TMI Blog1958 (4) TMI 6X X X X Extracts X X X X X X X X Extracts X X X X ..... ith exhibit A, but that relates to a period anterior to the formation of the new State and is within the saving enacted in the proviso to section 3 of the Ordinance. The appellant has failed to substantiate his plea that there has been affirmance of clause (23) of exhibit A by the Patiala State Union, and this point also must be found against it. Appeal dismissed. - C.A. 230 OF 1954 - - - Dated:- 28-4-1958 - Judge(s) : GAJENDRAGADKAR., S. K. DAS., S. R. DAS., VENKATARAMA AIYAR., VIVIAN BOSE JUDGMENT VENKATARAMA AIYAR, J.--Messrs. Dalmia Dadri Cement Co. Ltd., which is the appellant in Civil Appeal No. 230 of 1954 and the petitioner in Petition No. 276 of 1953, is a public company engaged in the manufacture and sale of cement at a place called Dadri situate in what was once the independent State of Jind. On April 1, 1938, one Shanti Prasad Jain, a promoter of the above company, obtained certain concessions from the Ruler of Jind under an agreement, exhibit A, and as it is this document that forms the basis of the present claim of the appellant, it is necessary to refer to the material terms thereof. Clause (1) of the agreement grants to the licensee, Shanti Prasad J ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts and subject to the obligations under the licence and realised royalty and levied income-tax in accordance with the provisions of exhibit A. This objection was taken for the first time only in the Writ Petition No. 276 of 1953 in this court. It is stated for the appellant--and that is not controverted for the respondent--that under the law of Jind State an assignment need not be in writing, and that being go, it is open to us to infer such assignment from the conduct of the parties. We must accordingly decide these cases on the footing that the rights under the licence, exhibit A, dated April 1, 1938, had become vested in the appellant by assignment. On August 15, 1947, India became independent, and on the same date, the Ruler of Jind signed an Instrument of Accession ceding to the Government of India power to legislate with respect to Defence, External Affairs and Communications. On May 5, 1948, eight of the Rulers of States in East Punjab including Jind entered into a Covenant for the merger of their territories into one State, called the Patiala and East Punjab States Union. For brevity, this State will hereafter be referred to as the Patiala Union. Article VI of the Covena ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... force in such Covenanting State immediately before that date shall be repealed : Provided that proceedings of any nature whatsoever pending on such date in the courts or offices of any such Covenanting State shall, notwithstanding anything contained in this Ordinance or any other Ordinance, be disposed of in accordance with the laws governing such proceedings in force for the time being in any such Covenanting State. This Ordinance came into force on August 20, 1948. On February 5, 1949, it was repealed and replaced by Ordinance No. XVI of S. 2006, section 3(a) whereof being in the same terms as section 3 of Ordinance No. 1 of S. 2005. Article X(1) of the Covenant provided, as has been mentioned, for the framing of a Constitution for the Union in the manner provided therein. That, however, did not materialise, and on November 24, 1949, the Rajpramukh issued a proclamation accepting the Indian Constitution as that of the Patiala Union, and thus the Union became a Part B State under the Constitution. On April 13, 1950, the Patiala Union accepted the Federal Financial Integration Scheme, and became a taxable territory of the Union of India and the Indian Finance Act, 1950, b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es of the High Court answered the question against the appellant, but granted a certificate under section 66A(2) of the Indian Income-tax Act, and that is how Civil Appeal No. 230 of 1954 comes before us. Meantime, proceedings were taken by the income-tax authorities for assessment of tax for years subsequent to 1949-1950, and the dispute again related to the question whether the amount of tax should be determined in accordance with clause (23) of exhibit A or the provisions of the Indian Income-tax Act, 1922. The Income-tax Officer, Rohtak, rejected the contention of the appellant that it was liable to pay tax only in accordance with exhibit A and passed orders determining the tax under the provisions of the Indian Income-tax Act for the year 1950-1951 on April 28, 1952, for 1951-1952 on May 12, 1952, and for 1952-1953 on March 17, 1953. Appeals against these orders have been preferred by the appellant, and they are stated to be pending before the Appellate Assistant Commissioner. On the allegation that the tax as imposed in the orders aforesaid is unauthorised, and that it constitutes an unlawful interference with its rights to carry on business guaranteed under article 19(1)( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the observations in Blackpool Corporation v. Starr Estate Co. Now, the rule of construction expressed in the maxim, generalia specialibus non derogant, is well-settled, and we shall also assume in favour of the appellant that the agreement, exhibit A, is a special law in the nature of a private Act passed by the British Parliament, and that accordingly section 3 of the Ordinance should not be construed, unless the contrary appears expressly or by necessary implication, as repealing the provisions of exhibit A. But ultimately, the question is what does the language of the enactment mean ? Section 3 is quite explicit, and it provides that from the date of the commencement of the Ordinance all laws in force in such Covenanting States immediately before that date shall be repealed , and the proviso further enacts that pending proceedings are to be disposed of in accordance with laws in force for the time being in the Covenanting States. In the face of this language which is clear and unqualified, it is idle to contend that Ordinance No. 1 of S. 2005 saves the rights of the appellant to the tax concessions under clause (23) of exhibit A. (2) It is next contended by Mr. Pathak tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing in the occupation of territories. It includes all acquisitions of territory by a sovereign State for the first time, whether it be by conquest or cession : vide Vajesingji Joravar Singji and Others v. Secretary of State, and Thakur Amar Singhji v. State of Rajasthan. And on principle, it makes no difference as to the nature of the act, whether it is acquisition of new territory by an existing State or, as in the present case, formation of a new State out of territories belonging to quondam States. In either case, there is establishment of new sovereignty over the territory in question, and that is an act of State. Mr. Pathak did not contest the position that the Covenant in so far as it provided for the extinction of the sovereignty of the rulers of the Covenanting States and the establishment of a new State is an act of State. But he contended that it was much more than that, that it was also in the nature of a Constitution for the new State in the sense that it is a law under which all the authorities of the new State including the Rajpramukh had to act. In support of this contention he referred to article X, which provided for the convening of a Constituent Assembly for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rritories and thereafter they become the subjects of the new sovereign. It is also well established that in the new set-up these residents do not carry with them the rights which they possessed as subjects of the ex-sovereign, and that as subjects of the new sovereign, they have only such rights as are granted or recognised by him : vide Secretary of State for India v. Bai Rajbai, Vajesingji Joravar Singji and Others v. Secretary of State. Secretary of State v. Sardar Rustam Khan and Asrar Ahmed v. Durgah Committee, Ajmer. In law, therefore the process of acquisition of new territories is one continuous act of State terminating on the assumption of sovereign powers de jure over them by the new sovereign and it is only thereafter that rights accrue to the residents of those territories as subjects of that sovereign. In other words, as regards the residents of territories which come under the dominion of a new sovereign, the right of citizenship commences when the act of State terminates and the two, therefore, cannot co-exist. It follows from this that no act done or declaration made by the new sovereign prior to his assumption of sovereign powers over acquired territories can qu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rty shall be respected, that is only a bargain which can be enforced by sovereign against sovereign in the ordinary course of diplomatic pressure. In Vajesingji Joravar Singji and Others v. Secretary of State for India the dispute related to the title of the appellants to certain lands situated in the Panch Mahals. This area formed at one time part of the dominion of the Scindias of Gwalior, and it was ceded to the British Government by treaty on December 12, 1860. Clauses (2) and (3) of the treaty provided for the recognition by the new sovereign of rights of the residents under existing leases, jagirs and the like. The complaint of the appellants was that in 1907 the British Government had proposed to lease the lands to them on terms which infringed their proprietary rights, and that this was in violation of the rights which had been guaranteed under clauses (2) and (3) of the treaty, and was, in consequence, bad. The answer of the Government was that the treaty in question was an act of State and conferred no rights on the appellants. In upholding this contention, Lord Dunedin observed : When a territory is acquired by a sovereign State for the first time that is an act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion entered into by the rulers of the Covenanting States is in its entirety an act of State, and that article VI therein cannot operate to confer on the appellant any right as against the Patiala Union. This conclusion becomes all the more impregnable when it is remembered that the Covenant was signed by the rulers on May 5, 1948, whereas the new State came into being only on August 20, 1948. In the decisions cited above the sovereign against whom the obligations created by the treaty were sought to be enforced was the very sovereign who entered into that treaty or his successor. But here, the ruler of the Patiala Union against whom article VI is sought to be enforced was not a party to the Covenant at all, because that State had not come into existence on that date. The person who signed the Covenant was the ruler of the State of Patiala which was one of the Covenanting States, but that State as well as the seven other States which entered into the Covenant stood all of them dissolved on August 20, 1948, when the new Patiala Union came into being. The new State could not and did not enter into any Covenant before August 20, 1948, and, therefore, in strictness, it cannot be held t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... valid, and it was in that context that the Covenant was referred to as a constitution. We had not to consider there the question whether the Covenant was an act of State, or whether it was a law conferring on the citizens of the defunct States, rights which were enforceable in a court of law. No such question arose for decision and, therefore, the description of the Covenant as Constitution cannot be read as importing a decision that it is a law conferring rights and not an act of State. In the result, we hold that the Covenant is in whole and in parts an act of State, that article VI therein does not operate to confer any rights on the subjects of the Covenanting States as against the sovereign of the new State constituted thereunder, and that Ordinance No. 1 of S. 2005 is, in consequence, not open to attack as being a violation of article VI. (3) We shall now consider the contention of the appellant that even apart from article VI of the Covenant, the impugned Ordinance No. 1 of S. 2005 is bad in so far as it annuls rights granted by the Ruler of Jind under the agreement dated April 1, 1938. It was argued that exhibit A was not a mere concession which could be withdrawn by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellant, law. But apart from this, there is an obvious reason why the above decisions have no application to the present controversy. The point for decision there was whether a State which had entered into a contract with its subjects conferring rights on them was entitled to enact a law abridging or abrogating those rights, and the answer was in the negative. But here, the impugned law is that of the Patiala Union and the contract which it affects is not a contract entered into by it but by the Ruler of Jind and unless it can be established that the obligations of the Ruler have devolved on the sovereign of the Patiala Union, the question whether he could repudiate obligations undertaken by him cannot arise. That would have arisen for consideration if article VI had the effect of imposing obligations on him. But on our finding that that is not its effect, there is no scope for the contention that the impugned Ordinance is bad as involving breach of contractual obligations, which were entered into by the Patiala Union, or which devolved on it. Lastly, we have to deal with the contention of Mr. Pathak that the Patiala Union had affirmed the agreement, exhibit A, that, in co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e into force it conferred on the citizens certain fundamental rights, that the tax concessions which the petitioner had under the agreement, exhibit A, were rights to property and they were protected by article 19(1)(f), and that it was entitled to seek redress under article 32 of the Constitution when those rights were violated. The decision in Virendra Singh and Others v. The State of Uttar Pradesh, is relied on in support of this position. This argument assumes that there were in existence at the date when the Constitution came into force, some rights in the petitioner which are capable of being protected by article 19(1)(f). But in the view which we have taken that the concessions under clause (23) of exhibit A came to an end when Ordinance No. 1 of S. 2005 was promulgated, the petitioner had no rights subsisting on the date of the Constitution, and, therefore, there was nothing on which the guarantees enacted in article 19(1)(f) could operate. The petition must, therefore, be dismissed on this short ground. In this view, it is unnecessary to express any opinion on the soundness of the contention based on article 295 which was urged in support of the petition, or on the scope o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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