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1966 (3) TMI 87 - SUPREME COURT

1966 (3) TMI 87 - SUPREME COURT - 1967 AIR 40, 1966 (0) Suppl. SCR 81 - Civil Appeal No. 203 of 1964 - Dated:- 29-3-1966 - RAMASWAMI, V., SARKAR, A.K. (CJ) AND SUBBARAO, K. Sarjoo Prasad and T. Satyanarayana, for the Appellant. R. Ganapapathy Iyer and B.R.G.K. Achar, for the Respondent. JUDGMENT: The Judgment of the Court was delivered by Ramaswami, J. This appeal is brought by certificate against the judgment and decree of the Rajasthan High Court dated January 29, 1963. The appellant firm Bans .....

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issued a notification on May 18, 1946 offering the plots by public advertisement for sale on certain terms and conditions. The notifification-Ex. 4-was published in Bharatpur Rajpatra and one of the concessions proposed to be granted was embodied in cl. 3 of the notification which stated: "If any commodity is imported from outside into the Mandi and is sold for consumption within the State, or if any commodity received in the Mandi from within the State and is exported in both cases, a red .....

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sale of plots and certain other conditions such as deposit of one-fourth sale money at the time of auction etc. The appellant purchased plots Nos. 8 and 9 for ₹ 4,600 at a public auction and two sale deeds (sanad nilam) were issued to the appellant on October 10, 1946. The Government of Bharatpur and after its merger, the Government of United State of Matsya and thereafter the present Rajasthan State carried out the promise contained in cl. 3 of the Bharatpur notification and allowed reduc .....

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ese Mandies or Zones shall cease to have force and duties of customs shall be levied and collected in such Mandies or Zones in accordance with the revised tariff, amended from time to time." The appellant and other traders thereupon made representation to the Rajasthan Government on January 29, 1951 and pending the disposal of the representation the Customs authorities agreed to keep the amount of 25 per cent by way of 'Amanat'. The State of Rajasthan ultimately decided on May 25, 1 .....

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State and the applicability of the concessions had also become impracticable on the formation of Rajasthan. The District Judge of Bharatpur, by his judgment dated March 31, 1956, held that item No. 3 of Bharatpur notification was a term of sale between the parties and the Rajasthan State was bound by it and the succeeding States have recognised the concessions granted to the appellant and therefore the suit of the appellant should be decreed. The State of Rajasthan took the matter in appeal to t .....

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argued on behalf of the appellant that Ex. 4 which is the notification dated May 18, 1946 regarding the sale of plots by the Bharatpur State was an offer of purchase of plots on terms and conditions made in that notification. It was contended that the offer was made to the public as a whole and after it was accepted by the appellant a valid contract came into existence. The opposite view point was presented on behalf of the respondent. It was submitted that the concession granted in cl. 3 did no .....

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ncession was granted might be in the hands of purchasers and builders of plots, their tenants and licensees or other dealers. It was therefore not possible to hold that the State Government offered the tax concessions as a reciprocal promise in connection with the contracts of sale with the appellant and the latter had no justification for treating the benefits offered as consideration in return for the purchase of the plots and the construction of shop buildings. It is also pointed out by learn .....

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ification, Ex. 4, was a term of the contract of sale of plots 8 and 9 of the Mandi. Even upon that assumption the suit of the appellant must fail, for we shall presently show that there was no recognition of the contractual right by the succeeding State of Rajasthan, and in the absence of such recognition the contract between the former State of Bharatpur and the appellant cannot be legally enforced. We shall proceed, therefore, to consider the next question, namely, whether the term of the cont .....

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osition is that the contract of the predecessor State terminates with the change of sovereignty unless the contract is ratified by the succeeding sovereign State. It is now well-established in law that the contractual liability of a former State is binding on a succeeding sovereign State only if it recognises that contractual liability. The season is that the taking over of sovereign powers by a State in respect of territory which was not till then a part of it is an. act of State" and the .....

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in his municipal courts. In The Secretary of State in Council of India v. Kamachee Boye Saheba Moore's I.A. 476 the jurisdiction of the courts in India to adjudicate upon the validity of the seizure by the East India Company of the territory of Rajah of Tanjore as an escheat, on the ground that the dignity of the Raj was extinct for want of a male heir, and that the property of the late Rajah lapsed to the British Government, fell to be determined. The Judicial Committee held that as the se .....

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orcing any decision which they may make." In another case-Vajesingji Joravarsingji v. Secretary of State for India in Council 51 I. A. 357 the Judicial Committee observed as follows: "when a territory is acquired by a sovereign State for the first time that is an act of State, It matters not how the acquisition has been brought about. It may be by conquest, it may be by cession following on treaty, it may be by occupation of territory hitherto unoccupied by a recognized ruler. In all c .....

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t to enforce remains only with the high contracting parties." In Secretary of State v. Sardar Rustom Khan and Others a question arose whether the rights of a grantee of certain proprietary rights in lands from the then Khan of Kalat, ceased to be enforceable since the agreement between the Khan and the Agent to the Governor-General in Baluchistan under which the Khan had granted to the British Government a perpetual lease of a part of the Kalat territory, at a quit rent, and had ceded in pe .....

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e that cession of territory by one State to another is an act of State and the subjects of the former State may enforce only those rights which the new sovereign recognises has been accepted by this Court in M/s. Dalmia Dadri Cement Co. Ltd. v. The Commissioner of Income-tax 1959] S.C.R. 729. The State of Saurashtra v. Jamadar Mohamat Abdulla and others 68 I.A. 100. Maharaja Shree Umaid Mills Ltd. v. Union of India [1963] Supp. 2 S.C.R 515, and State of Gujarat v. Vora Fiddali Badruddin Mithibar .....

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barrier. After the formation of the Matsya Union on March 18, 1948 there was a promulgation of the Matsya Customs Ordinance by the Raj Pramukh on September 21, 1948. The United State of Rajasthan was constituted on May 15, 1949 when there was merger of Matsya Union in the United State of Rajasthan. On August 9, 1949 the Raj Pramukh promulgated the Rajasthan (Regulation of Customs Duties) Ordinance No. 16 of 1949. Section 3 of this Ordinance abolished duties on the transport of goods within the t .....

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to that extent: Provided that the Government may, by notification in the Rajasthan Gazette-(a) Impose a duty of customs on the transport of goods from or to any part of Rajasthan to or from such other part thereof at such rate or rates and with effect from such date as may be specified in the notification, or (b) direct that, in respect of the transport of goods of such description and from or to such part of Rajasthan as may be specified in the notification, a sum of money equal to the amount .....

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e being in force in the place from or into which goods leviable with a duty of Customs have been exported or imported, as the case may be." sub-section (2) of s. 4 provides: "The Government may, by notification in the Rajasthan Gazette, issue a revised tariff specifying the goods or class of goods in respect of which, and the rate at which, duties of Customs shall be levied and collected with effect from such date as may be specified in the notification on the export or on the import o .....

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xamination of the provisions of this Ordinance that there was a repeal of all Customs laws of the Covenanting States in so far as they provided for the levy and collection of duties in the particular territorial limits of the Covenanting States and the Ordinance introduced a new law imposing duty on export and import into Rajasthan State as a whole. Further, after the issue of a revised tariff the old tariffs under the various laws of the Covenanting States also stood repealed. There is no expre .....

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Raj Patra, which itself refers to ss. 10 and 33 of the Matsya Customs Ordinance No. 14 of 1948 by which customs concessions were revoked. We are, therefore, of the opinion that the High Court has rightly taken the view, upon an analysis of the evidence adduced in the case, that there was no recognition of the contractual liability by the succeeding State of Rajasthan. We shall however ,assume in faboure of the appellant that the State of Rajasthan recognised the contractual right of the appellan .....

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han, which came into existence on January 26, 1950. The former Bharatpur State remained a separate entity till March 18, 1948, though it had acceded to the Dominion of India after August 15, 1947 with respect to three subjects, namely, communications, defence and external affairs. In 1948, however, the process of merger in Rajasthan began and the first merger that took place was of the former States of Alwar, Bharatpur, Dholpur and Karauli, which formed the Matsya Union as from March 18, 1948 by .....

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e to time. Section 33 of the Ordinance similarly granted power to the State Government to exempt any goods or class of goods imported or exported from the United State of Matsya from payment of customs duty leviable thereon. Then came another union of certain other Rulers in Rajasthan in March 1948 by which these Rulers united under the Ruler of Udaipur to form what later came to be known as the Former State of Rajasthan. In March 1949, the United State of Rajasthan was formed by Covenant entere .....

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is well-established that Parliament or State Legislatures are competent to enact a law altering the terms and conditions of a previous contract or of a grant under which the liability of the Government of India or of the State Governments arises. The legislative competence of Parliament or of the State Legislatures can only be circumscribed by express prohibition contained in the Constitution itself and unless and until there is any provision in the Constitution expressly prohibiting legislation .....

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t the Crown cannot deprive itself of its legislative authority by the mere fact that in the exercise of its prerogative it makes a grant of land within the territory over which such legislative authority exists, and no court can annul the enactment of a legislative body acting within the legitimate scope of its sovereign competence. If therefore, it be found that the subject-matter of a Crown grant is within the competence of a Provincial legislature nothing can prevent that legislature from leg .....

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r item 21 of List 11 of the 7th Sch. to the Government of India Act, 1935, was intra vires the Provincial legislature notwithstanding that admittedly some of its provisions cut down the absolute rights claimed by the appellant taluqdar to be comprised in the grant of his estate as evidenced by the sanad granted by the Crown to his predecessor. The same principle has been reiterated by this Court in Maharaj Umeg Singh and others v. The State of Bombay and others 1955] 2 S.C. R. 16. It was pointed .....

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5 in which it was pointed out that there is nothing in Art. 295 of the Constitution which prohibits Parliament from enacting a law altering the terms. and conditions of a contract or of a grant under which the liability of the Government of India arises. It was further held that there was nothing in Art. 295 prohibiting Parliament from enacting a law as to excise duty or income-tax in territories which became Part B States, and which were formerly Indian States, and such a prohibition cannot be .....

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persedes the previous contract of the appellant with the State of Bharatpur. Lastly, it was argued on behalf of the appellant that the notification dated January 16, 1951 revoking the tax concessions was in violation of Art. 306 of the Constitution which provides as follows: "Notwithstanding anything in the foregoing provisions of this Part or in any other provisions of this Constitution, any State specified in Part B of the First Schedule which before the commencement of this Constitution .....

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