{"id":97793,"date":"1962-11-27T00:00:00","date_gmt":"1962-11-26T18:30:00","guid":{"rendered":"https:\/\/www.legalindia.com\/judgments\/maharaja-shree-umaid-mills-ltd-vs-union-of-india-on-27-november-1962"},"modified":"2016-01-07T05:01:57","modified_gmt":"2016-01-06T23:31:57","slug":"maharaja-shree-umaid-mills-ltd-vs-union-of-india-on-27-november-1962","status":"publish","type":"post","link":"https:\/\/www.legalindia.com\/judgments\/maharaja-shree-umaid-mills-ltd-vs-union-of-india-on-27-november-1962","title":{"rendered":"Maharaja Shree Umaid Mills Ltd vs Union Of India on 27 November, 1962"},"content":{"rendered":"
Supreme Court of India<\/div>\n
Maharaja Shree Umaid Mills Ltd vs Union Of India on 27 November, 1962<\/div>\n
Equivalent citations: 1963 AIR 953, \t\t 1963 SCR Supl. (2) 515<\/div>\n
Author: S Das<\/div>\n
Bench: Das, S.K., Kapur, J.L., Sarkar, A.K., Hidayatullah, M., Dayal, Raghubar<\/div>\n
           PETITIONER:\nMAHARAJA SHREE UMAID MILLS LTD.\n\n\tVs.\n\nRESPONDENT:\nUNION  OF INDIA\n\nDATE OF JUDGMENT:\n27\/11\/1962\n\nBENCH:\nDAS, S.K.\nBENCH:\nDAS, S.K.\nKAPUR, J.L.\nSARKAR, A.K.\nHIDAYATULLAH, M.\nDAYAL, RAGHUBAR\n\nCITATION:\n 1963 AIR  953\t\t  1963 SCR  Supl. (2) 515\n CITATOR INFO :\n F\t    1964 SC 888\t (6)\n R\t    1964 SC1043\t (96,133)\n D\t    1964 SC1495\t (12)\n R\t    1964 SC1793\t (14)\n R\t    1964 SC1903\t (17,23)\n R\t    1967 SC  40\t (5,7)\n R\t    1971 SC 846\t (9)\n\n\nACT:\nExcise Duty- Agreement with Ruler-Exempting payment of duty-\nIfamounts to law-Whether agreement binding on  Government\nof India-Power of Parliament to alter agreement-Constitution\nof India, Art. 295.\n\n\n\nHEADNOTE:\nA  formal agreement executed in 1941, between the  Ruler  of\njodhpur\t and  the appellant provided that  the\tState  would\nexempt\tthe appellant from State or Federal excise duty\t and\nincome-tax, super-tax, surcharge or any other tax on  income\nand that if the appellant had to pay any such duty or tax,\nthe  State  would refund the same to the appellant.   After\nIndia had attained  independence, jodhpur joined the  United\nState of  Rajasthan on April 7, 1949.  On January 26, 1950,\nRajasthan  became a Part B State.  The Central\tExcises\t and\nSalt  Act,  1944, was extended to Rajasthan  from  April  1,\n1950, and the Union of India recovered excise duty from\t the\nappellant for the period 1-4-1950 to 31-3-1952.\t  Similarly,\nthe  Indian Income-tax Act, 1922, was extended to  Rajasthan\nand  the Union sought to assess and recover income-tax\tfrom\nthe  appellant.\t  The appellant contended that\tit  was\t not\nliable\tto pay any excise duty or income-tax on the  grounds\nthat the agreement of. 1941 with, the Ruler of jodhpur under\nwhich the exemptions were granted was law which continued in\nforce and that even if the agreement was purely contractual,\nthe rights and obligations thereunder were accepted by\teach\nsucceeding  Sovereign  and  under Art. 295 (1)\t(b)  of\t the\nConstitution  they became the rights and obligations of\t the\nGovernment of India which could not be abrogated by any law.\nThe appellant further contended that under the agreement  it\nwas entitled to a refund from the State of Rajasthan of\t the\nexcise duty paid by it.\nHeld,  that the appellant was liable to pay the excise\tduty\nand income-tax.\nThe 1941 agreement was not law and did not have the force of\nlaw.  I Every order' of a Sovereign Ruler cannot be  treated\nas law irrespective of the nature or character thereof,\n516\nThe  true nature of the order has to be considered  and\t the\norder,\tto  be law must have the characteristics  of  'law,'\nthat  is of a binding rule of conduct as' the expression  of\nthe  will  of  the  Sovereign, which  does  not\t derive\t its\nauthority from a mere contract.\t An agreement which is based\nsolely on the consent of the parties is different from a law\nwhich  derives its sanction from the will of the  Sovereign.\nThe  1941 agreement was entirely contractual in\t nature\t and\nwas not law, as it had none of the characteristics of law.\nAmeer-un-nissa Begum v. Mahboob Begum, A. I. R.<\/a> (1955) S. C.\n352,  Director\tof Endowments, Government  of  Hyderabad  v.\nAkram  Ali, A.<\/a> 1. R. (1956) S.C. 60, Madharo Phalke  v.\t The\nState  of Madhya Pradesh,<\/a> [1961] I S. C. R..957 and  Promode\nChandra\t Dev  v. State of Orissa, [1962] Supp.\tI S.  C.  R.\n405, referred to.\nThe  1941 agreement contained no term and no undertaking  as\nto exemption from excise duty or income-tax to be imposed by\nthe  Union Legislature in future.  As such the\tquestion  of\nsucceeding   Sovereigns\t accepting  such  a  term   and\t  an\nobligation  arising therefrom under Art.295 (1) (b) did\t not\narise.\t Apart\tfrom this, the\tcorrespondents\tshowed\tthat\nneither\t the United State of Rajasthan nor the Part B  State\nof   Rajasthan\taffirmed  this\tagreement.   Even   if\t the\nobligation  under the agreement continued and Art.  295\t (1)\n(b)  was  applicable to it, there was nothing  in  Art.\t 295\nwhich Prohibited Parliament from enacting a law as to excise\nduty or income-tax altering the terms of the agreement.\nMaharaj Umeg Singh v. State of Bombay, A.<\/a> r. R. (1953) S.   C.\n540, referred to.\n\n\n\nJUDGMENT:\n<\/pre>\n
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 214\/56.
\nAppeal from the judgment and order dated October 19, 1953 of
\nthe Rajasthan High Court in D.\t   B. Civil Misc.  Writ\t No.
\n47 of 1953
\n\t\t\t    WITH
\nCivil  Appeal No. 399 of 1960. Appeal from the judgment\t and
\ndecree dated May 7, 1959, of the Rajastan High-Court in D.B.
\nCivil Regular First Appeal No. 10 of 1955.\n<\/p>\n
517<\/span><\/p>\n
G. S. Pathak, Rameshwar Nath, S. N. Andley and P. L.’ Vohra,
\nfor the appellants.\n<\/p>\n
M.   C. Setalvad, Attorney-General for India, H.  N.Sanyal,
\nAdditional  Solicitor  General of India, -K.   N.  Rajagopal
\nSastri and R. N. Sachthey, for the respondents (in C. A. No.
\n214\/56)\t and  respondents  Nos. 1, 3 and 4  (in\t C.  A.\t No.
\n399\/6O), G. C. Kasliwal, Advocate-General, Rajasthan, M.   M.
\nTiwari, S. K. Kapur, Kan Singh, S. Venkatakrishnan and K. K.
\nJain, for respondent No. 2 (in C. A. No. 399\/60.)
\n1962.  November 27.  The judgment of the Court was delivered
\nby
\nS.   K. DAS, J These two appeals on certificates granted by
\nthe  High  Court  of Rajasthan\thave  been  heard  together,
\nbecause\t they  raise common questions of law and  fact,\t and
\nthis judgment will govern them both.\n<\/p>\n
Shortly\t put, the main question in C. A. No.399 of 1960\t is’
\nwhether\t the  appellant, the Maharaja  Shree  Umaid  ‘.Mills
\nLtd.,  is  liable to pay excise duty on -the cloth  and\t yam
\nmanufactured  and  produiced by it, in accordance  with\t the
\nprovisions  of the Central Excises and Salt Act, 1944  which
\nprovisions  were extended to the territory of the  State  of
\nRajasthan on April 1, 1950.  The main question in C.   A.
\nNo. 214\/1956 is whether the same appellant is\t  liable  to
\npay  income-tax\t in accordance with the\t provisions  of\t the
\nIndian\tIncome-tax  Act, 1922 from the date on\twhich  those
\nprovisions  were extended to the territory of the  State  of
\nRajasthan.  C. A. No.399 of- 1960 arises out of a suit which
\nthe appellant  had filed in the court of the District Judge,
\nJodhpur\t . That suit was dismissed by the  learned  District
\nJudge.\tThen there was an appeal to the High
\n518<\/span>
\nCourt  of Rajasthan.  The High Court of Rajasthan  dismissed
\nthe  appeal.   The\t      Court was\t then  moved  for  a
\ncertificate   under   Arts.132\t(1)  and   133(1)   of\t the
\nConstitution.\tSuch certificate having been granted by\t the
\nHigh Court, the I ‘appeal has been preferred to this  court.
\nC. A. Xi 214 of 1956 arises out of a writ petition which the
\nappellant had filed for the issue of writ of mandamus or any
\nother  appropriate  writ restraining  the  respondents\tfrom
\nassessing or recovering income-tax from the appellant.\tThis
\nwrit  petition\twas  dismissed\tby the\tHigh  Court  on\t the
\npreliminary  ground  that the appellant had  another  remedy
\nopen to it under the provisions of the Income-tax Act, 1922.
\nThe   appellant\t moved\tthe  High  Court  and\tobtained   a
\ncertificate in pursuance of which it has filed C. A. No. 214
\nof 1956.  As we arc deciding both the appeals on merits,  it
\nis unnecessary to deal with the preliminary, ground on which
\nthe High Court dismissed the writ petition.
\nWe have already stated that in both the appeals the Maharaja
\nShree Umaid Mills Ltd.\tPali, is the . appellant.  In C.  A.
\nNo. 399 of 1960 the respondents are the Union of India, the,
\nState  of  Rajasthan, the Collector of Central\tExcise,\t New
\nDelhi  and the Superintendent, Central Excise, jodhpur.\t  In
\nC.  A.\tNo.  214 of 1956 the respondents are  the  Union  of
\nIndia,\tthe State of Rajasthan, the Commissioner of  Income-
\ntax, Delhi and the Income-tax . Officer, Jodhpur.
\nWe may now state the facts whichare relevant to these two
\nappeals. The appellant was incorporated under the Marwar
\nCompanies Act, 1923, and has  its registered office  at
\nPali in the appellant Stat of  Rajasthan.  It  has  been
\nmanufacturing cloth and yarn  since 1941. The case  of\tthe
\nappellant was  that  the then Ruler of the State of  Jodhpur
\nwas  earnestly desirous of having a cotton mills started at
\npali and for that purpose agreed togive certain
\n519<\/span>
\nconcessions  by\t way of immunity from payment of  taxes\t and
\nduties\tthen  ‘in force in the Jodhpur State or\t likely\t to
\ncome  into force in view of the con templated federation  of
\nthe  Indian  States and Provinces under\t the  Government  of
\nIndia\t Act,\t1935.\t There\t were\tnegotiations\tand-
\ncorrespondence\tabout  the  concessions\t which\twere  to  be
\nfinally\t a  formal  deed  of  agreement\t incorporating\t the
\nconcessions and immunities granted was executed between\t the
\nGovernment  of His Highness the Maharaja of. jodhpur on\t one
\nside  and  the\tappellant on the other on  April  17,  1941.
\nClause 6 of ‘this agreement, in so far as it is relevant for
\nour purpose said
\n“The  State  will exempt or remit the following\t duties\t and
\nroyalties:\n<\/p>\n
     (a) xx    xx\n     (b) xx\txx\n     (c) xx    xx\n     (d) xx    xx\n<\/pre>\n
(c)  State or Federal Excise duty on goods manufactured\t  in
\nthe  mill premise.  If any such duty his. to be paid by\t the
\nCompany the State  will\t refund\t the  same  wholly  to\t the
\n\t      Company.\n<\/p>\n
(f)  State or Federal Income, Tax or Super Tax or  surcharge
\nor  any other tax on, income If any such tax has to be\tpaid
\nby the company the State will refund the- same wholly to the
\n\t      company.\n<\/p>\n
(g)  xx\t       xx.”\n<\/p>\n
In  consideration  of the concessions  given  the  appellant
\nagreed to pay to the State of jodhpur, a royalty
\n520<\/span>
\nof 7 1\/2 per cent on the net profits of the company in\teach
\nof  its\t financial years, such payments to  be\tmade  within
\nthree  months after the close of each financial year.\tThis
\nagreement,  it\twas stated, was acted upon by the  State  of
\nJodhpur\t and the appellant enjoyed an immunity\tfrom  excise
\nduty and income-tax. The Indian IndependenceAct,       1947
\nbrought into existence as from August 15, 1947, a Dominion
\nof India. The Ruler of Jodhpur acceded to the  Dominion
\nof India by means of an Instrument of Accession in the form
\nreferred to in Appendix VII at pages 165 to 168 of the White
\nPaper  on  Indian States. jodhpur was one of  the  Rajputana
\nStates.\t  The integration of these States was  completed  in
\nthree  stages.\tFirstly, a Rajasthan Union ‘was formed by  a
\nnumber\tof smaller kajaputana States situated in the  south-
\neast  of  that region.\tLater, there was formed\t the  United
\nState of Rajasthan.  The Ruler of jodhpur joined the  united
\nState  of  Rajasthan  and on Apri  17,1949,  made  over\t the
\nadministration of his State to the Rajpramukh of the  United
\nState  of Rajasthan.  The Covenantby which this was done  IS
\nappendix XL `at pages 274 to 282 of the white is paper.\t  On
\nthe  same day was promulgated the  Rajasthan  Administration
\nOrdinance,  1949  (Ordinance No. 1 of 1949),  s.  3  whereof
\ncontinued  all\tthe laws in force in any  Covenanting  State
\nuntil  altered\tor  repealed  or  amended  by  a   competent
\nlegislature or other competent authority, etc.\tThere was  a
\nfresh Instrument of Accession on April 15 , 1949, on  behalf
\nof the United State of Raj asthan by which the United  State
\nof  Rajasthan accepted all matters enumerated in List I\t and
\nList III of -the Seventh Schedule to the Government of India
\nAct,  1935  as\tmatters in respect  of\twhich  the  Dominion
\nLegislature  might  make  laws\tfor  the  United  State\t  of
\nRajasthan,  there  was a proviso, however, which  said\tthat
\nnothing\t in the said.  Lists shall be deemed to empower\t the
\nDominion  Legislature  to  -impose any tax or  duty  in\t the
\nterritories of the United State of Rajasthan or to prohibit
\n\t\t\t    521<\/span>
\nthe imposition of any duty or tax by the legislature of\t the
\nUnited\tState’\tof Rajasthan in the  said  territories.\t  On
\nSeptember  5,  1949, was promulgated  the  Rajasthan  Excise
\nDuties\tOrdinance, 1949 (Ordinance No. XXV of 1949).   ‘This
\nOrdinance  was\tpublished on September 19, 1949, and  s.  30
\nthereof -said that all laws dealing with matters covered  by
\nthe  Ordinance in force at its commencement in any  part  of
\nRajasthan were repealed.  One of the questions before’ us is
\nwhether\t this  section\thad the -effect\t of  abrogating\t the
\nagreement  dated April 17, 1941, in case that agreement\t had
\nthe force of -law in the State of Jodhpur.  On November\t 23,
\n1949,  the United State of Rajasthan made a proclamation  to
\nthe  effect  that the Constitution of India  shortly  to  be
\nadopted\t by the Constituent Assembly of India shall  be\t the
\nConstitution  for the Rajasthan State.\tThe Constitution  of
\nIndia came into force on January 26, 1950, and as from\tthat
\ndate Rajasthan became a Part B State.\n<\/p>\n
For the purpose of these two appeals, we have to notice\t the
\nthree  stages of evolution- in the constitutional  position.
\nFirst,\twe  have the State of Jodhpur whose Ruler  had\tfull
\nsovereignty   and   combined  in  himself   all\t  functions,
\nlegislative, executive and judicial.\tThen  we  have\t the
\nUnited State of Rajasthan     into   which.    Jodhpur\t was
\nintegrated as from April 7,   1949,    by   the\t   Covenant,
\nAppendix XL at pages 274 to 282 of the White Paper.  Lastly,
\nwe  have the Bart B State of Rajasthan within the  framework
\nof  the\t Constitution  of India which  came  into  force  on
\nJanuary 26, 1950.  Jodhpur then became a part of the Part  B
\nState of Rajasthan.\n<\/p>\n
Both  duties of excise (except alcoholic liquors  etc.)\t and
\ntaxes  on income other than agricultural income fall  within
\nList I of the Seventh Schedule of the Constitution of India.
\nBy  s.\t11 of the Finance Act 1950, the\t provisions  of\t the
\nCentral Excises and
\n522<\/span>
\nSalt  Act,1944\tand all rules and orders made  there.  under
\nwere extended to the territory of Rajasthan as from April 1,
\n1950.  The Excise officers of the Union of India recovered a
\nsum  of\t Rs.  4,05,Q,14-12-0 as excise duty  for  the  goods
\nmanufactured and  produced by the appellant, for the  period
\nfrom  April 1, 1950, to March 31, 1952, from the  appellant.
\nThe  appellant said that it paid the amount  under  protest.
\nOn April 16, 1952, the appellant instituted a suit by  means
\nof  a  plaint  filed in the court  of  the  District  judge,
\njodhpur.  In the plaint the appellant made several averments
\non the basis of- which it claimed that’ the respondents were
\nnot  entitled to realise excise duty from the  appellant  by
\nreason of the agreement dated April 17, 1941.  The appellant
\nasked for the following-reliefs\n<\/p>\n
(a)a declaration that the agreement dated April 17,  1941,
\nis binding on all the respondents;\n<\/p>\n
(b)that\t the  amount of excise duty  already  realised\tbe
\nrefunded with interest at 6% per annum;\n<\/p>\n
(c)that the Union of India and the State of Rajasthan  and
\ntheir\tservants.,  agents  and\t officers   be\t permanently
\nrestrained  by\tmeans of an injunction\tfrom  realising\t any
\nexcise duty from the appellant; and\n<\/p>\n
(d)that the State of Rajasthan\tbe directed to refund from
\ntime to time as and when the appellant is to pay excise duty
\nto the Union of India, by reason of the indemnity clause  in
\nthe agreement of April 17, 1941.\n<\/p>\n
Several issues were framed by the learned District judge who
\non  a  trial  of those issues substantially  held  that\t the
\nagreement of April 17, 1941, was
\n 523<\/span>
\nnot  binding on the respondents.  He further held  that\t the
\nagreement  itself stood frustrated by reason  of  subsequent
\nevents\twhich  happened\t and  was  therefore  unenforceable.
\nThere  was an appeal to the High .Court which  affirmed\t the
\n;main findings of the learned District Judge.
\nThe facts in C.A.No.214 of 1956 are the same as those  given
\nabove, the only point of distinction being that this  appeal
\nrelates\t to  income-tax while the other\t relates  to  excise
\nduty.\tHere  again the appellant bases its  ‘claim  on\t the
\nagreement  dated  April\t 17  1941,  and\t contends  that\t the
\nagreement  is binding on the respondents and  the  appellant
\ncannot\tbe,  asked  to\tpay  income-tax\t by  reason  of\t the
\nprovisions  of\tthe Indian Income-tax Act, 1922\t which\twere
\nextended  to  the whole of India except the State  of  Jammu
\nand’ Kashmir as a result of certain amendments inserted\t in.
\nthe said Act by the Finance Act, 1950.\n<\/p>\n
On  behalf of the appellant two main lines of argument\thave
\nbeen  presented before us in support of the contention\tthat
\nthe  agreement\tdated  April 17, 1941,\tis  binding  on\t the
\nrespondents  and the finding to the,contrary by\t the  courts
\nbelow  is  incorrect.  The first, line of argument  is\tthat
\nagreement  of  April  17, 1941, is  itself  law,  being\t the
\ncommand of the Ruler of Jodhpur who was a sovereign Ruler at
\nthat time and combined in himself all legislative, executive
\nand  judicial functions.  This law, or legislative  contract
\nas  learned counsel for the appellant has put,it,  continued
\nin  force  when.  Jodhpur merged into the  United  State  of
\nRajasthan by reason of s. 3 of the  Rajasthan Administration
\nOrdinance,  1949  which continued all existing laws  in\t any
\ncovenanting   ..State  in  force  immediately\tbefore\t the
\ncommencement of the Ordinance.\tIt is -pointed out that\t for
\nthe .purpose’ of s. 3 a resaid, “law” means any rule,  order
\nor bye-law which having been made by a
\n524<\/span>
\n competent  authority ‘in a covenanting State has the  force
\nof law in that State’ The agreement of April 17, 1941, it is
\nargued,\t was  sanctioned by the ‘Ruler and  was\t his  order;
\ntherefore, it had the force of a special law in Jodhpur-and@
\nthis  law continued to be in force by reason of s.3 of\tthe’
\nOrdinance  referred  to above.\tWhen the Raipramukh  of\t the
\nUnited\tState of Rajasthan promulgated the Rajasthan  Excise
\nDuties\tOrdinance,  1949  (Ordinance XXV  of  1949),  s.  30
\nthereof\t did  not abrogate the special law embodied  in\t the
\nagreement.  the\t coming into force of  the  Constitution  on
\nJanuary 26, 1950, when Rajasthan became a Part B State, Art.
\n372  of\t the  Constitution  applied  and  the  special\t law
\ncontinued in force.  The finance Act, 1950 did not  abrogate
\nthe special law.  Therefore, the special law still continues
\nin force and binds the respondents.  This is the first\tline
\nof argument.\n<\/p>\n
The second line of argument proceeds on the footing that the
\nagreement  of  April   17, 1941,  is  purely  contractual in
\nnature\tand’  is  not law.  Even on  that  footing,  learned
\ncounsel\t for the appellant argues, the contract in  question
\ngives  rise  to rights in one party and obligations  on\t the
\nother.\t These rights and obligations, -it is  stated,\twere
\naccepted-by each succeeding sovereign (1) Jodhpur State\t (2)
\nUnited\tState  of  Rajasthan and (3) the’ Part\tB  State  of
\nRajasthan  It contended that the finding to the contrary  by
\nthe  courts below is wrong.  As the rights  and\t obligations
\nwere  accepted by each succeeding Sovereign, ‘Art.  295\t (i)\n<\/p>\n
(b), of the Constitution came into play as from January\t 26,
\n1950,and the rights and liabilities of the Jodhpur State  or
\nof  the United State of, Rajasthan’ -became the rights,\t and
\nliabilities  of the Government of India in so far  as  these
\nrights\tand  liabilities  were\tfor the\t pur  poses  of\t the
\nGovernment of India relating to any of the matters  enumered
\nin the Union List. Learned counsel for the appellant  argues
\nthat Art.295
\n 525<\/span>
\nis  of the nature of a constitutional guarantee and any\t law
\nmade in violation thereof must be void to the extent that it
\nviolates, the Article.\n<\/p>\n
Apart  from  the,  aforesaid two  main\tlines  of  argument,
\nlearned\t counsel for the appellant has also  submitted\tthat
\nthe  contract  in  question being a right  to  property\t the
\nappellant  could not be deprived of it in violation  of\t its
\nguaranteed rights under Arts. 19 and 31 of the\tConstitution
\nthat  there was no frustration of the contract as found\t by,
\nthe  learned  District\tJudge;\tand that  in  any  view\t the
\nappellant is entitled to a refund of the duty or tax paid by
\nit  to the Union Government from the State of  Rajasthan  by
\nreason of clause 6 of the agreement.\n<\/p>\n
We proceed now to deal with -these arguments in the order in
\nwhich we have stated them.  As to the first line of argument
\nwe  have come to the conclusion that the agreement of  April
\n17, 1941, rests solely on the consent of the parties; it  is
\nentirely  contractual in nature and is not law,\t because  it
\nhas none of the characteristics of law.\t Learned counsel for
\nthe  appellant has relied on the decisions of this court  in
\nAmeer-un-nissa\tBegum  v.  Mahboob  Begum<\/a>  (1)\tDirector  of
\nEndowments,  Govt. of Hyderabad v. Akram Ali<\/a> (2),  Madhaorao
\nPhalke v. The State of Madhya Bharat<\/a> (3) and Promod  Chandra
\nDeb v. The State of Orissa<\/a> (4).\t We do not think that  these
\ndecisions  help\t the  appellant.   It  was  pointed  out  in
\nMadhaorao Phalke’s Case (3) that in determining the question
\nwhether a particular order of a sovereign Ruler in whom\t was
\ncombined all legislative, executive and judicial  functions,
\nit  would  be  necessary to consider the  character  of\t the
\norders passed.\tTheir Lordships then examined the Kalambandi
\nunder consideration   before them, and pointed out that “the
\nnature\tof  the\t provisions contained  in  this\t    document
\nunambiguously  impresses upon in the character of a  statute
\nor a regulation having the force of a statute.”
\n(1) A.I.R. (1955) S.C. 352.\n<\/p>\n
[1961].S.C.R. 957.\n<\/p>\n
(2)  A.I.R. (1956) S.C. 60.\n<\/p>\n
(4)  [1962] Supp.  I.S.R. 405.\n<\/p>\n
526<\/span><\/p>\n
Same was the position in Ameer-un-nissa’s case and the\tcase
\nof the Director of Endowments,” Govt. of Hyderabad (2) where
\nthis court had to deal with the effect of Firmans issued  by
\nthe  Nizam  who was at the time an absolute Ruler.’  It\t was
\nheld  that such Firmans had the effect of law  because\tin,,
\nall domestic matters, the Nizam issued Firmans to  determine
\nthe  rights of his subjects.” The Firmans were not based  on
\nconsent, but derived their authority from the command of the
\nSovereign viz.,’ the Nizam, expressing his sovereign  will.:
\nFor  example, in Ameer-un-nissa’s case, (1) the\t Firmam\t set
\naside  the  decision of a Special Commission in\t respect  of
\ncertain claimants and though a subsequent Firman revoked the
\nearlier\t Firman,  it  did not restore the  decision  of\t the
\nSpecial\t ‘Commission.\tIt was in these\t circumstances\tthat
\nthis court observed
\n\t      “The  determination  of  all  these  questions
\n\t      depends primarily upon the meaning and  effect
\n\t      to be gives to the various’ ‘Firmans” of\tthe,
\n\t      Nizam  which  we have set\t out  already.\t.’It
\n\t      cannot   be   disputed  that  prior   to\t the
\n\t      integration of Hyderabad State with the Indian
\n\t      Union  and the coming to force of\t the  Indian
\n\t      Constitution,  the Nizam of Hyderabad  enjoyed
\n\t      uncontrolled  sovereign  powers.\tHe  was\t the
\n\t      supreme legislature, the supreme judiciary and
\n\t      the  supreme head of the executive, and  there
\n\t      were  no constitutional limitations  upon\t his
\n\t      authority\t to act in any of these\t capacities.
\n\t      The   ‘Firmans’  were:  expressions   of\t the
\n\t      sovereign\t will  of the Nizam  and  they\twere
\n\t      binding in the same way as any other
\n\t      law;…nay,  they\t would. Override  all  other
\n\t      laws  which  were in conflict. with  them.  So
\n\t      long  as’\t a  particular\t‘Firman’  ‘held\t the
\n\t      field”   that  alone would govern or  regulate
\n\t      the.  fights of the parties concerned,  though
\n\t      it could ‘be annulled or
\n     (1) A.I.R. (1955) S.C. 352,(2) A.I.R. (1956) S. 60;\n<\/p>\n
 527<\/span><\/p>\n
modified  by  a later ‘Firman’ at any time  that  the  Nizam
\nwilled.”\n<\/p>\n
These observations do not support the extreme view that any,
\nand  every  order of a sovereign Ruler is  law.\t  In  Promod
\nChandra Deb’s case (1). the Khorposh grants were considered.
\nin  the\t context of the rules laid down in Order 31  of\t the
\nRules, Regulations and Privileges of Kha jnadars which were.
\naccepted by the Ruler of the State is the law governing\t the
\nrights of Khorposhdars.\t It was in these circumstances\theld
\nthat the rules continued in force till they were changed; by
\na  competent; authority, and the grants made  in  accordance
\nwith those rules continued to be valid.\n<\/p>\n
In  our view, none of the aforesaid decisions go the  extent
\nof  laying  down  that any and every order  of\ta  Sovereign
\nRuler. who combines in himself all functions must be treated
\nas law irrespective of the nature or character of the  order
\npassed.\t We think that the true -nature of the order must be
\ntaken into consideration, and the order to be law must\thave
\nthe  characteristics of law, that is, of a binding  rule  of
\nconduct\t as  the expression of the will\t of  the  sovereign,
\nwhich  does not derive its authority from mere consensus  of
\nmind  of  two parties entering into a bargain.\t It  is\t not
\nnecessary  for\tthis purpose to go into\t theories  of  legal
\nphilosophy  or to ‘define law.\tHowever law may be  defined,
\nbe it the command of the supreme legislature as some jurists
\nhave  put  it or be it a “body of rules laid  down  for\t the
\ndetermination  of  legal  rights  and  duties  which  courts
\nrecognise  there  is an appreciable distinction\t between  an
\nagreement which is based solely on consent of parties and  a
\nlaw  which  derives  its  sanction  from  the  will  of\t the
\nSovereign.  A contract is. essentially a compact between two
\nor  more parties a law is not an agreement  between  parties
\nbut is a binding rule of conduct deriving its sanction from’
\nthe sovereign authority.  From this
\n(1)  [1962] Supp . I S.C.R 405.\n<\/p>\n
528<\/span><\/p>\n
point  of  view,  there is a  valid  distinction  between  a
\nparticular agreement between two or more parties even if one
\nof the parties is the sovereign Ruler, and the law  relating
\ngenerally,  to agreements. The former rests on consensus  of
\nmind,  and the latter expresses the will of  the  Sovereign.
\nIf one bears in mind this distinction, it seems clear enough
\nthat the  agreement  of\t April\t17,  1941,  even   though
\nsanctioned by the Ruler and purporting to be on his,  behalf
\nrests  really on consent.  We have, been taken\tthrough\t the
\ncorrespondence\twhich  resulted in the\tagreement  and\tour.
\nattention was particularly drawn to a letter dated April 22,
\n1938,  in which the Ruler was stated to have sanctioned\t the
\nterms and concessions decided upon by his Ministers in their
\nmeeting\t of  February 25, 1938.\t We do not  think  that\t the
\ncorrespondence\tto which we have been referred advances\t the
\ncase of the appellant.\tOn the contrary, the, correspondence
\nshows that there were prolonged negotiations, proposals\t and
\ncounter-proposals,  offer  and acceptance of terms  …\t all
\nindicating that the matter-was treated even by the Ruler  as
\na  contract between his Government and the appellant.\tThat
\nis  why\t in the letter dated April 22, 1938, it\t was  stated
\nthat Messrs Crawford Bailey & Co. Solicitors, would draw  up
\na  formal  agreement embodying the terms agreed\t to  by\t the
\nparties.   This resulted ultimately in the execution of\t the
\nagreement  dated April 17,1941:.  To call such an  agreement
\nas law is in our opinion to misuse the term “law’.
\nIt  is also worthy of note in this connection that clause  6
\nof  the agreement purports to give the\tappellant  exemption
\nnot  only  from\t State Excise duty, but\t also  from  Federal
\nExcise\tduty; similarly not only from State Income-tax,\t but
\nfrom  Federal Income tax or Super-tax or Surcharge.   It  is
\ndifficult  to see what, authority the Jodhpur Ruler  had  to
\ngive  exemption from Federal Excise duty or Federal  Income-
\ntax.   Such an exemption, if it were to be treated as,\tlaw,
\nwould be beyond the competence of the Ruler.  A
\n 529<\/span>
\nRuler  can  make  a  law  within  his  own  competence\t and
\njurisdiction.\t He  cannot  make  a  law  for\tsome   other
\nsovereign.   Such  an exemption would be a dead\t letter\t and
\ncannot\thave  the  force of law.  Learned  counsel  for\t the
\nappellant  suggested somewhat naively that the\tRuler  might
\nexercise  his influence on the other Sovereign (if and\twhen
\nFederation came into existence) so as to secure an exemption
\nfrom Federal tax for the appellant.  Surely, an assurance of
\nthis  kind  to\texercise  influence  on\t another   sovereign
\nauthority,  assuming that the effect of the relevant  clause
\nis  what learned counsel has submitted, as to which we\thave
\ngreat  doubt,  will  at\t once  show  that  it  has  not\t the
\ncharacteristics\t of  a\tbinding\t rule  of  conduct.   It  is
\ndoubtful  if  such an, assurance to  exercise  influence  on
\nanother\t sovereign  authority  can be  enforced\t even  as  a
\ncontract not to speak of law.\n<\/p>\n
Learned\t counsel for the respondents referred us to  several
\nother  clauses of the agreement which in his opinion  showed
\nthat  the agreement read as a whole could not be treated  as
\nlaw,  because some of the clauses merely gave  an  assurance
\nthat  the  State would take some action in  future;  as\t for
\nexample,  clause 8 which gave an assurance to amend the\t law
\nin future.  He contended that an assurance to amend the\t law
\nin  future cannot be treated as present law.  There  is,  we
\nthink,\t much\tforce  in  this\t contention.\tWhen   these
\ndifficulties  were  pointed out to learned counsel  for\t the
\nappellant, he suggested that we should separate the  various
\nclauses of the agreement and treat only those clauses as law
\nwhich gave the appellant a present right.  We do not see how
\nwe  can\t dissect the agreement in the manner  suggested\t and
\ntreat  as law one part of a clause and treat the rest as  an
\nagreement only.\n<\/p>\n
We  should notice here that clause 6 of the  agreement\tdoes
\nnot refer to excise duty or income-tax to be imposed by\t the
\nUnion of India.\t As a matter of
\n530<\/span>
\nfact,  nobody  could  envisage in  1941\t the  constitutional
\ndevelopments  which took place in 1947-1950, and  when\tthe
\nparties\t talked of Federal excise duty and  Federal  income-
\ntax, they had in mind the scheme of Federation envisaged  by
\nthe  Government\t of India Act, 1935 … which  scheme  never
\ncame  into  operation.\t It  is difficult  to  see  how\t the
\nagreement in any view of the matter can be treated as law in
\nrespect\t of  a tax or duty imposed by the  Union  Government
\nwhen there is no mention of it therein.\n<\/p>\n
The argument if carried to a reductio ad absurdum would come
\nto  this  that\tevery order of the Ruler would\thave  to  be
\ncarried out by the succeeding Sovereign.  That order may  be
\nalmost\tof  any kind, as for example, an order to  thrash  a
\nservant.   We have no doubt in our minds that the nature  of
\nthe order must be considered for determining whether it\t has
\nthe  force  of\tlaw.  Art. 372\tof  the\t Constitution  which
\ncontinues existing law must be construed as embracing  those
\norders only which have the force of law…Iaw as  understood
\nat the time.\n<\/p>\n
There  has  been  a lot of argument before  us\tas  to\twhat
\nlearned\t counsel  for  the appellant  has  characterised  as
\n‘legislative  contracts,’  an  expression  used\t mostly\t  in
\nAmerican decisions relating to the limitation placed by\t the
\n‘contract  clause’ in the American Constitution upon  action
\ntaken  by the State legislature in respect  of\tpre-existing
\ncontracts  (see\t Piqua Branch of the state Bank of  Ohio  v.
\nJacob Knoop (1)).  We do not think those decisions have\t any
\nbearing\t on the question before us, which is simply  this  :
\ndoes   a  compact  between  two\t or  more  parties,   purely
\ncontractual in nature, become law because one of the parties
\nto  the\t contract  is the Sovereign  Ruler  ?  The  American
\ndecisions throw no light on this question.  Learned  counsel
\nalso  referred us to the statement of the law in  Halsbury’s
\nLaws of England, Vol.8, Third Edition,, paragraph 252 at
\n(1)  (1853) 14L.  Ed. 977.\n<\/p>\n
 531<\/span><\/p>\n
page   146  relating  to  statutory  confirmation  of\tvoid
\ncontracts by means of a local and personal Act of Parliament
\n:  the\teffect of such a statute is to\tmake  the  agreement
\nvalid  in  toto.   The principle is that  where\t an  Act  of
\nParliament  confirms  a scheduled agreement,  the  agreement
\nbecomes\t a statutory obligation and is to be read as if\t its
\nprovisions  were  contained  in a section of  the  Act\t(see
\nInternational Railway Company v. N. P. Commission (1)).\t  We
\nfail  to see how this principle has any application  in\t the
\npresent\t case.\tThere is nothing to show that the  agreement
\nin the present case was confirmed as a law by the Ruler;  on
\nthe  contrary,\twe  have shown earlier that  it\t was  always
\ntreated\t as  a contract between two ,parties.  There  is  no
\nmagic in the expression ‘legislative contract’.\t A  contract
\nis  a  compact\tbetween two or more parties  and  is  either
\nexecutory  or executed. If a statute adopts or confirms\t it,
\nit  becomes law and is no longer a mere contract.   That  is
\nall that a legislative contract’ means.\t In the cases before
\nus there is no ‘legislative contract’.\n<\/p>\n
In  view of our conclusion that the agreement of  April\t 17,
\n1941,  is not law, it is perhaps unnecessary to\t decide\t the
\nfurther\t question  as  to  whether  s.3\t of  the   Rajasthan
\nOrdinance,  1949  (Ordinance  I of  1949)  continued  it  or
\nwhether s.30 of the Rajasthan Excise Duties Ordinance,\t1949
\n(Ordinance XXV of 1949) repealed it.  We may merely say that
\nwith  regard to the effect of s.30, learned counsel for\t the
\nappellant  relied on the principle that the  presumption  is
\nthat a subsequent enactment of a purely general character is
\nnot intended to interfere with an earlier special  provision
\nfor   a\t  particular  case,  unless  it\t  appears   from   a
\nconsideration of the general enactment that the intention of
\nthe  legislature  was  to  establish  a\t rule  of  universal
\napplication  in which case the special provision  must\tgive
\nway to the general (see paragraph 711, page 467 of Vol.\t 36,
\nHalsbury’s  Laws of England, Third Edition, and Williams  v.
\nPritchard Eddington v. Borman (3)).\n<\/p>\n
(1)  A.I.R. (1937) P.C. 214.\n<\/p>\n
(2) (1790) E.R. 862.\n<\/p>\n
(3) (1799)  E.R. 863.\n<\/p>\n
532<\/span><\/p>\n
On behalf of the respondents it was submitted that s. 30  of
\nthe  Rajasthan\tExcise Duties Ordinance,  1949,\t in  express
\nterms repealed all laws dealing with matters covered by\t the
\nordinance,  and\t s. 3 thereof dealt with  excise  duties  on
\ngoods produced or manufactured in Rajasthan therefore, there
\nwas  no\t room  for the application of  the  maxim  generalia
\nspecialibus  non  derogant and s. 30  clearly  repealed\t all
\nearlier\t laws  in the matter of excise duties  or  exemption
\ntherefrom.   It\t is  perhaps  unnecessary  to  decide\tthis
\nquestion  ; because we have already held that the  agreement
\nof April 17, 1941, was neither law nor had the force of law.
\nWe  may merely point out that the question is really one  of
\nfinding out the intention or the legislature, and in view of
\nthe very clear words of s. 30 of the Rajasthan Excise Duties
\nOrdinance,  1949  and  of the  repealing  revisions  in\t the
\nFinance\t Act,  1950 it would be difficult to hold  that\t the
\nearlier special law on the subject still continued in force.
\nWe  proceed  now  to consider the second  line\tof  argument
\npressed\t on  behalf of the appellant.  So far as  the  Union
\nGovernment  and\t its officers are concerned,  there  is,  we
\nthink,\ta very short but convincing answer to. the  argument
\nThe   agreement\t in  question  contains\t no  term   and\t  no
\nundertaking  as to exemption from excise duty or  income-tax
\nto  be imposed by the Union Legislature in future.  We\thave
\npointed\t out earlier that the undertaking, such as  it\twas,
\nreferred  to Federal excise duty and Federal income-tax\t and
\nwe  have further stated that the Federation contemplated  by
\nthe Government of India Act, 1935 never came into existence.
\nThe  Union which came into existence under the\tConstitution
\nof  1950  is  fundamentally different  from  the  Federation
\ncontemplated  under  the  Government  of  India\t Act,  1935.
\nTherefore,  in the absence of any term as to exemption\tfrom
\nexcise\tduty  or  income-tax  to be  imposed  by  the  Union
\nLegislature, the question
\n 533<\/span>
\nof  succeeding\tsovereigns  accepting such  a  term  and  an
\nobligation  arising therefrom on January 26, 1950, by  means
\nof Art. 295 (i) (b) of the Constitution cannot at all arise.
\nSurely,\t a term or undertaking which is non-existent  cannot
\ngive  rise to a right or obligation in favour of or  against
\nany  party.   On this short ground only, the  claim  of\t the
\nappellant  should be rejected against the respondents in  so
\nfar  as\t the  levy of excise duty or tax  by  the  Union  is
\nconcerned,  apart altogether from any question\twhether\t the
\nRuler of jodhpur or even the United State of Rajasthan could
\nlegally bind the future action of the Union Legislature.
\nIt  is\tnow well settled by a number of\t decisions  of\tthis
\ncourt  that an act of State is the taking over of  sovereign
\npowers by a State in respect of territory which was not till
\nthen  a\t part  of  it,\tby  conquest,  treaty,\tcession\t  or
\notherwise,  and the municipal courts recognised by  the\t new
\nSovereign have the power and jurisdiction to investigate and
\nascertain  only such rights as the new sovereign has  chosen
\nto  recognise  or acknowledge by legislation,  agreement  or
\notherwise ; and that such recognition may be express or\t may
\nbe   implied  from  circumstances.   The  right\t which\t the
\nappellant  claims stems from the agreement entered  into  by
\nthe  Ruler  of\tjodhpur.  The first  question  is,  did\t the
\nsucceeding   sovereign,\t the  United  State  of\t  Rajasthan,
\nrecognise  the right . which the appellant is now  claiming?
\nThe second question is., did the next succeeding  sovereign,
\nthe State of Rajasthan, recognise the right ? As against the
\nState of Rajasthan the main claim of the appellant is  based
\non  that part of cl. 6 which says that if any such duty\t (or
\ntax)  has to be paid by the company, the state\twill  refund
\nthe  same to the company.  The appellant claims\t as  against
\nrespondent No. 2 a refund of the duty or tax as and when  it
\nis paid to the Union Government by the appellant.\n<\/p>\n
534<\/span><\/p>\n
The  learned District judge found that the Ruler of  jodhpur
\nacted\tupon  the  agreement  in  the  matter\tof   customs
\nconcessions  granted  to  the  appellant  and  accepted\t the
\nroyalty\t as per cl. 12 of the agreement ; but  the  question
\nrelating to excise duty never came before the Jodhpur  State
\nas  no\tsuch duty was leviable in the State.   In  the\tHigh
\nCourt  jagat  Narayan, J., dealt with the  evidence  on\t the
\npoint  and  gave  a list of documents  bearing\ton  it.\t  He
\npointed\t out that the Director of Industries of\t the  United
\nState of Rajasthan no doubt made demands for the payment  of
\nroyalty\t not only for the period since the formation of\t the
\nUnited\tState of Rajasthan, but also for arrears of  royalty
\nfor  the  period prior to the formation of that\t State.\t  He
\nfound  however that as to exemption from excise duty or\t the
\nclaim of refund the United State of Rajasthan had in no\t way
\naffirmed the agreement.\t The learned Judge said :
\n“What  has  to\tbe determined is whether on  the  facts\t and
\ncircumstances  appearing from the evidence on record it\t can
\nbe  said  that the United State of  Rajasthan  affirmed\t the
\nagreement.   I\tam  firmly  of\tthe  opinion  that  no\tsuch
\ninference can be drawn.\t The state did not make up its\tmind
\nwhether\t or not to abide by the agreement and pending  final
\ndecision the agreement was acted upon provisionally.”
\nSo far as the Part B State of Rajasthan is concerned,  there
\nis  nothing in the record to show that it had  affirmed\t the
\nagreement.   Mr.  Justice  Bapna  agreed  with\this  learned
\ncolleague  on the Bench and refer-red specially to a  letter
\ndated  January\t20,  1950,  which  was\ta  letter  from\t the
\nCommissioner  of Excise jodhpur, to the appellant.  In\tthat
\nletter the appellant was informed that it was liable to\t pay
\nexcise\tduty in accordance with the Rajasthan Excise  Duties
\nOrdinance,  1949.   The appellant sent a reply in  which  it
\nstated that excise’ duty was not leviable by
\n 535<\/span>
\nreason\tof  the\t agreement dated April\t17,  1941.   Further
\ncorrespondence followed and finally a reply was given on May
\n10, 1952, in which the Government of the State of  Rajasthan
\nsaid that
\n“the  rights and concessions granted to the company and\t the
\nliabilities  and obligations accepted by the former  jodhpur
\nState under the agreement are extraordinary,  unconscionable
\nand disproportionate to the public interest.”
\nThe  letter ended by saying that the claim of the  appellant
\nto exemption could not be accepted.  Another letter on which
\nthe appellant relied was dated May 1, 1950.  In this  letter
\nthe  Government of Rajasthan said that the burden of  excise
\nduty  on  cloth\t produced  by  the  appellant  fell  on\t the
\nconsumerswho  purchased the cloth therefore the\t Government
\nof Rajasthan did not consider it  necessary  to\t exempt
\nthe appellant formfrom\tpayment\t of excise  duty.   It\tis
\nworthy of note that all\t this correspondence started  within
\na  very\t short\ttime of the promulgation  of  the  Rajasthan
\nExcise\tDuties\tOrdinance, 1949.  From\tthis  correspondence
\nBapna,\tJ., came to the conclusion that neither\t the  United
\nState  of Rajasthan nor the State of Rajasthan affirmed\t the
\nagreements We see no reasons to take a different view of the
\ncorrespondence to which our attention has been drawn.
\nWhat  then is the position ? If the new\t Sovereign,  namely,
\nthe  United  State  of\tRajasthan or the  Part\tB  State  of
\nRajasthan, did not affirm the agreement so far as  exemption
\nfrom  excise duty or incometax was concerned, the  appellant
\nis clearly out of court.  Learned counsel for the  appellant
\nhas  relied on Art. 295 (1) (b) of the\tConstitution.\tThat
\nArticle is in these terms :-\n<\/p>\n
“295. (1) As from the commencement of this
\n536<\/span>
\nConstitution :-\n<\/p>\n
(a)all\tproperty  and assets which immediately\tbefore\tsuch
\ncommencement  were vested in any Indian State  corresponding
\n\t      to  a State specified in Part B of  the  First
\n\t      Schedule\tshall  vest  in the  Union,  if\t the
\n\t      purposes\tfor which such property\t and  assets
\n\t      were    held    immediately,    before\tsuch
\n\t      commencement  will thereafter be\tpurposes  of
\n\t      the  Union  relating  to any  of\tthe  matters
\n\t      enumerated in the Union List, and\n<\/p>\n
(b)all rights, liabilities and obligations of the Government
\nof  any Indian State corresponding to a State  specified  in
\nPart  B\t of the First Schedule, whether arising out  of\t any
\ncontract or otherwise, shall be the rights, liabilities\t and
\nobligations of the Government of India, if the purposes\t for
\nwhich\tsuch   rights  were  acquired  or   liabilities\t  or
\nobligations.  were  incurred before such  commencement\twill
\nthereafter  be purposes of the Government of India  relating
\nto any of the matters enumerated in the Union List,
\nsubject to any agreement entered into in that behalf by\t the
\nGovernment of India with the Government of that State.
\n(2)Subject  as\taforesaid,  the\t Government  of\t each  State
\nspecified in Part B of the First Schedule shall, as from the
\ncommencement  of this Constitution, be the successor of\t the
\nGovernment of the corresponding Indian State as regards\t all
\nproperty   and\t assets\t  and\tall……………   rights,
\nliabilities  and  obligations, whether arising\tout  of\t any
\ncontract  or  otherwise,  other than those  referred  to  in
\nclause (1).”\n<\/p>\n
The  argument is that the Article provides a  constitutional
\nguarantee   in\tthe  matter  of\t rights,   liabilities\t and
\nobligations  referred to in cl. (b) and no law can  be\tmade
\naltering those rights, liabilities
\n 537<\/span>
\nand  obligations. in support of this argument our  attention
\nhas  been drawn to Art. 245 which says that subject  to\t the
\nprovisions of the Constitution Parliament may make laws\t for
\nthe  whole or any part of the territory of India  etc.\t The
\ncontention  is\tthat the power of Parliament  to  make\tlaws
\nbeing  subject to the provisions of the\t Constitution,\tArt.
\n295  which  is\tone of the provisions  of  the\tConstitution
\ncontrols the power of Parliament to make laws in respect  of
\nrights,\t liabilities, obligations etc. referred to in  Art.
\n295  (1) (b), and therefore Parliament cannot pass  any\t law
\naltering those rights, liabilities and obligations.
\nWe  do\tnot think that this is a correct  interpretation  of
\nArt.  295  of the Constitution.\t But before going  into\t the
\nquestion of interpretation of Art. 295 It may be pointed out
\nthat  if  the United State of Rajasthan did not\t affirm\t the
\nagreement,  then  the  appellant had  no  enforceable  right
\nagainst\t either the United State of Rajasthan or the Part  B
\nState of Rajasthan.  Under Art. 295 (1) (b) there must be  a
\nright  or  liability on an Indian State corresponding  to  a
\nState  specified in Part B of the First, schedule which\t can
\nbecome\tthe  right or liability of the Government  of  India
\netc.   If  the\tright  itself  did  not\t exist\tbefore\t the
\ncommencement  of the Constitution and could not be  enforced
\nagainst\t any  Government,  the question of  its\t vesting  in
\nanother Government under Art. 295(1) (b) can hardly arise.
\nThe  scheme  of Art. 295 appears to be this, It\t relates  to
\nsuccession  to\tproperty, assets,  rights,  liabilities\t and
\nobligations.  Clause (a) states from the commencement of the
\nConstitution  all  property  and  assets  which\t immediately
\nbefore\tsuch  commencement were vested in  an  Indian  State
\ncorresponding  to a State specified in Part B of  the  First
\nschedule shall vest in the Union, if the purposes for  which
\nsuch property and assets were held-be purposes
\n538<\/span>
\nof  the Union.\tClause (b) states that all rights,  liabili-
\nties and obligations of the Government of’ any Indian  State
\ncorresponding  to a State specified in Part B of  the  First
\nSchedule,  whether arising out of any contract or  otherwise
\nshall  be  the rights, liabilities and\tobligations  of\t the
\nGovernment  of India if the purposes for which\tsuch  rights
\nwere acquired or liabilities- and obligations were  incurred
\nbe purposes of the Government of India.\t There is nothing in
\nthe  Article to show that it fetters for all time  to  come,
\nthe power of the Union Legislature to make modifications  or
\nchanges in the rights, liabilities etc. which have vested in
\nthe Government of India.  The express provisions of Art. 295
\n(10)  deal  with only two matters, namely,  (1)\t vesting  of
\ncertain, property and assets in the Government of India, and
\n(2)   the  arising  of\tcertain\t rights,   liabilities\t and
\nobligations  on\t the Government of India.   Any\t legislation
\naltering the course of vesting or succession as laid down in
\nArt.  295  will\t no  doubt be bad  on  the  ground  that  it
\nconflicts with Article.\t But there is nothing in the Article
\nwhich prohibits Parliament from enacting a law altering\t the
\nterms and conditions of a contract or of a grant under which
\nthe  liability\tof  the Government  of\tIndia  arises.\t The
\nlegislative  competence of the Union Legislature or even  of
\nthe  State Legislature can only be circumscribed by  express
\nprohibition contained in the Constitution itself and  unless
\nand  until  there  is  any  provision  in  the\tConstitution
\nexpressly  prohibiting\tlegislation on\tthe  subject  either
\nabsolutely   or\t conditionally,\t there\tis  no\t fetter\t  or
\nlimitation  on\tthe  plenary powers  which  the\t legislature
\nenjoys to legislate on the topics enumerated in the relevant
\nLists  Maharaj\tUmeg Singh v. State of Bombay<\/a> (1).   In\t our
\nopinion,  there\t is  nothing in\t Art.  295  which  expressly
\nprohibits Parliament from enacting a law as to income-tax or
\nexcise\tduty in territories which became Part B States,\t and
\nwhich  were formerly Indian States, and such  a\t prohibition
\ncannot be read into Art. 295 by virtue of
\n(1)  A.I.R. (1955) S.C. 540,
\nsome contract that might have been made by the then Ruler of
\nan Indian State with any person.\n<\/p>\n
There  is  another  aspect of this  question.\tThe  rights,
\nliabilities and obligations referred to in Art. 295 (1)\t (b)
\nare, by the express language of the Article, subject to\t any
\nagreement  entered into in that behalf by the Government  of
\nIndia  and the Government of the State.\t Such  an  agreement
\nwas  entered  into  between  the  President  of\t India\t and
\nRajpramukh  of\tRajasthan  on  February\t 25,  1950.   It  is
\nnecessary to explain how this agreement came into existence.
\nA  committee  known as the Indian  States  Finances  Enquiry
\nCommittee was appointed by a resolution of the Government of
\nIndia  dated  October 22 1948, to examine and  report  upon,
\namong other things, the present structure of public  finance
\nin  Indian  States and the desirability and  feasibility  of
\nintegrating   Federal  Finance\tin  Indian   States.\tThis
\ncommittee  submitted  its report on October 22,\t 1949.\t The
\nagreement between the President of India and the  Rajpramukh
\nof Rajasthan said :\n<\/p>\n
“The  recommendations of the Indian States  Finance  Enquiry
\nCommittee, 1948-49 (hereafter referred ‘to as the Committee)
\ncontained  in Part I of its Report read with Chapters I,  II
\nand III of Part II of its Report in so far as they apply  to
\nthe State of Rajasthan (hereafter referred to as the  State)
\ntogether with the recommendations contained in Chapter\tVIII
\nof  Part  II  of the report, are  accepted  by\tthe  parties
\nhereto, subject to the following modifications.”
\nIt  is\tnot  necessary\tfor  our  purpose  to  set  out\t the
\nmodifications in detail.  It is enough to say that there  is
\nnothing\t in the modifications which in any way benefits\t the
\nappellant.  One of the modifications relates to\t State-owned
\nand  State-operated enterprises which are to be exempt\tfrom
\nincome-tax etc.
\n540<\/span>
\nThe  appellant is neither a State-owned nor a State  operate
\nenterprise.  Another modification states-
\n“State-sponsored Banks or similar State-ponsored enterprises
\n\t      in  the  State now enjoying any  explicit\t tax
\n\t      exemptions  shall\t be treated  as\t “Industrial
\n\t      Corporations” for purposes of the\t continuance
\n\t      of  the Income tax concessions now enjoyed  by
\n\t      them  in accordance with paragraph 11 (3)\t (b)
\n\t      of  the Annexure to Part 1 of the\t Committee’s
\n\t      Report.”\n<\/p>\n
Now  the appellant is neither a State-sponsored bank  nor  a
\nState-sponsored\t enterprise.   So far as  the  appellant  is
\nconcerned  the recommendations of the committee\t which\twere
\naccepted in the agreement inter alia said :
\n“Any special financial privileges and immunities  (affecting
\n“federal”  revenues)  conferred\t by  the  State\t upon  other
\nindividuals and corporations should ordinarily be  continued
\non the same terms by the Centre, subject to a maximum period
\nof ten (or fifteen) years, and subject also to limiting\t in
\nother  ways  any  such concessions  as\tmay  be\t extravagant
\nagainst the public interest.”\n<\/p>\n
The  recommendation quoted above clearly shows that  it\t was
\nopen  to  the Union to limit in any way it thought  fit\t any
\nconcessions  as\t appear\t to  the  Union\t Government  to\t  be
\nextravagant  and  against the public interest.\tIn  view  of
\nthis recommendation which was part of the agreement  entered
\ninto  between the President of India and the  Rajpramukh  of
\nRajasthan  on  February 25, 1950, the appellant\t can  hardly
\nplead  it has a constitutional guarantee to claim  exemption
\nfrom excise duty or income-tax.\n<\/p>\n
This finishes the second line of argument urged on behalf of
\nthe appellant.\tAs to the pleas based on Arts. 1.9 and 31 of
\nthe Constitution, it is enough to
\n  541<\/span>
\nsay  that on our findings the appellant had  no\t enforceable
\nright  either against the State Government of  Rajasthan  or
\nthe  Union Government on january 26, 1950.  It\tis  obvious,
\ntherefore,  that  the  appellant cannot invoke\tto  its\t aid
\neither\tArt. 19 or Art. 31 of the Constitution.\t As  to\t the
\nclaim  of refund which the appellant preferred\tagainst\t the
\nState  of Rajasthan, the appelant, s position is no  better.
\nIf  neither  the United State of Rajasthan nor\tthe  Part  B
\nState of Rajasthan affirmed the agreement of April 17, 1941,
\nthe  appellant cannot enforce any right\t against  respondent
\nNo. 2 on the basis of that agreement.\n<\/p>\n
In the trial court as also in the High Court the question of
\nfrustration  of\t the contract was canvassed and\t gone  into.
\nThe courts found that the contract was frustrated.  In\tview
\nof  the\t findings  at  which we have  arrived.\t It  is\t now
\nunnecessary to consider that question.\tTherefore we do\t not
\npropose to deal with it.\n<\/p>\n
For the reasons given above, we have come to the  conclusion
\nthat  the  appeals are without any merits.   We\t accordingly
\ndismiss them with costs, one hearing fee.\n<\/p>\n
Appeal dismissed.<\/p>\n","protected":false},"excerpt":{"rendered":"
Supreme Court of India Maharaja Shree Umaid Mills Ltd vs Union Of India on 27 November, 1962 Equivalent citations: 1963 AIR 953, 1963 SCR Supl. (2) 515 Author: S Das Bench: Das, S.K., Kapur, J.L., Sarkar, A.K., Hidayatullah, M., Dayal, Raghubar PETITIONER: MAHARAJA SHREE UMAID MILLS LTD. Vs. RESPONDENT: UNION OF INDIA DATE OF JUDGMENT: […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_lmt_disableupdate":"","_lmt_disable":"","_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[30],"tags":[],"class_list":["post-97793","post","type-post","status-publish","format-standard","hentry","category-supreme-court-of-india"],"yoast_head":"\nMaharaja Shree Umaid Mills Ltd vs Union Of India on 27 November, 1962 - Free Judgements of Supreme Court & High Court | Legal India<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.legalindia.com\/judgments\/maharaja-shree-umaid-mills-ltd-vs-union-of-india-on-27-november-1962\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Maharaja Shree Umaid Mills Ltd vs Union Of India on 27 November, 1962 - 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