECIFIC ADAPTATIONS: 1. Expanded scope to include 'carrying on any trade or business' — reflecting India's post-independence socialist commitment to state participation in economic activities. 2. After 7th Amendment (1956), explicitly extended powers to States — the original 1950 text was narrower, the substitution recognised States' growing role in economic development. 3. Added proviso structure linking executive commercial power to federal legislative competence — ensuring neither Union nor States could bypass the other's legislative domain through executive trade activities.
Constituent Assembly Debate
DEBATED ON: 15 June 1949 (CAD Volume VIII) Draft Article Number: Draft Article 272 KEY SPEAKERS: 1. Dr. B.R. Ambedkar — Moved amendments to extend Draft Article 272 to Part III States (princely states) in addition to Part I States. 2. H.V. Kamath — Questioned whether it was wise to invest the executive with power to make contracts without reference to or subsequent confirmation by Parliament. 3. Prof. Shibban Lal Saksena — Defended the article, explaining that the power to make contracts is subject to Acts of the legislatures and no contract can be made in contravention of those laws. 4. Shri Mahavir Tyagi — Raised concerns about property-related powers and their scope, especially regarding contracts with Pakistan. MAJOR DISAGREEMENTS: 1. Executive vs. Legislative control over contracts — H.V. Kamath objected that unfettered executive contract power without Parliamentary oversight was unwise; Ambedkar's position prevailed. 2. Extension to Part III States — Ambedkar's amendment to include Part III (princely states) was adopted. FINAL OUTCOME: Draft Article 272, as amended to include Part I and Part III States, was adopted as part of the Constitution. AMBEDKAR'S KEY QUOTE (on related Article 273/299): Explained the principal-agent analogy — an agent acting within scope of authority conferred by the principal incurs no personal liability.
Landmark Judgments
LANDMARK JUDGMENTS: 1. Rai Sahib Ram Jawaya Kapur v. State of Punjab (1955) — Executive can carry on trade/business under Article 298 without specific legislative sanction; power of contract is expressly vested in the Government. 2. Erusian Equipment & Chemicals Ltd. v. State of West Bengal (1975) — State's executive power under Article 298 to trade and make contracts is subject to Part III; Article 14 requires equality of opportunity in public contracts, and blacklisting without hearing violates natural justice. 3. Radhakrishna Agarwal v. State of Bihar (1977) — Article 14 imports an obligation on State's executive power under Article 298 at the stage of entry into contracts; but once a valid contract under Article 299 is executed, disputes are governed by contract law, not writ jurisdiction. 4. B.R. Enterprises v. State of U.P. (1999) — Article 298 uses 'trade or business' and 'contracts for any purpose' — wider in scope than 'trade and commerce' under Article 301; State lotteries fall within Article 298's executive power. 5. State of Tamil Nadu v. Hind Stone (1981) — Right of State to carry on trade or business is recognised by Article 298; authority to exclude competitors does not arise from Article 19(6) alone. NOTABLE DISSENTS (if any): 1. No major recorded dissents — the above rulings were largely unanimous or by Constitution Benches. SCHOLARS & JURISTS: 1. Prof. V.V. Ramanadham — Examined financial accountability of Public Enterprises set up under Article 298, arguing they must be accountable to Parliament while maintaining business autonomy. 2. D.D. Basu — Noted that Article 298 post-7th Amendment removed the earlier limitation on States' commercial powers and placed Union and States on an equal footing in executive commercial competence.