# FIRM BANSIDHAR PREMSUKHDAS v. STATE OF RAJASTHAN

- **Citation:** [1966] Supp. 1 S.C.R. 81
- **Court:** Supreme Court of India
- **Decided:** 1966-03-29
- **Case number:** Civil Appeal No. 203 of 1964
- **Bench:** A. K. Sarkar, C. J. K. Subba Rao, V. Ramaswami
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/firm-bansidhar-premsukhdas-v-state-of-rajasthan-3889
- **Pages:** 11

## Headnote

Act of State-Contract with former Indian State-Enforceability
after merger against successor State.
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The fonner State of Bharatpur sold some plots for establishing
a Mandi, and the appellant was one of the purchasers. Under the
terms of the sale, a person trading in the Mandi wouldl get a reduc•
tion of 25% in the customs duty payable, if the commodities were
imported into or exported out of the State through the Mandi. The
Government of Bharatpur and after its merger the Government of
the United State of Matsya, and thereafter, the present Rajasthan
State (respondent herein) allowed the reduction to the appellant,
who was also a trader. In 1951, the respondent revoked the concession. The appellant filed a suit for the recovery of the excess amount
of customs duty paid on the basis that there was a valid contractual
liability to grant the concession. The suit was dismissed by the High
Court on appeal.
In appeal to this Court,
HELD: (i) The appellant's suit must fail because there was no
recognition of the contractual ri!>;ht to the succeeding State of
Rajasthan.
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The contractual liability of a former State is binding on a succeeding sovereign State on~ if it recognises that contractual liability. The enjoyment of the concession by the appellant after the formation of the Rajasthan State did not show any implied recognition
of the contractual liability by the respondent, because, the concession
is referable to s. 33 of the Miatsya Customs Ordinance of 1948 under
which the concession could be granted and recognised. [85Bi 880-DJ
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## Text

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FIRM BANSIDHAR PREMSUKHDAS
v.
STATE OF RAJASTHAN
March 29, 1966
81
[A. K. SARKAR, C. J. K. SUBBA RAO AND V. RAMASWAMI, JJ.]
Act of State-Contract with former Indian State-Enforceability
after merger against successor State.
·
The fonner State of Bharatpur sold some plots for establishing
a Mandi, and the appellant was one of the purchasers. Under the
terms of the sale, a person trading in the Mandi wouldl get a reduc•
tion of 25% in the customs duty payable, if the commodities were
imported into or exported out of the State through the Mandi. The
Government of Bharatpur and after its merger the Government of
the United State of Matsya, and thereafter, the present Rajasthan
State (respondent herein) allowed the reduction to the appellant,
who was also a trader. In 1951, the respondent revoked the concession. The appellant filed a suit for the recovery of the excess amount
of customs duty paid on the basis that there was a valid contractual
liability to grant the concession. The suit was dismissed by the High
Court on appeal.
In appeal to this Court,
HELD: (i) The appellant's suit must fail because there was no
recognition of the contractual ri!>;ht to the succeeding State of
Rajasthan.
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The contractual liability of a former State is binding on a succeeding sovereign State on~ if it recognises that contractual liability. The enjoyment of the concession by the appellant after the formation of the Rajasthan State did not show any implied recognition
of the contractual liability by the respondent, because, the concession
is referable to s. 33 of the Miatsya Customs Ordinance of 1948 under
which the concession could be granted and recognised. [85Bi 880-DJ
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Case law referred to.
(ii) Even upon the assumption that there was an implied recognition by the respondent of the contractual liability, the suit must
fail, for the contractual liability mu!it be taken to have been superseded by the enactment of the Rajasthan (Regulation of Customs
Duties) Ordinance No. 16 of 1949. [88 E-F].
Parliament and State Legislatures are, subject to any prohibition in the Constitution, competent to enact laws altering the terms
and conditions of a previous contract or of a grant under which the
liability of the Government of India or of the State Governments
arises. There is nothing in the provisions of the Ordinance which
preserves the alleged contractual rights of the appellant, and in the
absence of any express language in the Ordinance preserving such
rights. it must be held that the general law enacted in the Ordinance
supersedes the previous contract of the appellant with the State of
Bharatpur. [90 D-F]
Maharaj Umeg Singh v. The State of Bombay. [1955] 2 S.C.R.
164 and Maharaja Shree Umaid Mills Ltd. v. Union of India, [19631
Supp. 2 S.C.R. 515, f0llowed.
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SUPRBME COURT REPORTS
[1966] SUPP. S.C.B.
(.iii) The levy of Customs duty is in conformity with Art. 306 of
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the Constitution. (91 DJ
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QVIL APPELLATE JURISDICllON: Civil Appeal
No. 203 of
1964.
Appeal from the judgment and decree dated January 29, 1963 B
of the Rajasthan High Court in Civil Regular First Appeal No. 29
of 1956.
Sarjoo Prasad and T. Satyanarayana, for appellant.
R. Ganapapathy Iyer and B.R.G.K. Achar, for the respondent.
The Judgment of the Court was delivered by
Ramuwami, J. This appeal is brought by certificate against
the judgment and decree of the Rajasthan High Court dated January 29, 1963.
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The appellant firm Bansidhar Premsukhdas brought a suit
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which is the subject-matter of this appeal against the State of Rajasthan on March 31, 1953 for the recovery of Rs. 86,646 I 3 /- in the
Court of District Judge. Bharatpur. The case of the appellant was
that the former State of Bharatpur with a view to increase the trade
and commerce in the said State decided to establish a Mandi at
Bharatpur where at the material time a T.B. Hospital was located.
lt decided to sell plots for certain fixed amounts and, therefore, •
issued a notification on May 18, 1946 offering the plots by public
advertisement for sale on certain terms and conditions. The notifi-
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fication-Ex. 4-was published in Bharatpur Rajpatra and one of
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the concessions proposed to be granted was embodied in cl. 3 of
the notification which stated:
"If any commodity is imported from outside into the
Mandi and is sold for consumption within the State, or if
any commodity received in the Mandi from within the
State and is exported in both cases, a reduction of 25 %
in the customs duty prevailing at the time of the import
and export of such commodities will be allowed. This
concession shall not be available in case of vegetable
Ghee."
The notification contained other terms and conditions relating to
auction sale such as the prices for different kinds of plots available
and the maximum number of plots which a person could purchase.
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A committee for supervising the auction was also formed and the B
noiification laid down the procedure for the sale of plots and certain
other conditions such as deposit of one-fourth sale money at the
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FIRM BANSIDHAR v. RAJASTHAN (Ramaswami, J.)
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time of auction etc. The appe'lant purchased plots Nos. 8 and 9 for
Rs. 4,600 at a public auction and two sale deeds (sanad nilam) were
issued to the appellant on October 10, 1946. The Government of
Bharatpur and after its merger, the Government of United State of
Matsya and thereafter the present Rajasthan State carried out the
promise contained in cl. 3 of the Bharatpur notification and allowed
reduction of 25 per cent in the customs duty, but on January 16,
1951 the Rajasthan Government issued notification No. F.4(18)
SR/ 49 which reads as follows:
"Now therefore Government of Rajasthan is hereby
pleased to direct that with an immediate effect all free
Mandies and Zones including the area comprising the
former Kishangarh State and the Bhim District of the
former Rajasthan State shall be abolished and that in consequence all the Customs concession hitherto enjoyed by
or applicable to these Mandies or Zones shall cease to
have force and duties of customs shall be levied and
collected in such Mandies or Zones in accordance with the
revised tariff amended from time to time."
The appellant and other traders thereupon made representation to
the Rajasthan Government on January 29, 1951 and pending the
disposal of the representation the Customs authorities agreed to
keep the amount of 25 per cent by way of 'Amanat'. The State of
E.· Rajasthan ultimately decided on May 25, 1951 that the reduction
in the customs duty could not be conceded. On March 31, 1953 the
appellant filed the present suit in' the Court of the District
Judge of Bharatpur for the recovery of the excess amount
of customs duty paid to the Rajasthan Government.
The
main
defence
of
the State
Government was
that item
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No. 3 of the Bharatpur notification was a matter of concession!
and could not be claimed as of right and the Rajasthan State as
successor State was not bound by the contracts of the former State
and the applicability of the concessions had also become impracticable on the formation of Rajasthan. The District Judge of Bharatpur, by his judgment dated March 31, 1956, held that item No. 3
of Bharatpur notification was a term of sale between the parties and
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the Rajasthan State was bound by it and the succeeding States have
recognised the concessions granted to the appellant and therefore the
suit of the appellant should be decreed. The State of Rajasthan took
the matter in appeal to the Rajasthan High Court which allowed
the appeal and dismissed the suit holding that item No. 3 of the
Bharatpur notification was not a part of the contract of sale, and
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even if it was held to be a part of the contract, the successor State
of Rajasthan did not recognise it and was not, therefore, bound
by it:
RUPREME COURT REPORTS
[1966] SUPP. B.C.R.
The first question involved in this appeal is whether cl. 3 of the
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Bharatpur notification-Ex. 4, was a term of the contract of sale
between the appellant and the State of Bharatpur. It was argued on
behalf of the appellant that Ex. 4 which is the notification dated
May 18, 1946 regarding the sale of plots by the Bharatpur State was
an offer of purchase of plots on terms and conditions made in that B
notification. It was contended that the offer was made to the public
as a whole and after it was accepted by the appellant a valid contract came into existence. The opposite view point was presented on
behalf of the respondent.
It was submitted that the concession
granted in cl. 3 did not relate to, nor did it form a part of the
contract of sale of the plots of the Mandi. It was pointed out that
the concession of 25 per cent reduction in customs duty will not
merely enure to the benefit of the purchaser of the plots but also
cnure to the benefit of the person trading in the shop. The benefits
were generally offered for trade and business in the Mandi and
cannot be considered as an offer of benefit only to the prospective
purchasers of the plots. The commodities for which the concession
was granted might be in the hands of purchasers and builders of
plots, their tenants and licensees or other dealers. It was therefore
not possible to hold that the State Government offered the tax concessions as a reciprocal promise in connection with the contracts of
sale with the appellant and the latter had no justification for treating the benefits offered as consideration in return for the purchase
of the plots and the construction of shop buildings. It is also pointed
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out by learned Counsel on behalf of the respondent that there are
certain conditions in the Bharatpur notification-Ex. 4, which can-
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not, in the nature of things. be treated as terms of the sale. Reference
was made, in this connection, to els. 5, 6, 7, IO and 11. In our
opinion, there is much force in the argument advanced on behalf of
the respondent but it is not necessary to express any concluded
opinion on this aspect of the case. We shall assume in favour of the
appellant that cl. 3 of the Bharatpur notification, Ex. 4, was a term r
of the contract of sale of plots 8 and 9 of the Mandi. Even upon
that assumption the suit of the appellant must fail, for we shall
presently show that there was no recognition of the contractual right
by the succeeding State of Rajasthan. and in the absence of such
recognition the contract between the former State of Bharatpur and
the appellant cannot be legally enforced.
We shall proceed, therefore, to consider the next question, G
namely, whether the term of the contract was binding upon the
successor State of Rajasthan on the assumption that cl. 3 of the
Bharatpur notification. Ex. 4, was an integral term of the contract
between the appellant and the Government of Bharatpur State.
It is not correct to say as a matter of law that the successor H
State automatically inherits the rights and obligations of the merged
State. There is no question of suborgation-the successor State is not
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FIRM BANSIDHAR v. RAJASTHAN (Ramaswami, J.)
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subrogated ipso jure to the contracts with the merged State. The
true legal position is that the contract of the predecessor State
terminates with the change of sovereignty unless the contract is ratified by the succeeding sovereign State. It is now well-established in
law that the contractual liability of a former State is binding on a
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succeeding sovereign State only if it recognises that contractual lia-
. bility. The season is that the taking over of sovereign powers by a
State in respect of territory which was not till then a part 0£ it is
an "'act of State" and the municipal courts recognised by the new
sovereign. have the power and jurisdiction to investigate and ascertain only such rights as the new sovereign has chosen to recognise
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or acknowledge; and such recognition may be express or may be
implied from circumstances. In other words, accession of one State
to another is an "act of State"' and the subjects of the former State
may claim protection of only such rights as the new sovereign
recognises as enforceable by the subjects of the former State in his
municipal courts. In The Secretary of State in Council of India v.
Kamachee Boye Saheba(') the jurisdiction of the courts in India to
adjudicate upon the validity of the seizure by the East India Company of the territory of Rajah of Tanjore as an escheat, on the
ground that the dignity of the Raj was extinct for want of a male
heir, and that the property of the late Rajah lapsed to the British
Government, fell to be determined. The Judicial Committee held
that as the seizure was made by the British Government, acting as
a sovereign power, through its delegate, the East India, Company, it
was an act of State and the Municipal Court had no jurisliiction
to inquire into the propriety of the action. At page 529 of the Report
Lord Kingsdown observed:
"The transactions of independent States between
each other are governed by other laws than those which
Municipal Courts administer: Such Courts have neither
the means of deciding what is right, nor the power of
enforcing any decision which they may make."
In another case-Vajesingji Joravarsingji v. Secretary of State for
India in Council(')-the Judicial Committee observed as follows:
" ...... when a territory is acquired by a sovereign State
for the first time that is an act of State. 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 recognized ruler. In all cases the result is the same. Any
inhabitant pf the territory can make good in the municipal courts established by the new sovereign only such
rights as that sovereign has, through his officers, recosnised. Such rights as he had under the rule of precedes-
(') Moore's LA. 476.
(') 61 LA. 367.
86
[1966) SUPP. S.C.R.
sors avail him nothing. Nay more even if in a treaty of
cession it is stipulated that certain inhabitants should
enjoy certain rights, that does not give a title to those inhabitants to enforce these stipulations in the municipal
courts. The right to enforce remains only with the high
contracting parties."
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In Secretary of State v. Sardar Rustom Khan and Others(') a
question arose whether the rights of a grantee of certain proprietary
rights in lands from the then Khan of Kalal, ceased to be enforceable since the agreement between the Khan and the Agent to the
Governor-General in Baluchistan under which the Khan had
granted to the British Government a perpetual lease of a part of
the Kalal territory, at a quit rent, and had ceded in perpetuity with 0
full and exclusive revenue civil and criminal jurisdiction and all
other forms of administration.
In delivering the opinion of the
Judicial Committee, Lord Atkin observed as follows:
"In this case the Government of India had the right
to recognise or not recognise the existing titles to land.
In the case of the lands in suit they decided not to recognize them, and it follows that the plaintiffs have no recourse against the Government in the Municipal Courts."
The principle that cession of territory by one State to another is
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an act of State and the subjects of the former State may enforce
only those rights which the new sovereign recognises has been
iCte1'fed by this Court in MI s. Dalmia Dadri Cement Co. Ltd. v.
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The Commissioner of Income-tax(').
The State of Saurashtra v.
Jamadar Mohamat Abdulla and others('). Maharaja Shree Umaid
Mills Ltd. v. Union of India ('), and State oi Gujarat
v. Vora
Fiddali Badruddin Mithibarwa/a(').
On behalf of the appellant it was contended that there was
an implied recognition by the Rajasthan State of the contractual
liability since the exemptions were continued upto January 13, J
!951 and were revoked with effect from that date by the notification No. F.4(18JSR/49. We arc unable to accept this argument as
correct. Before the process of integration began, each Covenanting
State was a separate geographical unit for customs purposes and
had its own customs laws and barrier. After the formation of the
Matsya Union on March 18, 1948 there was a promulgation of G
the Matsya Customs Ordinance by the Raj Pramukh on September
21, 1948. The United State of Rajasthan was constituted on May
JS, 1949 when there was merger of Matsya Union in the United
State of Rajasthan. On August 9, 1949 the Raj Pramukh promulgated the Rajasthan (Regulation of Customs Duties) Ordinance
(') 68 I.A. 100.
('I [1002] 3 8.G.R. 970.
l'I [1964] 6 A.C.R. •61.
I') [1050) 8.C.I\. 729.
r'I 11963] Supp. 2 ~.C.R. 51,.
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FIRM BANSIDHAH v. HAJASTHAN (Ramaswami, J.)
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No. 16 of 1949. Section 3 of this Ordinance abolished duties on
the transport of goods within the territory of Rajasthan. Section 3
reads as follows :
"3. No duty leviable on internal transport-With
effect from such date as may be notified by the Government in the Rajasthan Gazette, no duties of Customs shall
be levied and collected in respect of any goods transported within Rajasthan, notwithstanding anything to the
contrary in any law, or rule, instrument of usage having
the force of law, in any part of Rajasthan; and any such
law, rule instrument or usage shall be deemed to be repealed to that extent:
Provided that the Government may, by notification
in the Rajasthan Gazette-(a) Impose a duty of customs
on the transport of goods from or to any part of Rajasthan
to or from such other part thereof at such rate or rates
and with effect from such date as may be specified in the
notification, or (b) direct that, in respect of the transport
of goods of such description and from or to such part of
Ra jasthan as may be specified in the notification, a sum
of money equal to the amount of the duty leviable on
the export on such goods shall be deposited with the
appropriate Customs Officer of the place from where the
goods are intended to be transported."
Section 4 is the charging section with regard to import and export
duties. Section 4(1) states:
"4. Duties on export and import: (])Until a revised
tariff is introduced under sub-section (2) Customs duties
on the export or on the import of goods shall be levied
and collected in accordance with the tariff for the time
being in force in the place from or into which goods
leviable with a duty of Customs have been exported or
imported, as the case may be."
Sub-section (2) of s. 4 provides:
"The Government may, by notification in the Rajasthan Gazette, issue a revised tariff specifying the goods
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or class of goods in respect of which, and the rate at
which, duties of Customs shall be levied and collected
with effect from such date as may be specified in the
notification on the export or on the import of such goods
or class of goods."
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Eventually on August 15, 1949 a uniform revised tariff was made
applicable to the whole of Rajasthan. Section 6 provided that the
existing law in force of the covenanting States shall regulate the
L/S5SCGI-S
88
SUPRE!dE COURT REPORTS
[1066] SUPP. s.c.R.
collection of such duties and other ancillary duties in relation
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thereto, unless altered. modified or repealed by a competent legislative authority of Rajasthan and thus saved existing law with
regard to the procedure and ancillary matters. It is manifest on
examination of the provisions of this Ordinance that there was a
repeal of all Customs laws C1f the Covenanting States in so far
as they provided for the levy and collection of duties in the partiB
cular territorial limits of the Covenanting States and the Ordinance
introduced a new law imposing duty on export and import into
Rajasthan State as a whole. Further, after the issue of a revised
tariff the old tariffs under the various laws of the Covenanting
States •tlso stood repealed. There is no express provision in the
Ordinance saving the previous contractual rights with regard to C
customs duty. In the absence of any such express provision it
must be held that all existing contracts were repudiated and cancelled. The enjoyment of the concession by the appellant after the
formation of the Rajasthan State is clearly referable to the law
under which customs concessions could be granted and recognised.
This is borne out by the notification dated January 16. 1951 which
appeared in the Rajasthan Raj Patra, which itself refers to ss. 10
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and 33 of the Matsya Customs Ordin:mce No. 14 of 1948 by
which customs concessions were revoked. We are, therefore, of
the opinion that the High Court has rightly taken the view,
upon an analysis of the evidence adduced in the case, that there
was no recognition of the contractual liability by the succeeding
State of Rajasthan.
We shall, however. assume in favour of the appellant that E
the State of Rajasthan recognised the contractual right of the
appellant with regard to the exemption of tax. Even upon that
assumption the suit of the appellant must fail, for the contractual
liability must be taken to have been superseded by the enactment
of the RajaSthan
(Regulation ·of Customs Duties) Ordinance
No. 16 of 1949 promulgated by the Raj Pramukh on August 9,
1949. Before we deal with this question it is desirable to indicate
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the constitutional developments which resulted in the inclusion
of the former Bharatpur State into the Part B State of Rajasthan.
which came into existence on January 26. 1950.
The former
Dharatpur State remained a separate entity till
March 18, 1948,
though it had acceded to the Dominion of India after August
15, 1947 with respect to three subjects, namely. communications. G
defence and external affairs. In 1948. however, the process of
merger in Rajasthan began and the first merger that took place
was of the former
States of Alwar, Bharatpur. Dholpur and
Karauli. which formed the Matsya Union as from March 18,
1948
by a Covenant entered
on
February
28.
1948.
After the formation of the Matsya Union the Raj Pramukh
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promulgated the Matsya Customs Ordinance 1948 on September 21, 1948. Section 2 of 1ha1 Ordinance repealecl the levy of
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FIRM BANSIDHAR v. RAJASTHAN (Ramaswami, J.)
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customs duty in force in all the Covenanting States and applied
the provisions of the new Ordinance to the whole of the United
State of Matsya. Section 10 of the Ordinance provided for the
charge of customs duty on goods or class of goods to be notified
in the State Gazette from time to time. Section 33 of the Ordinance similarly granted power to the State Government to exempt
any goods or class of goods imported or exported from the United
State of Matsya from payment of customs duty leviable thereon.
Then came another union of certain other Rulers in Rajasthan in
March 1948 by which these Rulers united under the Ruler of
Udaipur to form what later came to be known as the Former State
of Rajasthan. In March 1949, the United State of Rajasthan was
formed by Covenant entered into by fourteen Rulers of Rajasthan,
including those who had formed the Former State of Rajasthan,
and this State came into existence from April 7. 1949. There was
a merger of the Matsya Union in the State of Rajasthan on May
15, 1949 and thus the former Bharatpur State came to be included
in the United State of Rajasthan through the Matsya Union. As
we have already stated, the Raj Pramukh promulgated the Rajasthan (Regulation of Customs Duties) Ordinance No. 16 of 1949 on
August 9, 1949. It is well-established that Parliament or State
Legislatures are competent to enact a law altering the terms and
conditions of a previous contract or of a grant under which the
liability of the Government of India or of the State Governments
arises. The legislative competence of Parliament or of the State
Legislatures can only be circumscribed by express prohibition contained in the Constitution itself and unless and until there is any
provision in the Constitution expressly prohibiting legislation on
the subject either absolutely or conditionally, there is no fetter or
limitation on the plenary powers which the Legislature is endowed
with for legislating on the topics enumerated in the relevant Lists.
This view is borne out by the decision of the Judicial Committee
in Thakur Jagannath Baksh Singh v. The United Provinces(') in
which a similar complaint was made by the taluqdars of Oudh
against the United Provinces Tenancy Act (U.P. Act 17 of 1939).
Tt was held by the Judicial Committee that the Crown cannot deprive itself of its legislative authority by the mere fact that in the
exercise of its prerogative it makes a grant of land within the territory over which such legislative authority exists, and no court can
annul the enactment of a legislative body acting within the legitimate scope of its sovereign competence. If therefore, it be found
that the subject-matter of a Crown grant is within the competence
of a Provincial legislature nothing can prevent that legislature from
legislating about it unless the Constitution Act itself expressly prohibits legislation on the subject either absolutely or conditionally.
Accordingly, in the absence of any such express prohibition, the
(') [1946] F.O.R. III.]
J:,/85SOI~(a)
90
SUPREME COL'JtT REPORTS
[!966) SUPP. S.C.R.
United Provinces Tenancy Act. 1939. which in consolidating and
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amending the law relating to agricultural tenancies and other
matters connected therewith in Agra and Oudh. dealt with matters
within the exclusive legislative competence of the Provincial legislature under item 21 of List II of the 7th Sch. to the Government
of India Act. 1935. was intra vire.1· the Provincial legislature notwithstanding that admittedly some of its provisions cut down the
absolute rights claimed by the appellant taluqdar to be comprised
in the grant of his estate as evidenced hy the sanad granted by the
Crown to his predecessor. The same principle has been reiterated
by this Court in Maharaj Umeg Singh and others v. The State of
Bombay and others('). It was pointed out that in view of Art. 246
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of the Constitution. no curtailment of legislative competence can he
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spelt out of the terms of clause 5 of the Letters of Guarantee given
by the Dominion Government to the Rulers of "States'" subsequent
to the agreements of Merger. which guaranteed. inter alia, the
continuance of Jagirs in the merged 'States". This principle also
unde•lies the recent decision of this Court in Maharaja Shree Umaid
Mills Ltd. v. Union of India(') in which it was pointed out that
there is nothing in Art. 295 of the Constitution which prohibits D
Parliament from enacting a law altering the terms and conditions
of a contract or of a grant under which the liability of the Government of India arises. It was further held that there was nothing in
Art. 295 prohibiting Parliament from enacting a law as to excise
duty or income-tax in territories which became Part B States. and
which were fonnerly Indian States. and such a prohibition cannot
be read into Art. 295 by virtue of some contract that might have
been made by the then Ruler of an Indian State with any person.
As we have already indicated. there is nothing in the provisions
of the Rajasthan (Regulation of Customs Duties) Ordinance No. 16
of 1949 which preserves the alleged contractual ri)!hts of the appellant, and in the absence of any express language in the Ordinance
preserving such alleged contractual rights. it must he held that
the general law enacted in the Ordinance supersedes the previous
contract of the appellant with the State of Rharatpur.
Lastly. it was argued on behalf of the appellant that the
notification dated January 16, 1951 revoking the tax concessions was
in \'iolation of Art. 306 of the Constitution which provides as
follows:
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"Notwithstanding anything in the foregoing provisions of this Part or in any other provisions of this
Constitution. any State specified in Part R of the First
Schedule which before the commencement of this Constitution was levying any tax or duty on the import of goods
into the State from other States or on the export of goods
{t)
[19.;!IJ 2 S.C.It 161.
(_2J i 1!163] ~upp. 2 S.C.lt. 515.
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riRM BANS!DHAR V. RMASTilAN (Ramaswami, J.)
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from the State to other States may, if an agreement in
that behalf has been entered into between the Government of India and the Government of that State, continue
to levy and collect such tax or duty subject to the terms
of such agreement and for such period not exceeding
ten · years from the cornmencement of this Constitution
as may be specified in the agreement.
"
...... : .............................. .
The argument is based on the assumption that the appellant was
enjoying concessions under s. 40 of the Customs Circular No. 15
and continued to enjoy the concessions in the State of Matsya
under s. 34 of the Matsya Customs Ordinance No. 14 of 1948, and
subsequently in the State of Rajasthan under s. 6 of the Rajasthan
(Regulation of Customs Duties) Ordinance No. 16 of 1949. It is the
admitted position that the agreement entered between the Government of India and the United State of Rajasthan on February 25,
1950 incorporated certain recommendations of the Federal Finance
Enquiry Committee Report 1948-49. The agreement having been
executed and the condition under Art. 306 having been satisfied
in this case, the continuance of the customs duty is in conformity
with the provisions of this Article. In any case, the claim of the
appellant is not bas~d on any provision of Bharatpur law but upon
a contractual liability of Bharatpur State and to a case of th;s
description the provisions of Art. 306 cannot be attracted.
For the reasons expressed, we hold that the judgment of the
High Court is right and this appeal must be dismissed with costs.
Appeal dismissed .