TMI Blog1994 (9) TMI 316X X X X Extracts X X X X X X X X Extracts X X X X ..... of the matter, the judgment and order of the High Court cannot be upheld. The appeal succeeds and is allowed. The judgment and order of the High Court is set aside and that of the trial court decreeing the suit of the appellant is restored with costs. - C.A. 3856 OF 1988 - - - Dated:- 6-9-1994 - SAHAI, R.M. AND HANSARIA B.L., JJ. JUDGMENT R.M. SAHAI, J.- Is the State vicariously liable for negligence of its officers in discharge of their statutory duties, was answered in the negative by the High Court of Andhra Pradesh on the ratio laid down by this Court in Kasturi Lal Ralia Ram Jain v. State of U.P AIR 1965 SC 1039: (1965) 1 SCR 375 while reversing the decree for payment of Rs 1,06,125.72 towards value of the damaged stock with interest thereon at the rate of 6% granted by the trial court for loss suffered by the appellant due to non-disposal of the goods seized under various control orders issued under the Essential Commodities Act, 1955 (hereinafter referred to as 'the Act'). But for determining correctness of the view taken by it, the High Court granted certificate under Article 133(1) of the Constitution of India as the case involved "substantial questions of l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elease it in its favour for disposal and deposit of the sale price. But neither any order was passed by the DRO nor any action was taken by the AAO. On 29-6-1976 the proceedings under Section 6-A of the Act were decided and the stock of horsegram (foodgrain) was confiscated as the appellant's licence had been cancelled. As regards fertiliser it was held that the explanation of the appellant for difference in stock was not satisfactory. The only violation of Control Orders found was improper maintenance of accounts. In consequence of this finding, rather in absence of any material to prove that the appellant was guilty of any serious infringement such as black marketing or adulteration or selling at higher price than the controlled price, the Collector was left with little option except to direct confiscation of part of the stock and the rest was released in favour of the appellant. That the confiscated stock was only nominal, shall be clear from a comparative chart of the stock seized and released Stock seized (bags) Stock confiscated (bags) 1.Ammonium Sulphate 392 29 2.Ammonium Phosphate 6 2 3.Puskhhal ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ory obligation but once it was seized then it was the responsibility of the State Government to ensure that the goods were maintained in proper condition. But they failed in discharging their obligation and in any case there was no justification for retaining the goods after the order was passed by the Sessions Judge directing the AAO to return the goods without any permission from the Vigilance Inspector. The trial court was also of the opinion that the fertiliser fell in the category of those goods the utility of which deteriorated with lapse of time. The trial court did not believe the AAO, who appeared as witness, that he tried to dispose of the stock as there was nothing on the record to show that any such effort was made. Not only that, even when the higher authorities directed him to sell away the stocks and make a compliance report he did not make any effort nor contacted any cooperative society, depot or super bazar. The trial court found that there was nothing on record to show that any ryot or cultivator had refused to purchase the seized stocks of fertilisers on the ground that its quoted price was higher than the market price. It was further held, after discussing vari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it was held that the prime object of the legislation was to secure availability of essential commodities to the general public at fair prices and to protect their interest by way of equitable distribution. "Essential commodity" under clause (a) of Section 2 of the Act means any of the commodities mentioned therein. It extends to such varied items as cattle fodder, coal, component parts and accessories of automobiles, cotton and woollen textiles, foodstuffs, iron and steel, paper, petroleum, raw cotton, jute and any other class of commodity notified by the appropriate Government. Section 3 is the main provision directed towards securing equitable distribution of the essential commodity and its availability at fair prices. To achieve this objective, its various sub- sections confer powers on Government to issue orders regulating or even prohibiting production, supply and distribution of such goods. Clause (j) of sub-section (2) of Section 3 empowers the Government to make any provision for any incidental or supplementary matter including in particular, the entry, search or examination of such premises, aircraft, vessels, vehicles etc. to make seizure by a person authorised to make su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the nature of power and how it is expected to be exercised. Nothing turns on it so far this appeal is concerned. But what needs to be mentioned is that since the power is very wide as a person violating the Control Orders is to be visited with serious consequences leading not only to the confiscation of the seized goods, packages or vessel or vehicle in which such essential commodity is found or is conveyed or carried, but is liable to be prosecuted and penalised under Section 7 of the Act, it is inherent in it that those who are entrusted with responsibility to implement it should act with reasonableness, fairness and to promote the purpose and objective of the Act. Further, it should not be lost sight of that the goods seized are liable to be confiscated only if the Collector is satisfied about violation of the Control Orders. The language of the section and its setting indicate that every contravention cannot entail confiscation. That is why the section uses the word 'may'. A trader indulging in black marketing or selling adulterated goods etc. should not, in absence of any violation, be treated on a par with technical violations such as failure to put up the pricelist etc. or e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase, its proper maintenance and early disposal is statutory duty. It is more so as the proceedings do not come to an end quickly. The rationale of the provision appears to be that penalise the person who acts in contravention of the order but protect the goods as they are essential for the society. Loss in value of the goods in quality or quantity is neither in public nor in society's interest. Therefore, the Collector has to form an opinion if the goods seized are of one or the other category and once he comes to conclusion that they fall in one of the categories mentioned in the sub-section then he has no option but to direct their disposal or selling of in the manner provided. The expression "speedy and natural decay" does not need any elucidation. It is not an expression of art and must be understood in a common sense manner. The other expression, "it is otherwise expedient in the public interest" has also to be understood so as to advance the legislative objective of ensuring that the goods do not suffer either in quality or quantity. For instance, fertiliser may not be susceptible to speedy and natural decay but it is expedient in public interest to ensure that it is either s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reason to return the essential commodity seized" then the State shall be liable to pay the market price of the value with interest. The expression "for any reason" should be understood in broader and larger sense as it appears from the context in which it has been used. The inability to return, giving rise to the statutory obligation of deeming it as sale to the Government, may arise for variety of reasons and extends to any failure on the part of the Government. For instance, the goods might have been sold in pursuance of interim arrangement under Section 6-A(2). Or it might have been lost or stolen from the place of storage. The goods might have deteriorated or rusted in quality or quantity. The liability to return the goods seized does not stand discharged by offering them in whatever condition it was. Confiscation of part of the goods thus could not affect the right of owner to claim return of the remaining goods. Nor the owner is bound to accept the goods in whatever condition they are. The claim of the respondent, therefore, that the appellant was bound to accept the goods in whatever condition they were is liable to be rejected. 8. Having discussed the scheme of the Act, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh the maxim "lex non protest peccare" that is the King can do no wrong had no place in ancient India or in medieval India as the Kings in both the periods subjected themselves to the rule of law and system of justice prevalent like the ordinary subjects of the States. According to Manu, it was the duty of the King to uphold the law and he was as much subject to the law as any other person. "In the Vedic period kingship was purely secular institution. Ancient Indian philosophers were not prepared to recognise the divinity of the unworthy Kings." G.P. Verma : State Liability in India 5 (1868-69) It was said by Brihaspati "Where a servant commissioned by his master does any improper act, for the benefit of his master, the latter shall be held responsible for it." Even during Muslim rule the fundamental concept under Muslim law like Hindu law was that the authority of King was subordinate to that of the law. It was no different during British rule. The courts leaned in favour of holding the State responsible for the negligence of its officers. (See Narayan Krishna Laud v. Gerard Norman, Collector of Bombay Bom HCR 1 (Bom), a decision which has been approved in State of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reign yet it was made sovereign for carrying on hostilities and seizing the property. And this enunciation of law, even though incorrect and uncalled for, was seized upon and extended further in Nobin Chunder Dey v. Secretary of State of India ILR (1875) 1 Cal II: 24 WR 309, where the English principle of sovereign immunity. of the Crown was applied and plaintiff's claim for recovery of damages against the State for non- issuing of the excise pass and in the alternative for refund of the auction money was rejected as it was an act done by the Government in exercise of sovereign power of the State. This decision and its application in numerous cases led to denial of relief to citizens and different principles were evolved but each revolving round basic doctrine of sovereign immunity. It was dissented to by the Madras High Court in Secretary of State for India in Council v. Hari Bhanji9 and it was observed that Nobin Chunder Dey8 did not properly comprehend the law laid down in Peninsular7. The Chief Justice of the Madras High Court, after dealing with Peninsular7 and its erroneous application in Nobin Chunder Dey (supra) observed that defence of sovereign immunity was available in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t was discussed very ably by the Madras High Court in Secretary of State v. Hari Bhanji (supra)." The learned Judge also considered the Peninsular case7 and observed as under: (SCR pp. 696 : AIR p. 249, para 132) "Much importance, cannot in my opinion be attached to the observations of Sir B. Peacock in Peninsular and Oriental Steam Navigation Co. v. Secretary of State7. In that case the only point for consideration was whether in the case of a tort committed in the conduct of a business the Secretary of State for India could be sued. The question was answered in the affirmative. Whether he could be sued in cases not connected with the conduct of a business or commercial undertaking was not really a question for the court to decide." 11. But it was not till 1962 that an occasion arose for this Court to examine the tortuous act by servant of the State and whether a citizen who was wronged by it was entitled to claim compensation. In Vidhyawati6, the driver of a government vehicle while driving the jeep along a public road knocked down a person who was walking on the footpath by the side of the public road in Udaipur city causing him multiple injuries, including fractures of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iewing the case from the point of view of first principles, there should be no difficulty in holding that the State should be as much liable for tort in respect of a tortious act committed by its servant within the scope of his employment and functioning as such, as any other employer. The immunity of the Crown in the United Kingdom was based on the old feudalistic notions of justice, namely, that the King was incapable of doing a wrong, and, therefore, of authorising or instigating one, and that he could not be sued in his own courts. In India, ever since the time of the East India Company, the sovereign has been held liable to be sued in tort or in contract, and the Common Law immunity never operated in India. Now that we have, by our Constitution, established a Republican form of Government, and one of the objectives is to establish a Socialistic State with its varied industrial and other activities, employing a large army of servants, there is no justification, in principle, or in public interest, that the State should not be held liable vicariously for the tortious act of its servant. This Court has deliberately departed from the Common Law rule that a civil servant cannot mai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ublic servant in discharge of duties assigned to him not by virtue of the delegation of any sovereign power, an action for damages would lie. The act of the public servant committed by him during the course of his employment is, in this category of cases, an act of a servant who might have been employed by a private individual for the same purpose. This distinction which is clear and precise in law, is sometimes not borne in mind in discussing questions of the State's liability arising from tortious acts committed by public servants." The Bench did not avert to Hari Bhanji case9 which was approved by this Court in Province of Bombay (supra) 12. However, since 1965 when this decision was rendered the law on vicarious liability has marched ahead. The ever increasing abuse of power by public authorities and interference with life and liberty of the citizens arbitrarily, coupled with transformation in social outlook with increasing emphasis on human liberty resulted in more pragmatic approach to the individual's dignity, his life and liberty and carving out of an exception by the court where the abuse. of public power was violative of the constitutional guarantee. Such infringement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed to him, that he can make no claim against the State. That, we think, is not a very satisfactory position in law. The remedy to cure this position, however, lies in the hands of the Legislature." 14. Necessity of the legislation apart, which shall be adverted later, it is necessary to mention that in subsequent decisions rendered by this Court the field of operation of the principle of sovereign immunity has been substantially whittled down. In Shyam Sunder v. State of Rajasthan (1974) 1 SCC 690: AIR 1974 SC 890 where the question of sovereign immunity was raised and reliance was placed on the ratio laid down in Kasturi Lal case1, this Court after considering the principle of sovereign immunity as understood in England and even applied in America observed that there was no "logical or practical" ground for exempting the sovereign from the suit for damages. In Pushpa Thakur v. Union of India 1984 ACJ 559 (SC): AIR 1986 SC 11 99, this Court while reversing a decision of the Punjab Haryana High Court (Union of India v. Pushpa Thakur 1984 ACJ 401 (P H) which in its turn placed reliance on a Full Bench decision of that very Court in Baxi Amrik Singh v. Union of India (1973) 75 Pun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecretary of State in Council to sue or be sued, the concept of sovereign immunity, even if it was there, ceased to have any relevance. The decisions in Moodalay 21 and Kamachee 7 Moo IA 476: 1 Suther 373: 13 Moo PC 22 (also known as Rajah of Tanjore case furnished foundation in Peninsular case7 for deciding that the Crown having taken over from East India Company which was not a sovereign it could not claim that the Secretary of State in Council shall be immune for negligence of officers of the State. The decision in Viscount Canterbury4 which formed the basis of sovereign immunity in English law was held to be inapplicable as, " action against the Secretary of State in Council having been expressly given by the- 55th Section of the Act in lieu of that which formally existed against the East India Company". The learned Chief Justice held : "In determining the question whether the East India Company would, under the circumstances, have been liable to an action, the general principles applicable to Sovereigns and States, and the reasoning deduced from the maxim of the English law that the King can do no wrong, would have no force. We concur entirely in the opinion expresse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gn immunity for acts done by a trading company by the Judges presiding in higher courts. "English law never succeeded in distinguishing effectively between the King's two capacities personal and political." (H.W.R. Wade: Administrative Law, 6th Edn. 230) No such difficulty existed in our system of governance either during British rule or thereafter. The Indian law beginning from Government of India Act, 1858 and ending with Article 300 of the Constitution did not acknowledge the English principle of sovereign immunity. In England, "the judges had set their faces against any remedy in torts" (Wade) because of the "unfortunate by-product of the law of master and servant in the nineteenth century" (Wade). This misfortune was thrust upon our system, a typical judicial innovation, unparalleled anywhere in the world, where a commercial company was deemed to have such powers that it could not be "held liable for any act done by any of its officers and soldiers in carrying on hostilities or for the act of any of its naval officers in seizing the property of a subject under the supposition that it was the property of an enemy". The practical effect of it was that the officers of the Com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated 'acts of State', have been declared to be within the cognizance of those courts. Thus, in the Rajah of Tanjore case22, the question to be declared was thus stated by Lord Kingsdown in giving the judgment of the Committee: "What is the real character of the act done in this case? Was it a seizure by arbitrary power on behalf of the Crown of Great Britain of the dominion and property of a neighbouring State, an act not affecting to justify itself on grounds of municipal law, or was it in whole or in part a possession taken by the Crown under colour of legal title of the property of the late Rajah, in trust for those who by law might be entitled to it? If it were the latter, the defence set up, of course, has no foundation.' This Committee, in deciding the questions thus raised, held that the seizure was of the former character, and therefore not cognizable by a Municipal Court. The answer of the East India Company in that case did not rest on the simple assertion that the seizure was an act of State, but set out the circumstances under which the Rajah's property was taken. After referring to the treaties made with the Rajah, it averred that in entering into these ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nature of power which the Company enjoyed was delegation of the "act of State". An exercise of political power by the State or its delegate does not furnish any cause of action for filing a suit for damages or compensation against the State for negligence of its officers. Reason is simple. Suppose there is a war between two countries or there is outbreak of hostilities between two independent States in course of which a citizen suffers damage. He cannot sue for recovery of the loss in local courts as the jurisdiction to entertain such suit would be barred as the loss was caused when the State was carrying on its activities which are politically and even jurisprudentially known as 'acts of State'. But that defence is not available when the State or its officers act negligently in discharge of their statutory duties. Such activities are not acts of State. In Sir Anthony Musgrave24 the Privy Council, while determining liability of the Governor, observed that it cannot "be assumed that he possesses general sovereign power. His authority is derived from his commission, and limited to the powers thereby expressly or impliedly entrusted to him. Let it be granted that, for acts of power do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a new age of economic expansion and to reject all feudal notions of over-lordship or papal interference ... virtually unlimited capacity to make new law. Austin's sovereign was postulated as an illimitable, indivisible entity: From a conceptual standpoint there is no necessity for a sovereign to be undivided and unlimited. Indeed, in the complex societies that have developed since Bentham's day, particularly the modem collectivist States and federal systems, quite the reverse is true. Bentham thus accepts divided and partial sovereignty. " Lloyd's Introduction to Jurisprudence, 5th Edn. According to Dias-"the attributes of sovereignty are interesting. Such power is indefinite unless limited by express convention or by religious or political motivations. The sovereign may consist of more than one body, each of which is obeyed in different respects. Habitual obedience may thus be divided and partial, i.e., owed in certain areas of conduct. When divided in this way the power of each is limited by the other and each has a limited power to prescribe for the other." Dias : Jurisprudence, 5th Edn., 1985 29 (1970) 3 SCC 400 21. This change in outlook is consequence of gradual growth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... corporation analogous to a private company. The learned Judge observed as under: "Regal functions are inescapable and inalienable. Such are the legislative power, the administration of the laws, the exercise of the judicial power. Non-regal functions may be assumed by means of the legislative power. But when they are assumed the State acts simply as a huge corporation, with its legislation as the charter. Its action under the legislation, so far as it is not regal execution of the law is merely analogous to that of a private company similarly authorised." This decision reflects modem thinking. The State is treated in performance of its functions like a private company. It would obviously be answerable for negligence of its employees. 24. In the modem sense the distinction between sovereign or nonsovereign power thus does not exist. It all depends on the nature of power and manner of its exercise. Legislative supremacy under the Constitution arises out of constitutional provisions. The legislature is free to legislate on topics and subjects carved out for it. Similarly, the executive is free to implement and administer the law. A law made by a legislature may be ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... traordinary powers cannot be doubted. But with the conceptual change of statutory power being statutory duty for sake of society and the people the claim of a common man or ordinary citizen cannot be thrown out merely because it was done by an officer of the State even though it was against law and negligent. Needs of the State, duty of its officials and right of the citizens are required to be reconciled so that the rule of law in a Welfare State is not shaken. Even in America where this doctrine of sovereignty found its place either because of the "financial instability of the infant American States rather than to the stability of the doctrine's theoretical foundation", or because of "logical and practical ground", or that "there could be no legal right as against the State which made the law" gradually gave way to the movement from, "State irresponsibility to State responsibility". In Welfare State, functions of the State are not only defence of the country or administration of justice or maintaining law and order but it extends to regulating and controlling the activities of people in almost every sphere, educational, commercial, social, economic, political and even marital. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Procedure Code. The power to search and apprehend a suspect under Criminal Procedure Code is one of the inalienable powers of State. It was probably for this reason that the principle of sovereign immunity in the conservative sense was extended by the Court. But the same principle would not be available in large number of other activities carried on by the State by enacting a law in its legislative competence. 27. A law may be made to carry out the primary or inalienable functions of the State. Criminal Procedure Code is one such law. A search or seizure effected under such law could be taken to be an exercise of power which may be in domain of inalienable function. Whether the authority to whom this power is delegated is liable for negligence in discharge of duties while performing such functions is a different matter. But when similar powers are conferred under other statute as incidental or ancillary power to carry out the purpose and objective of the Act, then it being an exercise of such State function which is not primary or inalienable, an officer acting negligently is liable personally and the State vicariously. Maintenance of law and order or repression of crime may be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... substituted for the Province or the Indian State in those proceedings." 29. In Vidhyawati6 it was held that this article consisted of three parts (1) that the State may sue or be sued by the name of the State; (2) that the State may sue or be sued in relation to its affairs in like cases as the corresponding Provinces or the corresponding Indian States might have sued or been sued if the Constitution had not been enacted; and (3) that the second part is subject to any provisions which may be made by an Act of the Legislature of the State concerned, in due exercise of its legislative functions, in pursuance of powers conferred by the Constitution. In Vidhyawati6 and Kasturi Lal1 it was held that since no law had been framed by the legislature, the liability of the State to compensate for negligence of officers was to be decided on general principle. In other words, if a competent legislature enacts a law for compensation or damage for any act done by it or its officers in discharge of their statutory duty then a suit for it would be maintainable. It has been explained earlier that the Act itself provides for return of the goods if they are not confiscated for any reason. An ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wer to seize and confiscate was dependent upon a customs offence having been committed or a suspicion that such offence had been committed. The order of the Customs Officer was not final as it was subject to an appeal and if the appellate authority found that there was no good ground for the exercise of that power, the property could no longer be retained and had under the Act to be returned to the owner. That being the position and the property being liable to be returned there was not only a statutory obligation to return but until the order of confiscation became final an implied obligation to preserve the property intact and for that purpose to take such care of it as a reasonable person in like circumstances is expected to take. Just as a finder of property has to return it when its owner is found and demands it, so the State Government was bound to return the said vehicles once it was found that the seizure and confiscation were not sustainable. There being thus a legal obligation to preserve the property intact and also the obligation to take reasonable care of it so as to enable the Government to return it in the same condition in which it was seized, the position of the St ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... empowered to pass an order or grant decree for payment of the value of goods. Public policy requires the court to exercise the power in private law to compensate the owner where the damage or loss 33 (1977) 4 SCC 358: 1977 SCC (Cri) 598: AIR 1977 SC 1749 240 is suffered by the negligence of officers of the State in respect of cause of action for which suits are maintainable in civil court. Since the seizure and confiscation of appellant's goods was not in exercise of power which could be considered to be act of State of which no cognizance could be taken by the civil court, the suit of the appellant could not be dismissed. In either view of the matter, the judgment and order of the High Court cannot be upheld. 34. Before parting with this case, the Court shall be failing in its duty if it is not brought to the attention of the appropriate authority that for more than hundred years, the law of vicarious liability of the State for negligence of its officers has been swinging from one direction to other. Result of all this has been uncertainty of law, multiplication of litigation, waste of money of common man and energy and time of the courts. Federal of Torts Claims Act was enacte ..... X X X X Extracts X X X X X X X X Extracts X X X X
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