Maula Bux Rahim Bux and Sons vs State of Vindhya Pradesh

Jagat Narayan, J.C.

This is an application under O. 47. R. 1, C. P. C. for review of the appellate judgment of this Court in Civil Appeals Nos. 30 and 35 of 1955 decided on 23-9-55. It has been filed by Messrs. Maula Bux Rahim Bux & Sons who were respondents in Civil Appeal No. 30 of 1955 and were appellants in Civil Appeal No. 35 of 1955. The two appeals arose out of a suit for recovery of damages for breach of contract and for a permanent injunction which was filed by Messrs. Maula Bux Rahim Bux and Sons against the State of Vindhya Pradesh on 11-5-53. The suit was decreed in "part against the State of Vindhya Pradesh. On appeal the suit was dismissed in toto.

So far as damages for breach of contract were concerned it was found that they had not been proved. The plaintiffs were found entitled to the relief of permanent injunction on merits but the suit for permanent injunction was dismissed on account of a legal plea taken on behalf of the State for the first time in appeal that it was not a legal entity and no suit could be maintained against it. This plea was upheld.

On behalf of the applicant my attention was drawn to various provisions of the Constitution and the Government of Part O States Act, 1951 (No. 49 of 1951) and it was argued that the State of Vindhya Pradesh is a State forming an independent unit of India, which is competent to enter into contracts and to hold property and it is a legal entity capable of suing and being sued.

On behalf of the State it was contended that Vindhya Pradesh is not a State at all but is only an administrative unit like a District or a Commissioner''s Division which was neither competent to enter into contracts nor to hold property and was consequently not a legal entity. I have heard the Learned Counsel for the parties.

Vindhya Pradesh was formed by the integration of 35 Indian States. The Rulers of these States first acceded to India within the framework of the Constitution under the Government of India Act. 1935 as adapted by the Indian (Provisional Constitution) Order, 1947 and then entered into a Covenant in April 1948 as a result of which the United State of Vindhya Pradesh was formed.

On 26-12-49 these Rulers entered into an Agreement of Merger handing over their States to the Government of India. The administration was taken over under the provisions of the Extra Provincial Jurisdiction Act, 1947 (No. 47 of 1947). On 22-1-1950 it was constituted into a Chief Commissioner''s Province under the Government of India Act, 1935. On 26-1-50 when the present Constitution came into force the Vindhya Pradesh became a Part C State.

Article 1 of the Constitution runs as follows :

India, that is Bharat, shall be a Union of States.

The States and the territories thereof, shall be the States, and their territories specified in Parts A, B and C of the First Schedule.

The territory of India shall comprise

(a) the territories of the States;

(b) the territories specified in Part D of the First Schedule; and

(c) such other territories as may be acquired. It will be seen that India is a Union of States specified in Parts A, B and C of the First Schedule. The territory of each of these States is specified in the Schedule. The territory of a State is the place within which it exercises its authority. It is noticeable that territories specified in Part D of the First Schedule have not been referred to as States.

Under Art. 239 a State specified in Part C is administered by the President through a Lieut. Governor, or a Chief Commissioner. That however does not have the effect of reducing it to a mere administrative unit of the Central Government. These States are also component units of the Indian Union like Part A and Part B States.

A different form of government from that provided for Part A and Part B States has been laid down by the Constitution for these States taking into consideration the political backwardness of the people of the territories covered by them and other factors. Their powers are not the same as those of Part A and Part B States in many respects. It is however not necessary that all component units of a federation should have the same form of government.

In the federation of India envisaged by the Government of India Act, 1935 there were to be included the Governor''s Provinces, the acceding Indian States and the Chief Commissioner''s Provinces. Although the Governor''s Provinces had legislative assemblies containing elected representatives of the people some of the Indian States had no such institutions.

Even now all the Part B States are not politically as much advanced as Part A states and under Art. 371 of the Constitution Part B States are to be under the general control of and comply with such particular directions, if any, as may from time to time be given the President during a period of 10 years from the commencement of the Constitution or during any such longer or shorter period as Parliament may by law provide in respect of any State. This does not however make Part B States any less full-fledged, component units of India. Even Part A States are not completely autonomous.

Though there is a division of power between the Union and the States which is to be respected in normal times the Constitution vests the Union to override the division in the national interests in emergencies and other specified cases. For example in case of a dispute arising between two States the President has power under Art. 263 to establish a council to decide it.

The State of Vindhya Pradesh has its territory, its people and its government. It has a Legislature, a judiciary and an executive. I accordingly hold that it is a State forming a component unit of the Indian Union and is not merely an administrative unit.

As such it must necessarily have executive power. For no Government can be carried on without such power. The President does not administer a Part C State in exercise of the executive power of the Union which vests in him under Art. 53. He administers it under the authority conferred upon him by Art. 239. Under Art. 77 all executive action of the Government of India is to be taken in the name of the President.

Under S. 38 (2), Government of Part C States Act ( No. 49 of 1951) which will presently be referred to in greater detail all executive action of a Part C State shall be expressed to be taken in the name of the Lieut. Governor or Chief Commissioner. The executive power of the State necessarily extends to the grant, sale, disposition, or mortgage of any property held for the purposes of the State and to the purchase or acquisition of property for that purpose and to the mating of contracts.

It is not denied that the Government of Vindhya Pradesh exercises all these powers in its day to day administration. As has been shown above the executive power of the Union does not extend to the State of Vindhya Pradesh. The executive power in exercise of which the above acts are being performed is the executive power of the State of Vindhya Pradesh.

Article 240 shows that the intention of the Constitution makers was to raise the form of government in Part C States also to that of Part A States by gradual process of legislation. That process began in 1951 by the passing of Government of Part C States Act (No. 49 of 1951) providing for the establishment of legislative assemblies and cabinet governments in Part C States.

Section 37 provides for the appointment of Chief Ministers by the President and of other Ministers on the advice of the Chief Minister by the President. The Ministers hold office during the pleasure of the President but the council of ministers is collectively responsible to the legislative assembly of the State (S. 37).

The legislature of the State of Vindhya Pradesh is empowered to make with respect to any of the matters enumerated in the State List or in the Concurrent List (S. 21). Under item 36 - Acquisition or Requisition of Property - it has already enacted the Vindhya Pradesh Abolition of Jagirs and Land Reforms Act, 1952 (No. 11 of 1952) providing for the resumption of jagir lands.

Under S. 6 of the latter Act the right, title and interest of every Jagirdar is vested in the State Government. The Vindhya Pradesh Requisitioning and Acquisitioning of Immovable Property Act,.1953 (No. 4 of 1953) provides for the Requisitioning and acquisitioning of immovable property by the State Government. The State Legislature has also passed the Vindhya Pradesh Land Revenue and Tenancy Act, 1953 (No. 3 of 1953).

Under S. 3 it is declared that all lands including standing and flowing water, mines, quarries, minerals and forests, reserved or not, and all rights in the sub-soil of any land are the property of the State Government. State Government was formerly defined under the Vindhya Pradesh General Clauses Act (No. 6 of 1953) as Government of Vindhya Pradesh. This definition was amended by Act No. 8 of 1954: and it now means the Lieut. Governor of Vindhya Pradesh The Lieut. Governor can only hold this property for the State of Vindhya Pradesh and not for the Union.

Under S. 39 of Act 49 of 1951 a consolidated fund of the State of Vindhya Pradesh was created. In this Act State has been defined to mean a State specified in Part C of the First Schedule of the Constitution other than Bilaspur. All revenues received in the State by the Government of India and all revenues received in the State by the Lieut. Governor in relation to any, matter with respect to which the legislative assembly of the State has power to make laws and all grants made and all loans advanced to the State from the consolidated fund of India go into the consolidated fund of the State.

It was argued on behalf of the State that the consolidated fund of the State is the property of the Union of India. This argument is not tenable. The provisions of S. 39 show that the consolidated fund of the State is quite separate and distinct from the consolidated fund of India.

Under S. 28(3) of the Act the following expenditure shall be charged on the consolidated fund of the State.

28(3). The following expenditure shall be expenditure charged on the Consolidated Fund of each State -

(a) the emoluments and allowances of the Chief Commissioner and other expenditure relating to his office as determined by the President by general or special order;

(b) the salaries and allowances of the Speaker and the Deputy Speaker of the Legislative Assembly;

(c) expenditure in respect of the salaries and allowances of a Judicial Commissioner;

(d) any sums required to satisfy any Judgment decree or award of any Court or arbitral tribunal;

(e) any other expenditure declared by the Constitution or by law made by Parliament or by the Legislative Assembly of the State to be so charged.

Clause (d) of sub-s. (3) envisages that judgments decrees and awards shall be given against the State. Apart from the above expenditure no money can be appropriated out of the consolidated fund of the State except under an Appropriation. Act to be passed by the Legislative Assembly of the State. Under S. 39A of the Act a contingency, fund of the State has been established which is held by the Lieut. Governor.

In Part XII of the Constitution which deals with finance, property, contracts and suite "State" does not include a State specified in Part C of the First Schedule unless the context otherwise requires (Art. 264). Article 265 lays down that no tax shall be levied or collected except by authority of law. It applies equally to all the States.

Articles 266 and 267 deal with consolidated funds and contingency funds of India and of Part A and Part B States. When the Constitution was made Part C States had no Legislatures. Provision for these funds has been made under Act 49 of 1961 which was passed by Parliament under Art. 240. This Act has the effect of amending the Constitution. Sections 39 and 39A create consolidated funds and contingency funds in Part C States.

Under Art. 294 Government property situated in the territory of part C States vested in the Union although similar property in the territory of Governor''s Provinces held for the purposes of the Government of the Provinces vested in the corresponding Part A State. Under Art. 296 property accruing by escheat or lapse in a Part C State vests in the Union although similar property in Part A or Part B States vests in those States.

Articles 298-300 deal with power to acquire or dispose of property and to enter into contracts, the procedure for making those contracts and for bringing suits and proceedings by and against Governments. They speak of the Union and of the States. Under Art. 264 which has been referred to above "State" does not include a State specified in Part C unless the context otherwise requires. Either "State" should be taken to include States specified in Part C in these Articles or it must be held that these Articles are not applicable to Part C States and we must look for similar enabling powers elsewhere.

In the Vindhya Pradesh Rules of Business made under S. 38 of Act 49 of 1951 a provision has been made in Cl. 5 that all contracts made in connection with the administration of the State shall be expressed to be made by the President End shall be executed on behalf of the President by such person and in such manner as he may direct and authorise. A proviso has been added requiring the previous sanction of the Government of India in certain cases before making contracts or purchasing property.

Clause 4 provides that in the exercise of his function with respect to Government property situated within the State the Lieut. Governor shall act in consultation with the council of ministers.

Article 300 provides for bringing suits against the Government of India by the name of the Union of India. The Government of India can only be sued in respect of contracts made in the exercise of the executive power of the Union. It cannot be sued in respect of contracts made in the exercise of the executive power of a Part C State. In Satya Deo v. Padam Deo. 1954 SC 537 (AIR v. 41) (A) it was observed:

The argument is that the executive action of the Central Government is vested in the President, that the President is also the executive head of Part C States, and that, therefore, the contracts entered into with Part C States, are, in law, contracts entered into with the Central Government.

The fallacy of this reasoning is obvious. The President who is the executive head of the Part C States is not functioning as the executive head of the Central Government, but as the head of the State under powers specifically vested in him under Art. 239. The authority conferred under Art. 239 to administer Part C States has not the effect of converting those States into the Central Government.

Under Art. 239 the President occupies in regard to Part C States, a position analogous to that of a Governor in Part A States and of a Rajpramukh in Part B States. Though the Part C States are centrally administered under the provisions of Art. 239, they do not cease to be States and become merged with the Central Government.

Articles 240 and 241 provide for Parliament enacting laws for establishing legislative, executive and judicial authorities for those States, and Act No. 49 of 1951 was itself enacted under the power conferred under Art. 240. Section 38(2) of that Act provides that all executive action of the State shall be expressed to be taken in the name of the Chief Commissioner. It will be seen that while the executive action of the Central Government is to be taken under Art. 77 in the name of the President, that of Part C States is to be taken under S. 38(2), -in the name of the Chief Commissioner.

Thus, there is no basis for the contention that contracts with Part C States are to be construed as contracts with the Central Government.

The above judgment was reviewed but the judgment of review reported in Satya Deo v. Padam Deo, 1955 SC 5 ( (S) AIR V 42) (B) leaves the above observations untouched. The attention of their Lordships was invited to the definition of General Government in S. 3(8), General Clauses Act which runs:

Central Government shall in relation to anything done or to be done after the commencement of the Constitution means the President and shall include in relation to the administration of a Part C State the Lieut. Governor acting within the scope of the authority given to him under Art. 239 of the Constitution.

and also to S. 3(60) which runs:

State Government as respects anything done or to be done after the commencement of the Constitution shall mean in a Part A State the Governor in a Part B State the Rajpramukh, and in a Part C State the Central Government.

They observed:

We are unable to agree that S. 3(8) has the effect of putting an end to the status of Part C States as independent units, distinct from the Union Government under the Constitution. It merely recognises that those States are centrally administered through the President under Art. 239. and enacts that the expression "Central Government" should include the Chief Commissioner administering a Part C State under the authority given to him under Art. 239.

Section 3(8) does not affect the status of Part C States as distinct entities having their own Legislature and judiciary, as provided in Arts. 239 and 240.

Article 298 provides that the executive power of the Union & of each State shall extend, subject to any law made by the appropriate Legislature to grant, sale, disposition or mortgage of any property held for the purposes of the Union, or for such State as the case may be, and to the purchase or acquisition of property for those purposes respectively and to the making of contracts. This Article occurs in Part XII in which State does not include a State specified in Part C unless the context otherwise requires.

It is clear that under this Article the Union can only acquire property under law made by Parliament for that is the appropriate Legislature for it. Jagir lands in Vindhya Pradesh have been resumed under a law made by the Legislature of Vindhya Pradesh. It is not the case of the State that the resumption is invalid.

The logical conclusion is that power to acquire property has been validly conferred on the State of Vindhya Pradesh by Parliament under the Government of Part C States Act which authorises the State Legislature to make laws with respect to any of the matters enumerated in the State List or in the Concurrent List. It cannot therefore be said that Part XII deals exhaustively with all the powers of the component units of the Union with regard to finance, property, contracts and suits.

Article 286(1) provides that no law of a State shall impose or authorise the imposition of a tax on the sale or purchase of goods where such sale or purchase tabes place outside the State or in the course of the import of the goods into or export of the goods out of the territory of India. This Article also occurs in Part XII. The State of Vindhya Pradesh has been empowered to impose sales-tax. No such restriction has been placed upon it as is contained in Art. 286 under the Government of Part C States Act.

It stands to reason that it could not have been intended that Part C States should have wider powers of imposing taxes than Part A and Part B States. It must therefore be held that the context of Art. 286 requires that States shall include a State specified in Part C also.

In the same way although in Art. 308 State means a State specified in Part A or Part B unless the context otherwise requires the protection given to the civil servant under Art. 311 must have been intended also for civil servants in the services of Part C States and in that Article the word "State" should be deemed to include Part C States. The State of Vindhya Pradesh has its own services with separate cadres and different scales of pay. These services are quite distinct from the services of the Union.

It will thus be seen that the State of Vindhya Pradesh is empowered to enter into contracts and hold property. It has its own Legislature, its own judiciary, and its own services. In ''Bonsor v. Musicians'' Union'', (1955) 3 WLR 788 (C), the House of Lords affirmed the judgment of Farwell J. in - ''Taff Vale Rly. Co. v. Amalgamated Society of Rly. Servants", (1901) AC 426 (D), in which it was held:

Now, although a corporation and an individual or individuals may be the only entity known to the common law who can sue or be sued, it is, competent to the Legislature to give to an association of individuals which is neither a corporation nor a partnership nor an individual a capacity for owning property and acting by agents, and such capacity in the absence of express enactment to the contrary involves the necessary correlative of liability to the extent of such property for the acts and defaults of such agents.

It is beside the mark to say of such an association that it is unknown to the common law. The Legislature has legalized it, and it must be dealt with by the Courts according to the intention of the Legislature.

Article 300 is in terms inapplicable to suits by or against Part C States, We must therefore turn to S. 79, Civil P. C. which lays down what authority is to be named as plaintiff or defendant in a suit by or against the Government. Section 79 runs:

In a suit by or against the Government the authority to be named as plaintiff or defendant as the case may be shall be:

(a) In the case of a suit by or against the Central Government, the Union of India; and

(b) In the case of a suit by or against the State Government, the State.

On behalf of the State it was argued that the CPC being a Central Act should be construed with the help of the General Clauses Act in which State Government has been defined under S. 3(60) as respects anything done or to be done after the commencement of the Constitution in a Part C State the Central Government.

Under S. 3(8) Central Government includes in relation to the administration of a Part C State the Lieut. Governor acting within the scope of the authority given to him under Art. 239. Adapting the* definition of "State Government" in S. 79 cl. (b) would read:

In the case of a suit by or against a Central Government the State.

State is defined in S. 3(58) as a Part A State, a Part B State or a Part C State. This adaptation leads to something which is meaningless. Adapting the definition of "Central Government" in S. 79 cl. (a) would read:

In the case of a suit by or against the Lieut Governor acting within the scope of the authority given to him under Art. 239, the Union of India.

This shows that under S. 79 the authority to be named as plaintiff or defendant in a suit by or against the Government of a Part C State shall be the Union of India.

On behalf of the applicants it was argued that as the cause of action does not accrue against the Central Government cl. (a) is inapplicable and as the adaptation of cl. (b) leads to something which is meaningless it must be taken that there is something repugnant in the subject to this adaptation and that consequently in a suit by or against the Government of a Part C State the authority to be named as plaintiff or defendant is the Part C State. I am unable to accept this contention.

I have held above that the State of Vindhya Pradesh is a legal entity but that in a suit brought against it the authority to be named as defendant should be the Union of India. The plaintiffs however intended to sue the State of Vindhya Pradesh. All that they did was that instead of describing the defendant as Union of India they described it as the State of Vindhya Pradesh. This is a case of misdescription which is curable under S. 99, C. P. C.

In my previous judgment I held that it was. not a case of misdescription so curable because 1 was under the misapprehension that the State of Vindhya Pradesh was not a legal entity, that is, an entity capable of entering into contracts and of holding property against whom cause of action might arise and against whom decrees may be enforced.

The previous judgment of this Court was based on the assumption that the State of Vindhya Pradesh was not a legal entity, that is an entity capable of holding property and of entering into contracts. As has been shown above this assumption was erroneous. Under O. 47, R. 1 a Court has power to review its own judgment on the ground of some mistake or error apparent on the face of the record or for any other sufficient reason. The error may be an error of law. When does an error cease to be a mere error and become an error apparent on the face of record was considered in - ''Hari Vishnu v. Ahmad'' Ishaque'', 1955 SC 233 ( (S) AIR V 42 (E). It was observed that what is an error apparent on the lace of the record cannot be described precisely or exhaustively there being an element of indefinite''s inherent in its very nature and it must be left to be determined judicially on the facts of each case. These observations were made in connection with an application for a writ of certiorari. But in my opinion the observations are equally applicable to a case under O. 47, R. 1.

Their Lordships of the Supreme Court reviewed their decision in - ''Satyadeo v. Padamdeo (B)'', referred to above as an error had crept on account of the fact that their attention had not been invited to the provisions of the General Clauses Act. The present case is somewhat similar to that case and I am satisfied that there is sufficient reason for review as the ground for it is at any rate analogous to an error apparent on the face of the record.

On behalf of the applicants it was argued in the alternative that if the Court came to the finding that the State of Vindhya Pradesh was not a legal entity it could not have entertained the appeal preferred by the State and could not have set aside the decree passed by the trial Court. This argument has force. An appealable decree cannot be interfered with in the exercise of powers of revision even though it has been passed against an entity which is not a legal entity.

For reasons given above I grant the application for review and set aside my appellate judgment dated 23-9-55. In the circumstances of the case I direct that the parties shall bear their own costs of the application.

I held in my previous judgment that on merits the applicants were not entitled to a decree tor damages for breach of contract but were entitled to a decree for grant of a permanent injunction against the respondent. I accordingly dismiss Civil Appeal No. 35 of 1955 filed by the plaintiffs against the decree passed by the learned District Judge. I allow Civil Appeal No. 30 of 1955 filed by the defendant in part as indicated above.

The decree for damages is set aside and the suit is only decreed for grant of a permanent injunction as prayed. Parties shall pay & receive costs of the trial Court and the appellate Court in proportion to their failure and success.