2015 ALL SCR 3709
(SUPREME COURT)

RANJAN GOGOI AND N. V. RAMANA, JJ.

Union of India & Ors. Vs. Sancheti Food Products Ltd.

Civil Appeal No.5348 of 2001

13th August, 2015.

Petitioner Counsel: Ms. KIRAN SURI, Sr. Adv. Ms. KIRAN BHARDWAJ, Ms. RASHMI MALHOTRA, Ms. RAGNI SINGH, Mr. D.S. MAHRA, Mrs. ANIL KATIYAR
Respondent Counsel: Mr. PALLAV SISODIA, Sr. Adv. Mr. SUBHRO SANYAL

Merchant Shipping Act (1958), S.3, Part XV A (Introduced in 1983) - Rules of 1960 and Draft Rules of 1982 - Registration of 'fishing boats' - Delay in grant of registration - Contradictory and dilatory stand of officers about applicability of rules - Ships not permitted to move out to the high seas and remaining idle resulting in huge losses - In absence of fresh rules after amendment of Act, Rules of 1960 continued and Union of India was wholly unjustified in keeping cases pending and denying registration of ships - It cannot claim benefit of doctrine of sovereign powers especially when it had admitted wrong committed by officer concerned in as much as he was departmentally proceeded against - Held, State was rightly held liable for damages by High Court.

(1994) 6 SCC 205 Foll. (Paras 5, 9, 10, 11)

Cases Cited:
M/s Kasturi Lal Ralia Ram Jain Vs. The State of Uttar Pradesh, AIR 1965 SC 1039 [Para 6,7,9]
N. Nagendra Rao & Co. Vs. State of A.P., (1994) 6 SCC 205 [Para 7,8,9]


JUDGMENT

JUDGMENT :- This appeal arises out of an appellate order passed by the Division Bench of the High Court of Calcutta by which the decree for damages awarded by the learned trial judge in favour of the respondent plaintiff has been modified. The learned trial Judge had awarded a sum of Rs.3,71,10,000/- with interest thereon at the rate of 11% per annum on account of damages suffered by the respondent plaintiff. Aggrieved, the appellants had moved the Division Bench of the High Court in appeal. The Division Bench by the impugned judgment reduced the compensation awarded to Rs.13.19 lakhs i.e. the cost of acquisition of the three vessels in a public auction and a further sum of Rs.22 lakhs on account of repair charges incurred by the respondent/plaintiff. The interest awarded by the learned trial Judge was reduced from 11% per annum to 6% per annum. Not satisfied, the appellants are before us by means of the present appeal.

2. We have heard Ms. Kiran Suri, learned Senior Counsel appearing for the appellants and Mr. Pallav Sisodia, learned Senior Counsel appearing for the respondent.

3. The facts lie within a short compass. In an auction pursuant to an advertisement dated 9th January, 1987 the respondent plaintiff purchased three confiscated fishing trawlers on an offer of a sum of Rs.13.19 lakhs. The respondent plaintiff applied for registration of the vessels. The Merchant Shipping Act, 1958 (hereinafter referred to as "the Act") is the relevant statute dealing with such registration. Part XVA of the Act which deals with the registration of 'fishing boats' was brought into the statute book in the year 1983 by an amendment of the Act. 'Fishing boats' is defined in the Act to include sea going fishing vessels. Despite the amendment, the Rules of 1960 which governed the parameters of registration were not substituted by a new/fresh exercise pursuant to the amendment made to the Act. It appears that there was protracted correspondence between the parties with regard to the Rules which would govern the matter i.e. whether the old Rules of 1960 or the draft Rules of 1982. The correspondence, as held by the High Court in the impugned order, showed contradictory stand on the part of the officers of the Union of India dealing with the matter who from time to time altered their stand with regard to the applicability of either the Rules of 1960 or the Draft Rules of 1982. While the aforesaid correspondence was going on, the vessels in question suffered damage leading to the claims in question which had been dealt with by the two forums in the High Court in the manner, as noticed above.

4. The Division Bench of the High Court in a very elaborate and exhaustive judgment took the view that the contradictory and conflicting stands of the concerned Authorities under the Act resulted in delay of the grant of registration which held back the operation of the vessels in the high seas. It is on account of the aforesaid dilatory and contradictory stand of the officials of the Union of India that the vessels were not permitted to move out to the high seas and consequently they had suffered damage. It is in the light of the aforesaid finding that both the forums below thought it proper to award damages/compensation in favour of the plaintiff though divergent quantifications of such entitlement were made.

5. Having considered the facts of the case including the relevant findings of the High Court and the contradictory stand of the officials of the Union of India from time to time as evident from the correspondence on record, we are left with no doubt that the said officials could not have insisted on compliance of the provisions of the Draft Rules of 1982 by the respondent plaintiff as the said Rules would, in the facts of the present case, lack necessary legal sanctity. In the absence of any Rule making exercise under the amended provisions of the Act, it is the 1960 Rules which governed the field and on the findings of the High Court that the respondent plaintiff had complied with the said provisions we hold that the officers of the Union of India were wholly unjustified in keeping the matter pending and denying the registration of the vessles in favour of the respondent plaintiff.

6. An argument has been advanced on behalf of the appellants, on the strength of the Constitution Bench judgment of this court in M/s Kasturi Lal Ralia Ram Jain vs. The State of Uttar Pradesh [AIR 1965 SC 1039], that the suit against the Union of India for the wrongful act of its officers, even if such wrongful act is to be assumed, would not be maintainable as the acts performed by the officers pertain to the sovereign power of the State. Reliance has been placed on Paragraphs 21 and 29 of the judgment in Kasturi Lal (supra) which may be extracted at this stage.

"(21) Thus, it is clear that this case recognises a material distinction between acts committed by the servants employed by the State where such acts are referable to the exercise of sovereign powers delegated to public servants, and acts committed by public servants which are not referable to the delegation of any sovereign powers. If a tortious act is committed by a public servant and it gives rise to a claim for damages, the question to ask is: was the tortious act committed by the public servant in discharge of statutory functions which are referable to, and ultimately based on, the delegation of the sovereign powers of the State to such public servant? If the answer is in the affirmative, the action for damages for loss caused by such tortious act will not lie. On the other hand, if the tortious act has been committed by a public 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. That is why the clarity and precision with which this distinction was emphasised by Chief Justice Peacock as early as 1861 has been recognised as a classic statement on this subject.

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(29) In the present case, the act of negligence was committed by the police officers while dealing with the property of Ralia Ram which they had seized in exercise of their statutory powers. Now, the power to arrest a person, to search him, and to seize property found with him, are powers conferred on the specified officers by statute and in the last analysis, they are powers which can be properly characterized as sovereign powers; and so, there is no difficulty in holding that the act which gave rise to the present claim for damages has been committed by the employee of the respondent during the course of its employment; but the employment in question being of the category which can claim the special characteristics of sovereign power, the claim cannot be sustained; and so, we inevitably hark back to what Chief Justice Peacock decided in 1861 and hold that the present claim is not sustainable."

Learned counsel has submitted that in the light of the ratio of the decision of the Constitution Bench in Kasturi Lal (supra) there would be a legal embargo on the grant of compensation/damages in the suit filed by the respondent plaintiff.

7. Learned counsel for the appellants, however, has very fairly drawn the attention of the Court to a subsequent judgment of this Court in N. Nagendra Rao & Co. vs.State of A.P. [(1994) 6 SCC 205] wherein the Constitution Bench judgment in Kasturi Lal (supra) had received consideration for the purposes of understanding the true purport and effect thereof.

8. The aforesaid judgment in N. Nagendra Rao (supra) has also been relied upon by Shri Pallav Sisodia, learned Senior Counsel appearing for the respondent plaintiff, who has drawn the attention of the Court to the views expressed in Paragraphs 24, 25 and 26 of the judgment in N. Nagendra Rao (supra). Para 25 would require specific notice and is therefore quoted below:

"25. But there the immunity ends. No civilised system can permit an executive to play with the people of its country and claim that it is entitled to act in any manner as it is sovereign. The concept of public interest has changed with structural change in the society. No legal or political system today can place the State above law as it is unjust and unfair for a citizen to be deprived of his property illegally by negligent act of officers of the State without any remedy. From sincerity, efficiency and dignity of State as a juristic person, propounded in nineteenth century as sound sociological basis for State immunity the circle has gone round and the emphasis now is more on liberty, equality and the rule of law. The modern social thinking of progressive societies and the judicial approach is to do away with archaic State protection and place the State or the Government on a par with any other juristic legal entity. Any watertight compartmentalization of the functions of the State as "sovereign and non-sovereign" or "governmental and non-governmental" is not sound. It is contrary to modern jurisprudential thinking. The need of the State to have extraordinary 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. The demarcating line between sovereign and non-sovereign powers for which no rational basis survives has largely disappeared. Therefore, barring functions such as administration of justice, maintenance of law and order and repression of crime etc. which are among the primary and inalienable functions of a constitutional Government, the State cannot claim any immunity. The determination of vicarious liability of the State being linked with negligence of its officers, if they can be sued personally for which there is no dearth of authority and the law of misfeasance in discharge of public duty having marched ahead, there is no rationale for the proposition that even if the officer is liable the State cannot be sued. The liability of the officer personally was not doubted even in Viscount Canterbury. But the Crown was held immune on doctrine of sovereign immunity. Since the doctrine has become outdated and sovereignty now vests in the people, the State cannot claim any immunity and if a suit is maintainable against the officer personally, then there is no reason to hold that it would not be maintainable against the State."

9. We have read and considered the view expressed by the Constitution Bench in Kasturi Lal (supra) and those expressed in N. Nagendra Rao (supra). Being a numerically smaller Bench, we must, at the first instance, try and understand the true ratio of the law laid down in Kasturi Lal (supra). Such an exercise has been performed, if we may say, with great clarity in N. Nagendra Rao (supra) and we are in full agreement with the understanding of the law laid down in Kasturi Lal (supra) as has been expressed in N. Nagendra Rao (supra). Specifically in Paragraphs 24 of the judgment in N. Nagendra Rao (supra), this Court had confined the operation of the doctrine of sovereignty to specific areas of State function like defence, raising of the armed forces and maintaining it, making peace or war, foreign affairs, power to acquire and retain territory and similar other functions. Insofar as the exercise of other statutory powers are concerned, in Paragraph 26 of the judgment in N. Nagendra Rao (supra), the view expressed is:

"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."

In the same paragraph i.e. Paragraph 26, the decision in Kasturi Lal (supra) and the law laid down therein has been understood to be in the context of the power to search and seizure under the Code of Criminal Procedure, 1973 which was held to be an instance of inalienable/sovereign power of the State. Kasturi Lal (supra) having been lucidly explained in N. Nagendra Rao (supra) we can only take benefit of the aforesaid lucid exposition and clarification of the Constitution Bench judgment which coincidentally would demolish the stand taken by the appellants in the present appeal.

10. A further argument has been made on behalf of the appellants that without impleadment of particular officer who had committed the misfeasance, the action taken by the State would not be maintainable. We do not see how and on what logic the said argument can be accepted by us particularly as the entire case of the plaintiff is built upon the vicarious liability of the State for the action of its officers. In any case, the materials on record would go to show that the State had admitted the wrong committed by the officer(s) concerned inasmuch as he had been departmentally proceeded against and subsequently the officer had resigned.

11. For all the aforesaid reasons, we cannot find any fault with the order of the Division Bench of the High Court. The said order, therefore, is affirmed and the appeal of the appellants herein is dismissed. In the facts and circumstances of the case, we make no order as to costs.

12. The appeal is dismissed in the above terms.

Appeal dismissed.