PETITIONER: JAGANNATH AGARWALA Vs. RESPONDENT: STATE OF ORISSA DATE OF JUDGMENT: 08/03/1961 BENCH: HIDAYATULLAH, M. BENCH: HIDAYATULLAH, M. KAPUR, J.L. SHAH, J.C. CITATION: 1961 AIR 1361 1962 SCR (1) 205 CITATOR INFO : APL 1962 SC 445 (21,35) R 1962 SC1288 (7) R 1964 SC1043 (19,69,93,95,117,137) R 1971 SC 846 (7) RF 1981 SC1946 (18) ACT: Act of State--Duration of--State allowing claims to be preferred and enquired into--Act of State, if at an end--Administration of Mayurbhanj State Order, 1949, cl. 9. HEADNOTE: The appellant had two money claims against the Maharaja of Mayurbhanj State. From January 1, 1949, the State merged with the Province of Orissa. Clause 9 of the Administration of Mayurbhanj State Order, 1949, promulgated by the Government of Orissa, provided for the issuing of a notification for calling upon all persons having pecuniary claims against the Maharaja to notify the same to an officer authorised in that behalf. After issue of the notification the appellant preferred his two claims before the-Claims Officer. The Claims Officer made a report substantially accepting the claims. This report was submitted to the Member (third), Board of Revenue. Without giving the appel- lant any hearing the claims were rejected on the ground that they were barred by limitation. The appellant applied for a review and submitted the documents on which he relied but again without giving the appellant a hearing the Board of Revenue declined to review the matter. The appellant contended 206 that there was a breach of the principles of natural justice in the Board of Revenue deciding the matter without giving the appellant a proper hearing. The respondent contended that the rejection of the claims was an act of State, that the new Sovereign State could not be compelled by the courts to accept the liability of the old Ruler, that though the new Sovereign State might make such enquiry as it chose it was not compelled to give a hearing to the appellant. The appellant replied that the act of State was over when the claims were invited and accepted by the Claims Officer. Held, that the rejection of the claims was an act of State and could not be challenged. Unless the new Sovereign, either expressly or impliedly, admitted the claims, the municipal courts had no jurisdiction in the matter. The act of State did not come to an end when Government allowed the claims to be preferred or the Claims Officer made his report. The enquiry was for the benefit of the State and not for conferring rights on the claimants. Till there was an acceptance of the claims by the Government or some officer who could be said to bind the Government, the act of State was still open. Dalmia,Dadri Cement Co. Ltd. v. Commissioner of Income-tax, [1959] S.C.R- 729 State of Saurashtra v. Mmemon Haji Ismail Haji, [1960] 1 S.C.R. 537 and Vaje Singh ji joravar Singh v. Secretary of State for India, (1924) L.R. 51 I.A. 357, relied on. JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 666 and 667
of 1957.
N. C. Chatterjee and G. C. Mathur, for the appellant.
A. V. Viswanatha-Sastri, K. N. Rajagopala Sastri and T. M.
Sen, for the respondents.
1961. March 8. The judgment of the Court was delivered by
HIDAYATULLAH, J.-These two appeals raise a common question
of law, and it is convenient to deal with them together.
They have been filed (with certificate) against a judgment
of the High Court of Orissa, by Jagannath Agarwala, who
sought to enforce a claim he had against the former State of
Mayurbhanj and the ex-Ruler of Mayurbhanj. They arise out
of two petitions under Art. 226 of the Constitution, for
writs of mandamus, etc., which the High Court of Orissa
dismissed by its order under appeal.
It appears that in the year 1943 the Maharaja, of
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Mayurbhanj entered into an agreement or arrangement with
Jagannath Agarwala for establishing a business for the
manufacture of industrial alcohol and essential oils and for
purchases of wheat and barley in the Punjab. Civil Appeal
No. 666 of 1957 relates to the establishment of the
manufacturing business, and Civil Appeal No. 667 of 1957, to
the purchases of wheat and barley. With reference to the
establishment of the business, the appellant urges that it
was agreed that the capital required would be contributed by
the parties in equal shares, and that the profit and loss
would also be shared equally. As regards the purchases, the
appellant was to advance such money as might be required,
and the State of Mayurbhanj was to provide necessary permits
and facilities for transport.
In furtherance of this agreement, the appellant urges that
he established a factory and started the business, but the
Maharaja, instead of contributing his share of the capital,
asked the appellant to do so on his behalf, promising to pay
him the amount. The factory was constructed, and, it
appears, it went into production, but later closed down,
suffering a total loss of Rs. 2,80,875-9-3. In the first
case, therefore, the claim of the appellant against the
Maharaja and the State was Rs. 1,40,400 odd. In the second
case, the appellant advanced a sum of Rs. 50,000 and also
incurred a further expenditure of Rs. 3,741-7-9. The State
of Mayurbhanj failed in its promise of procuring the
necessary permits and facilities for transport, and the
appellant was, therefore, required to sell the foodgrains in
the Punjab, and thus incurred a loss of Rs. 14,844-0-3. The
appellant alleges that the Maharaja promised to pay the
‘amount.
From January 1, 1949, the Mayurbhanj State merged with the
Province of Orissa, and on the same day, the Government of
Orissa promulgated the Administration of Mayurbhanj State
Order, 1949 under s. 4 of the Extra Provincial Jurisdiction
Act, 1947 (47 of 1947). That Order allowed claims against
the State of Mayurbhanj to be preferred to Government for
its
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consideration. Clause 9 of the Order, in so far as it is
material, is as follows:
“9. Claims against Ruler of the State. (a) The
Administrator shall as soon as possible
publish a notification in the Gazette in
English and in vernacular calling upon all
persons having pecuniary claims, whether
immediately enforceable or not, against the
State or the Ruler of the State in his
capacity as Ruler of that State, to notify the
same in writing to the officer authorised, by
the Administrator in this behalf (hereinafter
called the said officer) within three months
from the date of the notification.
(b) The notice shall also be published at
such places and in such other manner as the
Administrator may by special or general order
direct.
(c) Every such claimant shall, within the
period specified in sub-paragraph (a) notify
to the said officer in writing his claim. with
full particulars thereof and any claim
presented after the expiration of such period
shall be summarily rejected.
(d) Every document including entries. in
book.% of account in the possession of or
under the control of the claimant on which he
bases his claim shall be produced before the
said officer along with the statement of the
claim:
(f) Nothing in the preceding sub-paragraphs
shall apply to any pecuniary claim of
Government or any local authority.
(g) The said officer shall after making such
enquiry as he may deem fit, decide which
claims notified under sub-paragraph (c) are to
be allowed in whole or in part and which are
to be disallowed, and on his decision being
confirmed by the Administrator, the said
officer shall give written notice of the same
to the claimants. The decision of the
Administrator shall be final and shall not be
liable. to be called into question in any
Court whatsoever..’
(h) No court shall have jurisdiction to
investigate
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any pecuniary claim against the State or
against the Ruler of the State in his capacity
as Ruler of that State and such claim shall be
determined only in accordance with the
provisions of this paragraph.
(i) The Administrator may delegate his
powers under this paragraph to any officer
subordinate to him not below the rank of an
Additional District Magistrate.
(j) The provisions of this paragraph shall
not apply to any claim against the State
based on a cause of action which arose on
or after the 1st January 1949 and such claim
shall be disposed of in accordance with the
laws applied or continued in force under
paragraph 5.”
The appellant preferred his two claims for the consideration
of the Claims Officer, who was dealing with such claims on
behalf of the Administrator. The Claims Officer made a
report to the Administrator on June 20, 1951 in respect of
the first claim, and after examining the merits, gave his
conclusions as follows:
“Considering the evidence laid by the Claimant
before me in support of his claim, I find that
he is entitled to a sum of Rs. 1,37,785-13-7-
1/2. It has been urged by the Claimant that
interest @ Rs. 4 per cent. per annum should be
allowed to him till the date of repayment of
his dues. He has been allowed interest from
1-4-43 to 28-2-49 and,, I think, he should get
interest thereafter @ Rs. 4 per cent. per
annum till the date of repayment of his dues.
As regards the Claimant’s demand for half
share of further advances made by the Claimant
after filing of this claim case, it cannot be
entertained in this case.
Submitted to the Revenue Commissioner, Orissa,
Cuttack through the District Magistrate,
Mayurbhanj as required under Clause 9(g) of
the Administration of Mayurbhanj State Order,
1949.”
In the other case, he made a report on November 5, 1951 that
the appellant had substantiated his claim for Rs. 14,844-0-
3, and was also liable to be paid interest amounting to Rs.
5,303-14-0. This report was
27
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submitted to the Member (Third), Board of Revenue, Orissa,
Cuttack, through the District Magistrate, Mayurbhanj.
On June 28, 1952, the appellant received a Memo randum
from the Deputy Secretary, Board of Revenue, Orissa,
Cuttack, which read as’ follows:
“Dear Sri Agarwalla,
With reference to your petitions dated 1-10-51 and 7-9-50.
I am directed to say that the claims have been rejected as
Government have been advised that they are barred by
limitation.
Yours sincerely,
Sd. Govind Tripathy”.
It appears that the appellant applied for review, and he was
asked on November 8, 1952 to produce before the Board any
document or documents in his possession to show that these
were continuing businesses and also to point out the law
that no claim of a continuing business could be barred by
limitation. The documents on which the appellant presumably
relied before the Board of Revenue have not been printed in
the record of this Court, but on April 2, 1953, the
solicitors of the appellant were informed that the Board of
Revenue had declined to review the matter. It appears also
that, in the first case, even before the merger the Revenue
Minister, Mayurbhanj State, had rejected the claim put
forward by the appellant by his order dated October 26,
1948, to the following effect:
“The State need not recognise the claims put
forward by Mr. J. Agarwalla, as there was
really no formation of any Joint Stock Company
nor any written agreement entered into and
finally settled.
Sd. B. Mohapatra
(Revenue Minister, Mayurbhanj)”.
It was in these circumstances, that the two petitions under
Art. 226 of the Constitution were filed. The High Court
dismissed them. From the order of the High Court, it
appears that two points alone were urged before it. The
first was that the decision of the
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Claims Officer should have gone to the Board of Revenue as a
whole and not to a single Member and the second was that the
appellant should have been served with a notice by the Board
before the recommendations of the Claims Officer were
rejected, and, as has now been argued before this Court,
allowed a hearing.
The first point was not argued before us, and it seems that
the appellant has accepted the decision of the High Court
that the Third Member was competent to hear and dispose of
these cases. The second point alone has been argued, and.
needs to be considered. The case was argued by Mr. N. C.
Chatterjee on behalf of the appellant as illustrating a
patent breach of the principles of natural justice. He
contended that his client was entitled to a proper hearing
before the report in his favour was rejected, and relied
upon the following cases: Shivji Nathubai v. The Union of
India (1), New Prakash Transport Co. Ltd. v. New Suwarna
Transport Co. Ltd. (2), Nagendra Nath Bora v. The
Commissioner of Hills Division and Appeals, Assam (3) and
Gullapalli Nageswara Rao v. Andhra Pradesh State, Road
Transport Corporation (4). In reply, Mr. A. V. Viswanatha
Sastri contended that the rejection of the claim was an act
of State, and that the new Sovereign State could not be
compelled by a process of the municipal courts to accept a
liability of the old Ruler, and though the new Sovereign
State might make such enquiry as it chose, it was not
compelled to give a hearing to the claimant. In his
rejoinder, Mr.Chatterjee contended that the act of State was
over, when the new Sovereign State invited claims under a
law passed for the purpose, and proceeded to consider the
evidence tendered in support of the claim He also contended
that by the admission of the claim by the Claims Officer the
act of State was over, and that any further consideration of
the report had to comply with the rules of natural justice,
laid down by this Court in the cases cited by him.
What is an act of State and when it ceases to apply between
a new Sovereign and the subjects of a State
(1) [1960] 2 S.C.R. 775.
(3) [1958] S.C.R. 1240.
(2) [1957] S.C.R. 98.
(4) [1959] SUPP. 1 S.C.R. 319.
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conquered, acquired or ceded to the new Sovereign, has been
the subject of several decisions of this Court. In M/s.
Dalmia Dadri Cement Co. Ltd. v. The Commissioner of Income-
tax (1) and The State of Saurashtra v. Memon Haji Ismail
Haji (2), it has been held that unless the new Sovereign,
either expressly or impliedly admits the claim., the
municipal courts have no jurisdiction in the matter. The
question to consider is whether such a stage had been
reached in the enquiry which had been commenced. No doubt,
the plea that this was a part of an act of State was not
specifically raised before the High Court; but, as pointed
out by the Judicial Committee’ in Vale Singh Ji Joravar
Singh v. Secretary of State for India (3), no plea is really
needed. It is clear from the Order, which was made under
the Extra Provincial Jurisdiction Act, that claims were
being asked to be entertained only for investigation and not
for acceptance. It is the acceptance of the claim which
would have bound the new Sovereign State and the act of
State would then have come to an end. But short of an
acceptance, either express or implied, the time for the
exercise of the sovereign right to reject a claim was still
open. In Vaje Singh Ji’s case (3), enquiries were made by
Captain Buckle and again in 1868, and the two enquiries
lasted 16 years before the rejection of the claims, and the
rejection was still upheld as an act of State. Vaje Singh
Ji’s case (3) has been relied upon by this Court in the two
cases referred to, in the argument of Mr. A. V. Viswanatha
Sastri. It would, therefore, appear that the act of State
could not be said to have come to an end, when the
Government allowed claims to be preferred, or when their own
Officer made his report. The Claims Officer was not a part
of the municipal courts, and Government cannot be said to
have submitted itself to the jurisdiction of the municipal
courts, when it entrusted the enquiry to him. Nor can the
investigation of claims be said to have conferred a civil
right upon the claimants to enforce their claims against the
State. In our opinion, enquiry was for the benefit of the
State and not
(1) [1959] S.C.R. 729. (2) [1960] 1 S.C.R. 537.
(3) (1924) L.R. 51 I.A. 357.
213
for conferring rights upon likely claimants. It was always
open to the Government to admit any claim, even though
reported adversely by the Claims Officer, though such a
contingency might have been very remote. Equally,
therefore, the Government had the paramount right to reject
a claim, which its Claims Officer considered good but on
which the Government held a different opinion. In short,
till there was an acceptance by the Government or some
officer of the Government, who could be said to bind the
Government, the act of State was still open, and, in our
opinion, it was so exercised in this case.
Mr. Chatterjee contended that at least within the four
corners of the Order, the appellant had a right to be heard,
and that he did not have a proper bearing. If the Member,
Board of Revenue, entertained some doubt about the claim
being within time, he might have heard the party. That this
was an enquiry mainly to ascertain whether a claim should or
should not be recognised is obvious enough. It was in no
sense a trial of any issue between the appellant and the
Government. To judge such an action with the same rigour
with which a judicial enquiry or trial is judged is to
convert the enquiry into a civil suit. The appellant was
fully heard by the Claims Officer, and the only question was
whether the claim was within time. Even there, the Member,
Board of Revenue, asked the appellant to submit all
documents and arguments in support of his contention that
the claim was within limitation, and to that extent, the
appellant had his say. Whether the Member, Board of Revenue
should have gone further and given a viva voce hearing was a
matter entirely for that Officer to choose, and there was
nothing under the law to compel him. Though we think that
such an opportunity might have been afforded to the
appellant, we cannot say that this was a matter which
entitled him to a writ.
In this view of the matter, the appeals fail, and are
dismissed. But, in the circumstances of the case, there
shall be no order as to costs.
Appeals dismissed.
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