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Issues Involved:
1. Successor Liability 2. Public Benefit of the Agreement 3. Limitation for Filing the Suit 4. Applicability of Acknowledgment for Limitation Extension Detailed Analysis: 1. Successor Liability: The primary issue was whether the State of Rajasthan was liable for the obligations of the former Bundi State under the agreement executed on 9th October 1945. The court examined the historical context of the integration of Rajputana states into Rajasthan. It was noted that the Rajasthan Union was formed through successive integrations, and legislative provisions ensured that the liabilities of the covenanting states became those of the United State of Rajasthan. The court cited the Supreme Court's decision in State of Rajasthan v. Shyamlal, which held that the new state assumed the liabilities of the merging states. Therefore, the court concluded that the State of Rajasthan was liable to honor the terms of the agreement (Ex. 1). 2. Public Benefit of the Agreement: The defendant argued that the agreement did not benefit the public and was solely for the Phoolsagar palace, which became the personal property of the Maharaja of Bundi. The court found that the agreement allowed the supply of electric energy to the public and for testing water wells for the city of Bundi. The agreement was executed by the Dewan of Bundi State, not in a personal capacity. The court also noted that the State of Rajasthan had paid Rs. 6,000/- under the agreement after the formation of the new state, indicating an acknowledgment of the contract. Thus, the court rejected the argument that the agreement was solely for personal benefit. 3. Limitation for Filing the Suit: The plaintiff claimed Rs. 48,000/- as rent and Rs. 11,880/- as interest, totaling Rs. 59,880/-. The trial court held that the suit was partly barred by limitation and decreed Rs. 24,000/-. The plaintiff argued that Article 131 of the Limitation Act applied, but the court disagreed, stating that the suit was for recovery of amounts due under the agreement, not for establishing a periodically recurring right. The court found that Article 115 of the Limitation Act was applicable, which pertains to compensation for breach of contract. The court cited various judgments, including a Full Bench decision of the Allahabad High Court, to support this view. 4. Applicability of Acknowledgment for Limitation Extension: The trial court treated a letter (Ex. 2) as an acknowledgment under Section 19 of the Limitation Act, extending the limitation period for the Rs. 6,000/- due on 1-4-1954. The court held that an acknowledgment must relate to a present subsisting liability. The letter (Ex. 2) only acknowledged the payment of Rs. 6,000/- by way of adjustment and did not indicate any other liability. Therefore, the court concluded that the trial court erred in treating Ex. 2 as an acknowledgment for the amount due on 1-4-1954. Conclusion: The court modified the trial court's judgment and decree, reducing the awarded amount from Rs. 24,000/- to Rs. 18,000/-, along with interest. The appeals by both the defendant and the plaintiff were partly allowed and dismissed, respectively, with costs proportionate to their success and failure in both courts.
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