Appeal No. 28 of 1954

23rd January, 1958.

Petitioner Counsel: M.P. Amin, with B.M. Kalagate,
Respondent Counsel: V.S. Desai, .

Cases Cited:
Virendra Singh v. State of Uttar Pradesh, AIR 1954 SC 447,(V 41),1955-1 SCR 415 [Para 9]
Ameer-un-Nissa Begum v. Mahboob Begum, AIR 1955 SC 352,(V 39) [Para 10]
Umeg Singh v. State of Bombay, AIR 1955 SC 540,(V 41),1955-2 SCR 164 [Para 6]
Vajesinghji Joravarsinghji v. Secy. of Stats, AIR 1924 PC 216 (V 11),51 Ind App 357 [Para 6]
Secy. of State v. Rustum Khan, AIR 1941 PC 64 (V 28),68 Ind App 109 [Para 9]
United States v. Percheman, (1863) 32 US 51,8 Law Ed 604 [Para 6]
West Rand Central Gold Mining Co. Ltd. v. Rex, (1905) 1905-2 KB 391,74 LJKB 753 [Para 9]
Shapleigh v. Mier, (1937) 299 US 468,81 Law Ed 355 [Para 9]

JUDGMENT

SHAH, J. :-Lands S. Nos. 15, 16, 17, 189, 190 342, 268, 335, Pot. 2, 224, 292 162 Pot. 2, and three houses at Vaghapur and lands S. Nos. 78 and 80 of the village of Vangntti, were originally regarded as Sheri Service lands of the Ghorpade family. On 20th November 1920, His Highness Shahu Chhatrapati Maharaja of Kolhapur, passed

Huzur Tharav, No. 460, forfeiting the lands holding that the Ghorapades were unauthorizedly in occupation. By an order passed in the year 1924, Ex. 48, some of the forfeited lands and certain other lands situate at Hanjmaal, Chikhalwal and Chinchwat were granted to the plaintiff's father Sharikarrao Abajirao Indulkar in Inam for services rendered by him. Shankarrao Abajirao Indulkar- who will hereafter for the sake of brevity be referred to as Indulkar - continued in possession of the lands till the year 1942. His Highness Chhatrapati Shahu Maharaja died sometime in or about the year 1940, and his successor being a minor, a Regency Council was constituted to carry on the administration of the State. On 19th November 1942, Ghorpade applied to the Regency Council to review the order of forfeiture passed in the year 1920. On 21st September 1943, the Regency Council ordered that the previous decision of the Maharaja be cancelled and the lands, which were taken from the Ghorpade family, be restored to them. Against that order, Indulkar appealed to the Resident on 31st August 1944. The appeal of Indulkar was allowed by the Resident, and the Order of the Regency Council was vacated. Against that order Ghorpade appealed to the Crown Representative in India, and on 7th February, 1947 the Crown Representative set aside the Order of the Resident, and restored the order of the Regency Council and accordingly the order of forfeiture stood vacated. But the Crown Representative recommended that reasonable compensation for loss of land be given to Indulkar. Against that order, Indulkar appealed to the Secretary of State in Council, on 12th August 1947. On 15th August 1947, the paramount authority of the British Crown having lapsed by the enactment of the Indian Independence Act the papers of the appeal were returned to His Highness the Maharaja of Kolhapur, with a request to deal with the appeal. On 12th November 1947. His Highness the Maharaja of Kolhapur confirmed the Order which was passed by the Crown Representative, but, as suggested by the Crown Representative, an amount of Rs. 66,666 was awarded as compensation to Indulkar by capitalising rental of Rs. 2,000 per acre at the rate of 3 per cent. Thereafter, on 1st February 1949, there was a merger agreement between the Ruler of the Kolhapur State and the Government of India, and on 1st March 1949 the Kolhapur State merged with the Bombay province. On 1st March 1949, the Government of India published under the authority vested in it by the Extra Provincial Jurisdiction Act two Orders-one the Administration of Kolhapur State Order, and the other "Kolhapur State (Application of Laws) Order." By the first Order, provision was made for the administration of the State, and by the second Order, divers Acts which were in force in the Bombay State and which were enacted either by the Bombay State legislature or by the Central Legislature were made applicable to the area of the former Kolhapur State. By clause (4) of that order it was provided that the Statutes referred to in Parts I and II of the Schedule were to come into force as from 1st May 1949, and by clause (5) it was provided by the first paragraph : ''Save as expressly provided in this Order, all enactments in force in the Kolhapur State or part thereof and corresponding to the enactments in force in the Province of Bombay and extended to the Kolhapur State under paragraph 3 and all notifications, schemes rules, by-laws, vathukums and all orders by whatever name or description called under such enactments or having the force of law immediately before the, appointed day shall stand repealed." By the second paragraph of Cl. (5) it was provided :

"Provided that the repeal by this Order of any such enactments, notifications, schemes, rules, bylaws, or vat hukums or orders shall not affect the validity, invalidity, effect or consequence of anything already done or suffered or any right, title, obligation or Liability already acquired, accrued or incurred, of any remedy or proceeding in respect thereof, or any release or discharge or from any debt, penalty, obligation, liability, claim or demand, or any indemnity already granted or the proof of any past act or thing."

2. The plaintiffs, who are the representatives of Indulkar, served a notice under Section 80 of the Civil Procedure Code, upon the Government of Bombay, and by Suit No. 1 of 1952, claimed to recover Rs. 1,10,775 as compensation with interest at the rate of 6 per cent, on the plea that they were entitled to recover the amount from the State of Bombay under the order passed by the Maharaja of Kolhapur on 12th November 1947, the State of Bombay being the successor to the Maharaja of Kolhapur.

3. This suit was resisted by the State of Bombay on diverse grounds. It was contended that the suit against the State of Bombay as a successor Government was not maintainable in law; that the grant of Inam by the Maharaja after forfeiting the lands was not legal; that the plaintiffs were not entitled to any compensation at the time of the restoration of the lands to Ghorpade; that the order passed by the Crown Representative to pay compensation was merely recommendatory and the affirmation thereof by the Maharaja of Kolhapur did not give rise to any enforceable obligation; that in any event, the order of His Highness the Maharaja for payment of compensation to the plaintiffs was not enforceable against the State of Bombay; that the Order of the State of Bombay refusing to pay the amount was not against the rules of natural justice, that the State of Bombay was not estopped from denying the plaintiffs' right, and that it was open to the successor Government to repudiate the order of His Highness the Maharaja. It was also contended that the suit was barred under Articles 115 and 14 of the Limitation Act.

4. The learned trial Judge held that the suit against the State of Bombay, which was a successor Government of the Kolhapur State, was not maintainable, and that the order which was originally passed by the Crown Representative suggesting payment of compensation to Indulkar was merely recommendatory and was not mandatory. The learned Judge on that view dismissed the plaintiffs' suit. Against the decree dismissing the plaintiffs' suit, this appeal has been filed.

5. Mr. Amin, who appears on behalf of the plaintiffs, contends that the right of the plaintiffs has been preserved by clause (5) of the Kolhapur State (Application of Laws) Order, 1949. It is contended by counsel that the order passed by the Kolhapur State (Application of Laws) Order continued in force all legislative provision and judicial orders which were not inconsistent with the provisions of that Order, and that in any event the order passed by the Maharaja of Kolhapur was saved by the operation of the proviso to clause (5) of that Order. In our judgment, clause (5) does not come, to the aid of the plaintiffs. By the first paragraph of clause (5), all enactments in force in the Kolhapur State corresponding to the enactments in force in the Bombay Province and extended to the Kolhapur State by paragraph 3, and all notifications, schemes, rules, bylaws and vat-hukums which were, passed under those enactments and which had the force of law stood repealed. But the repealing clause operated only upon enactments in force in the

Kolhapur State which were corresponding to the enactments in force in the Bombay Province and which by the operation of clause (5) stood repealed. We are of the view that the order passed by His Highness the Maharaja of Kolhapur could not be regarded as an "enactment" within the meaning of clause (5), nor can it be regarded as a rule or an order passed under any enactment. Even assuming that the order passed by His Highness the Maharaja of Kolhapur on 12-11-1947 can be regarded as an enactment or an order under an enactment, unless it is established that there is some Act which was in force in the Bombay Province and which had been extended to the State of Kolhapur and which corresponds to the order passed by the Maharaja of Kolhapur, Cl. (5), will not have the effect of repealing the same, and if the order does not stand repealed, evidently the proviso can have no application, because it is only by the repeal of that order by any enactment or notification or rule that certain consequences ensue.

6. Clause (5) not having repealed the order, on the view we have taken, the liability of the State of Bombay will have to be adjudged in the light of the question whether the State of Bombay with which the Kolhapur State is merged has undertaken the liability or has accepted or acknowledged liability for the amount claimed by the plaintiff. It is a well settled rule of international law that a successor State by whatever process the succession is effected whether by conquest, by merger by agreement or by treaty, is not under any obligation to recognise the liabilities of the former State, and unless the obligations have been so recognised, the Municipal Courts of the successor State are not competent to enforce that liability against the successor State. It has been so held in a recent judgment by Their Lordships of the Supreme Court : Umeg Singh v. State of Bombay, 1955-2 SCR 164 : ((S) AIR 1955 SC 540). In delivering the principal judgment of the Court, Mr. Justice Bhagwati observed, at p. 174 (of SCR) : (at p. 545 of AIR) :

"............... It was further urged that the State of Bombay was thus bound by all the obligations which had been undertaken by the Domnion Government under the agreements of merger and letters of guarantee above referred, and it could not lie in me mouth of the State of Bombay to repudiate the same.

This argument is not without force, but we do not consider it necessary to decide this question because even assuming that the State of Bombay was bound by these obligations, the question still remains how far the petitioners before us are entitled to enforce these obligations against the State of Bombay."

His Lordship then referred to the judgment of the Privy Council in Vajesingji Toravarsingji v. Secretary of State, 51 Ind App 357 : (AIR 1924 PC 216), and quoted an excerpt therefrom in which it was observed :

"But a summary of the matter is this : when a territory is acquired by a sovereign State for the 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 cases the result is the same. Any inhabitant of the territory can make good in the municipal Courts established by the new sovereign only such rights as that sovereign has, through his officers, recognised. Such rights as he had under the rule of predecessors avail him nothing. Nay more, even if in a treaty of cession it is stipulated that certain inhabitants should enjoy certain rights, that does not give a title to those inhabitants to enforce these stipulations in the municipal Courts. The right to enforce remains only with the high contracting parties."

It was then observed by Mr. Justice Bhagwati that these observations were also quoted with approval by then. Lordships of the Privy Council in Secretary of State v. Rustam Khan, 68 Ind App 109 : (AIR 1941 PC 64). It is evident, therefore, that for enforcing the obligation, which was enforceable either against His Highness the Maharaja of Kolhapur or against the State of Kolhapur, there can be no remedy in the municipal Courts of the State of Bombay unless the State of Bombay has recognized or acknowledged the rights of the plaintiffs created by order of His Highness the Maharaja of Kolhapur by order dated 12-11-1947. It was urged by Mr. Amin that the obligation in favour of the plaintiff is also enforceable against the State of Bombay by reason of the merger agreement between the Government of India and the Ruler of the Kolhapur State. But that argument has also been answered in Umeg Singh's case 1955-2 SCR 164 : ((S) AIR 1955 SC 540), at page 176 (of SCR) : (at p. 176 of AIR), of the report. After referring to the terms of Art. 363 of the Constitution, His Lordship Bhagwati, J., observed that if the petitioners claiming relief "be not deemed to be parties to the agreement between the two sovereign States, they would not be the contracting parties and would certainly not be able to enforce those obligations." The plaintiffs are not parties to the merger agreement between the Ruler of the Kolhapur State and the Government of India and the plaintiff cannot enforce the obligations arising from the merger agreement. Again the plaintiffs cannot enforce as against the successor State the obligations of the former State, unless those obligations have been recognized by Statute or otherwise.

7. Reliance was placed by Mr. Amin upon the States' Merger (Governor's Province) Order, 1949, in support of the contention that the State of Bombay had accepted or recognised the claim of the plaintiffs. Now, that order was issued on 27-7-1949, and by Cl. (7), which was relied upon, it was provided in the first paragraph, in so far as it is material, that all liabilities in respect of such loans, guarantees and other financial obligations of the Dominion Government as arise out of the governance of a merged State, including in particular, the Liability for the payment of any sums to the Ruler of the merged State on account of his Privy Purse or to the other persons in the merged State on account of political pensions and the like, shall, as from the appointed day, he liabilities of the absorbing Province. But Cl. (7) merely imposes the liability of the Dominion Government upon the Government of the absorbing Province as from the appointed day, and the appointed day is the date of the commencement of the order, namely, 27-7-1949. Before the provisions of the States' Merger (Governors' Provinces) Order, 1949, can he invoked in their favour by the plaintiffs, they have to establish that the Dominion Government had undertaken liability to the plaintiffs prior to the appointed day. Our attention has not been invited to any statute or order issued by the Government of India or by the Government of Bombay, under which the Government of Bombay undertook to discharge or satisfy the liabilities and the obligations of His Highness the Maharaja of Kolhapur.

8. Mr. Amin also sought to rely in support of his contention upon paragraph 158(v) and Art. 161 of the White Paper issued by the Government of

India on the Indian States in March 1950. Now, Cl. (iv) merely indicates the basis of settlement made in regard to private properties of the Rulers which were arrived at as a compromise between the claims of the Ruler and the claims of the Government of India. It was provided by Cl. (v) of paragraph 158 as follows :

"The opening balances which, according to the books of the States, belonged to the States, have been handed over to the successor Governments. Only such investments and cash to which the States could lay no claim have been recognised as private property of the Ruler."

It is difficult to appreciate how this statement in the White Paper can assist the claim of the plaintiffs. Evidently, Cl. (v) does not, even by implication, suggest that either (the Central Government or the Government of the Province undertook any obligations which were enforceable against a former State. Art. 161 states :

"When the administration of the States was taken over, the new Government inherited cash balances and investments of the value of nearly Rs. 700 millions. During the settlement of the private properties, the Rulers gave up their claims to approximately another Rs. 45 millions. Other properties given up include places, buildings, stables, garages, shoos, jewellery, fleets of motor cars, aeroplanes, etc."

Even this statement made in Art. 161 does not in our judgment, assist the plaintiffs' claim. Mr. Amin urged that when the Central Government took over all the assets of the Rulers, they must in fairness be regarded as subject to all obligations which were enforceable against those assets. In considering the obligation of the successor State under the rule of international law, we are not called upon to decide what is unfair or fair. The Central Government might have made a provision undertaking all the obligations enforceable against the States when the administration and assets of the States were taken over. But if the Central Government did not make such a provision, we cannot imply the same on any ground of equity or fairness.

9. Reliance was also placed by Mr. Amin upon a judgment of the Supreme Court in Virendra Singh v. State of Uttar Pradesh, 1955-1 SCR 415 : (AIR 1954 SC 447), where Mr. Justice Bose, in delivering the judgment of the Court, referred to the opinions expressed by two schools of thought about the effect of conquest or merger of territory of one sovereign State over or in another sovereign State. At page 424 (of SCR) : (at p. 450 of AIR), it was observed by Mr. Justice Bose that the jurists hold divergent views on the question whether any rights which were enforceable against the former State, in the absence of approval or ratification, continued to be in force. His Lordship referred to the judgments of the Privy Council reported in 51 Ind App 357 : (AIR 1924 PC 216) and 68 Ind App 109 : (AIR 1941 PC 64), which represented one school of thought, and the view expressed by John Marshall, Chief Justice of the United States Supreme Court, in United States v. Percheman, (1863) 32 US 51, at pages 86 and 87, and other cases such as Shapleigh v. Mier, (1937) 299 US 468, as representing the other school of thought. It is unnecessary to enter upon a discussion as to which of the two views may be accepted. Evidently in the American cases the Courts considered the application of the doctrine of immunity of the successor State from honouring the obligations of its predecessor primarily in relation to the private rights enforceable amongst the citizens inter se.

Chief Justice John Marshall, in the judgment in (1863) 32 US 51, observed that

"a cession of territory is never understood to be a cession of the property belonging to its inhabitants. The king cedes that only which belonged to him. Lands he had previously granted were not his to cede. Neither party could so understand the cession. Neither party could consider itself as attempting a wrong to individuals, condemned by the practice of the whole civilised world. The cession of a territory by its name from one sovereign to another, conveying the compound idea of surrendering at the same time the lands and the people who inhabit them, would be necessarily understood to pass the sovereignty only, and not to interfere with private property."

If, in the present case the dispute had arisen as to the private property, i.e., private rights enforceable at the instance of one citizen against another, it would have been necessary to consider how far this Court would be justified in ignoring the view of the Privy Council and accepting the view of the Supreme Court of the United States of America. But in the present case, the claim made is against the State of Bombay to enforce what was originally the obligation of the Kolhapur State. The dispute does not arise out of conflicting claims between the two citizens regarding their private property. It may be pointed out that at page 427 (of SCR) : at p. 451 (of AIR), in Virendra Singh's case 1955-1 SCR 415 : (AIR 1954 SC 447), Mr. Justice Bose referred to the case in West Rand Central Gold Mining Co. v. Rex, (1905) 2 KB 391, where, Lord Alverstone, C.J., commenting on the American cases, said that there is a difference between the private rights of individuals in private property and contractual rights which are sought to be enforced against the new sovereign. After quoting a passage from that judgment, Mr. Justice Bose observed that Lord Alverstone, C.J., pointed out that in the American cases, on which international jurists have based their views, the treaties of cession as well as the subsequent legislation of the United States protected the rights of owners of private property as they existed at the time of cession and so the only question for decision in each of those cases was whether any private rights of property existed at the relevant date. We do not therefore, think that the observations made in Virendra Singh's case, 1955-1 SCR 415 : (AIR 1954 SC 447), can have any bearing on the question to be decided in this appeal.

10. Finally, Mr. Amin invited our attention to a judgment of Their Lordships of the Supreme Court in Ameer-un-Nissa Begum v. Mahboob Begum, AIR 1955 SC 352. That was a case in which, it appears, that His Exalted Highness the Nizam had, by a Firman dated 19-2-1939, constituted a Special Commission to investigate and submit a report to him in a case of succession to a deceased Nawab which was transferred to the Commission from the file of Darul-Quaza Court. Another Firman dated 26-6-1947 declared that the report of the commission was worthy of implementation and directed i6 to be implemented. The report was transmitted to the Chief Justice of the Hyderabad High Court for execution with a direction that report for distribution of "matrooka" property should be submitted for the Nizam's sanction before carrying it into effect. After the Police Action, the previous order was withdrawn by a firman dated 24-2-1949 and the decision of the Special Commission was set aside in respect of certain claimants. This firman was again revoked by a fresh firman, dated 7-9-1949, and the case was referred to another person for opinion and report. On the effect of these

diverse firmans, the Supreme Court held that though the report of the special commission could not per se operate as a decree, it had that force after the sanction of the Nizam which was given to it by the firman dated 26-6-1947, and the result wad that a decree capable of execution was brought into existence by the firman of 28-6-1947. We are unable to hold that this case is an authority for the proposition that every order, whatever its character, passed by the Ruler of a former State, must be regarded as a legislative provision which remained binding upon the successor State. It is true that just as his Exalted Highness the Nizam was the fountain head of all judicial, legislative and executive authority. His Highness Maharaja of Kolhapur was equally a fountain head of the legislative and judicial authority. But, if, having regard to the circumstances of this case, the order was an executive order, and it did not amount to an "enactment" within the meaning of Cl. (5) of the Kolhapur State (Application of Laws) Order, 1949, it was evidently not repealed, nor was it continued or preserved by the rule of international law, it was not enforceable against either the Dominion Government of India or the Government of the State of Bombay, nor did it became enforceable by the merger agreement by which the Bombay State undertook obligations to discharge liabilities relating to the governance of the State which may have devolved upon it.

11. On that view of the case, the decree passed by the learned trial Judge must be confirmed and the appeal dismissed with costs.

Appeal Dismissed