# CHOUDHARY JAWAHARLAL & ORS v. STATE OF MADHYA PRADESH

- **Citation:** [1970] 3 S.C.R. 208
- **Court:** Supreme Court of India
- **Decided:** 1969-10-30
- **Case number:** Civil Appeal No. 91 of 1966
- **Bench:** S. M. Sjicri, G. K. Mitter, P. Jaganmohan Reddy
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/choudhary-jawaharlal-ors-v-state-of-madhya-pradesh-4903
- **Pages:** 5

## Headnote

Princely State-Construction of public buildings-Merger with Indian
State-Liability of successor State to honour claim for payment-Act of
State; what is.
The appellants constructed certain public buildings in a princely state
and the Maharaja admitted the claim of the appellants and executed a
promissory note for the amount claimed. The princely State was merged
with State of Madhya Pradesh and the State Government (respondent)
took over the possession of the public buildings.
On the question of the liability of the respondent to pay the amount of
the promissory note,
HELD : ( 1) The fact that the appellants were asked by the respondent
to supply details of their claim did not amount to an acceptance of the
liability. It was open to the respondent to examine and satisfy itself
whether it should honour the liability or not and it could not be said that
the State had waived its defence of Act of State.
(2) An Act of State is an exercise of sovereign power over a territory
which was not earlier subject to its sway. When such an event takes
place and territory is merged, although the soverign might allow the inhabitants to retain their old laws and customs or undertake to honour the
liabilities, it could not be itself bound by them until it purported to act
within the laws by bringing to an end the defence of Act of State. The
rule applies even in case of a public prope'rty of the erstwhile State which
the successor State takes over and retains as part of its public property.
[212 AJ
]J.aja Rajender Chand v. Sukhi & Ors. [1956] 2 S.C.R. 889, State of
Saurashtra v. Memon Haji lsmali, A.l.R. 1959 S.C.R. 1383 and Vaje Singh
ji Ioravar Singh & Ors. v. Secretary of State for India,
51
I.A. 357,
referred to.

## Text

208
CHOUDHARY JAWAHARLAL & ORS.
v.
STATE OF MADHYA PRADESH
October 30, 1969
[S. M. SJICRI, G. K. MITTER AND P. JAGANMOHAN REDDY, JJ.]
Princely State-Construction of public buildings-Merger with Indian
State-Liability of successor State to honour claim for payment-Act of
State; what is.
The appellants constructed certain public buildings in a princely state
and the Maharaja admitted the claim of the appellants and executed a
promissory note for the amount claimed. The princely State was merged
with State of Madhya Pradesh and the State Government (respondent)
took over the possession of the public buildings.
On the question of the liability of the respondent to pay the amount of
the promissory note,
HELD : ( 1) The fact that the appellants were asked by the respondent
to supply details of their claim did not amount to an acceptance of the
liability. It was open to the respondent to examine and satisfy itself
whether it should honour the liability or not and it could not be said that
the State had waived its defence of Act of State.
(2) An Act of State is an exercise of sovereign power over a territory
which was not earlier subject to its sway. When such an event takes
place and territory is merged, although the soverign might allow the inhabitants to retain their old laws and customs or undertake to honour the
liabilities, it could not be itself bound by them until it purported to act
within the laws by bringing to an end the defence of Act of State. The
rule applies even in case of a public prope'rty of the erstwhile State which
the successor State takes over and retains as part of its public property.
[212 AJ
]J.aja Rajender Chand v. Sukhi & Ors. [1956] 2 S.C.R. 889, State of
Saurashtra v. Memon Haji lsmali, A.l.R. 1959 S.C.R. 1383 and Vaje Singh
ji Ioravar Singh & Ors. v. Secretary of State for India,
51
I.A. 357,
referred to.
CIVIL APPELLATE JURISDICTION:
Civil Appeal No. 91 of
1966.
Appeal from the judgment anjl decree dated January 11, 1962
of the Madhya Pradesh High Court in First Appeal No. 115 of
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G
M. S. Gupta, for the appellants.
I. N. Shroff, for respondent No. 1.
The Judgment of the Court was delivered by
P. Jaganmohlul Reddy, J.-This appeal is by certificate
granted by the High Court of Madhya Pradesh under Article
13 3 ( i) (a) of the Constitution of India against its judgme-nt and
decree by which it reversed the judgment and decree of the Addi.
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JAWAHARLAL v. M. P. STATE (Reddy, J.)
209
District Judge, Ambikapur.
The High Court held that the claim
of the appellant on the proinisory note executed by the Maharaja
of Surguja-an erstwhile Ruler whose state was merged in Madhya
Pradesh, could not be enforced against the 1st Respondent the
State of Madhya Pradesh because after the cessiQil of the erstwhile
State, the new State had not expressly or impliedly undertaken to
ffillet that liability.
In other words, the plea of 'an act of Slate'
raised by the' 1st respondent was accepted.
The circumstances in which the suit was filed by the appellants
and the array of parties may now be stated.
Appellants 1, 2, 3
and deceased Hira Lal were brothers and members
of a Joint
Hindu family.
Appellant 4 is the wife of Hira Lal, appellants 5
to 7 are his sons and appellant 8 is the grand-son. All these appellants along with appellants 1 to 3 constitute a Joint Hindu family
which was carrying on business of construction of buildings under
the name and style of Hira Lal & Bros, at Ambikapur in the erstwhile State of Surguja.
The allegations in the suit filed by the
appellant against the respondent State was that they had constructed buildings of the District Court and the Secretariat at Ambikapur
in 1936.
The work was completed but in so far as payment was
conce!iried, there was a difference of opinion about the measurements etc. but ultimately it was decided to pay to the appellants
Rs. 80,000 on account of the said construction and accordingly
the Maharaja of Surguja-2nd respondent executed a promisory
note in favour of the appellants on 27-9-1947 for Rs. 80,000 with
~nterest @ Rs. 3 per annum.
Thereafter the Madhya Pradesh
Government took over the administration of the State of Surguja
on 1-1-48 after the merger of the Chattisgarh State and consequently the Court building as well as Secretariat building were
taken possession of by the Government.
When the appellants
claimed the mo,11ey from the State of Madhya Pradesh, it neither
accepted the claim nor paid them.
The appellants after giving
a notice u/ s 80 of the Code of Civil Procedure filed a suit.
On the pleadings, the Trial Court had framed several issues
but it is unnecessary to notice them in any great detail except to
say that the claim of Rs. 80,000 was held to be valid, that this
amount was payable on account of the construction of the buildings known as Court and Secretariat buildings, that the pronote
was not without consideration, that the first defendant was the
successor in interest of Sμrguja State and is liable to pay the claim
with interest and that the amount was not due to the plaintiffs on
account of the personal. obligatio,n and liability of the 2nd respondent.
The Court also found against the first respondent on the
issue relating to jurisdiction and negatived the defence that it is
not liable because of an act of State. In so far as the defe,ndant
the Maharaja of Surguja was concerned, it held that the suit was
. 210
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not maintaillable against· him without .the consent of the. Central
Govt. I as required under section 86 of the Civil Procedure Code
and that the liability was not ·a persop.al obligation of the Maharaja ··
· but an obligation incurred on account of his State. In the· result
as we said ·earlier· the Court awarded a decree for Rs .. 87,200
with full cost against the first defendant and discharged the second
defendant,_ In appeal the High Court while ;noticing that it is the
admitted case ~of the parties· that the District Court and the Secretariat building were public property and were in the possession of
the first defendant as such and. that that the liability in respect
·thereof was incurred by the Maharaja was not merely his.personal
liability but was a liability incurred on behalf of the State of Surguja, however, reversed the judgment of the Trial C~mrt by holding "the the liability of the State of Surguja under the pronote was
at best a contractual liability and this· . liability could only be
enforced against the State of Madhya Pradesh if after the cession
of the erstwhile State of Surguja, the new State had expressly or
impliedly, undertaken to meet that liability" which it had not done.
When this appeal came up on an earlier occasion, a Civil Miscellaneous Petition 429 of 1969 .. was filed by the appellant; that
inasmuch as the petitioners. had been advised to approach the State
Govt. again for making proper representation and to canvass their
claim before the. appropriate authority on the_basis of. the concurrent findings of 1:4e Courts below and or any other appropriate
orders. permission may be accorded to them to pursue this course~
The Respondents advocate did not · oppose this petition and
accordingly the-matter was adjourned.
But it would. appear that
no concrete results could be achieved.·
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In this appeal what we have to. consider is whether th~ plea
of an act of State is sustainable having regard to the concurrent
findings of the Court namely that the Court and Secretariat buildings were constructed by the appellants, that the erstwhile Maharaja
-the second respondent had admitted the claim· and executed a
promisory note, that the liability was incurred in respect of public
· buildings for which the State of Surguja was liable.
The fact
that appel!anis were a.sked to supply details of their claim and the
first respondent was prepared . to ·.consider it has been· urged as
being tantamount to. the acceptance of the liability~ In our view
no such inference can be drawn: It is open to the State to examine
and to satisfy itself whether it is going . to honour the liability or
not; but that )';not to say that it had waived its defence of an act
of State if such a defence was ope,ri to it. What constitutes an act
of State has been considered and. the· principles enunciated . in
numerous cases both cf the Privy Council and of this Court have
been stated.
Many of these, decisions were examined and ·discussed by the High Court in its judgment apd it is unnecessary for
(TJ [1956] 2 S.C.R. 889.
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JAWAHARLAL V. M. P, STATE (Reddy, J.)
211
us to re-examine them in any great detail.
These decisions lay
down clearly that when a territory is acquired by a sovereign state
for the first time that is an act of State. As pointed out in Raia
RaiemJer Cha,.t v. Sukhi & other(') that it matters not how the
acquisition has been brought about.
It may be by conquest, it
may be by cession following on treaty, it may be by
occupation of territory hitherto unoccupied by a recognised ruler.
In all cases the result.is the same.
Any inhabitant of the territory
can make good in the Municiple Courts established by the new
sovereign only such rights as that sovereign has, through his officers,
recognised. The principle upon which the liability of an erstwhile
ruler is contested by the plea of an act of State "is an exercise of
sovereign power against an alien ahd neither intended nor purporting to be legally founded,
A defence of this kind does not seek
to justify the action with reference to the law but questions the
very jurisdiction of the Courts to pronounce upon the legality or
justice of the Action", vide State of Saurashtra v. Memon Haji
lsmail(2)
In va;e Singh Ji Joravar Singh and others V. Secretary of State for India in Council(') it was observed :
"After a sovereign State has acquired territory,
either by conquest, or by cession under treaty, or by
the occupation of territory theretofore unoccupied by a
recognized ruler, or otherwise, an inhabitant of the territory can enforce in the Municipal Courcs only such
proprietary rights as the sovereign has conferred or
recognized.
Even if a treaty of cession stipulates that
certain inhabitants shall enjoy certaih rights that.gives
them no right which they can so enforce. The meaning
of a general statement in a proclamation that existing
rights will be recognized is that the Government will
recognize such rights as upon investigation it finds
existed.
The Government does not thereby renounce
its right to recognize only such titles as it considers should
be recognized, nor confer upon the Municipal Courts
any power to adjudicate in the matter".
"It is the acceptance of the claiin 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 tlie
Sovereign right to reject a claim was still open".
(I} (1956] 2 S.C.R. 889.
(2) A.l.R. 1959 s.c. 1383.
(3) 51 I.A. ;57
212
SUPREME COURT REPORTS
[1970] 3 s.c.R.
It appears to us that an act of State is an exercise of sovereign
power over a territory which was not earlier subject to its sway.
When such an event takes place, and the territory is merged,
although sovereign might allow the inhabitants to retain their old
laws and customs or undertake to honour the liabilities etc., it
could not be itse!i bound by them until it purported to act within
the Jaws by bringing to an end the defence of 'act of State'.
The
learned advocate for· the appellant was unable to refer us to any
authority which will justify any variation of this rule, in the case
of liability incurred in respect of a public property of the erstwhile
State which the successor State has taken over and retains as part
of its public property.
The judgment of the High Court is in
accord with the well recognized principles of law declared from
time to time by this Court. In our view the defence of 'Act of
State' however unreasonable and unjust it may appear to be can be
successfully pleaded and sustained by 1st respondent to non suit the
appellants.
The appeal is dismissed
accordingly but without
costs.
R.K.P.S .
Appeal dismissed.
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