# Mudholkar ]. z96z March 8. z96z Jagannath Agarwala v. State of Orissa

- **Citation:** [1962] 1 S.C.R. 205
- **Court:** Supreme Court of India
- **Decided:** 1962
- **Bench:** J. L. Kapur, M. Hidayatullah, J.C. Shah
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/mudholkar-z96z-march-8-z96z-jagannath-agarwala-v-state-of-orissa-1994
- **Pages:** 9

## Headnote

Act of State-Duration of-State allowing claims to be preferred and enquired into-Act of State, if at an end-Administration
of Mayurbhanj State Order, 1949, cl. 9.
The appellant had two money claims against the Maharaja
of. Mayurbhanj State. From January r, i949, the .State merged
with the Provmce of Onssa. Clause 9 of the Admrn1stration of
Mayurbhanj State Order, i949, promulgated by the Government
of Orissa, provided f?r the iss';'ing of .a notification for calling
upon all persons having pecuniary claims against the Maharaja
to notify the same to an officer authorised in that behalf. After
issue of the notification the appellant preferred his two claims
before the Claims Officer. The Claims Officer made a report substantially accepting the claims. This report was submitted to the
Member (third), Board of Revenue. Without giving the appellant any hearing the claims were rejected on the ground that
they were barred by limitation. The appellant applied for a
review and submitted the documents 6n which he relied but
again without giving the appellant a hearing the Board of Revenue declined to review the matter. The appellant contended
The State of
A ndhra Pradesh
v.
Kandirnalla Sub~:
baiah r§.. Another
Mudholkar ].
z96z
March 8.
z96z
Jagannath
Agarwala
v.
State of Orissa
206
SUPREME COURT REPORTS
[1962)
that there was a breach of the principles of natural justice in
the Board of Revenue deciding the matter without giving the
appellant a proper hearing. The respondent contended that
the rejection of the claims was an act of State, that the new
Sovereign State could nol be compelled by the courts to accept
the liability of the old Ruler, that though the new Sovereign
State might make such enquiry as it chose it was not compelled
to give a hearing to the appellant. The appellant replied that
the act of State was over when the claims were invited and
accepted by the Claims Officer.
Held, that the rejection of the claims was an act of State
and could not be challenged. Unless the new Sovereign, either
expressly or impliedly, admitted the claims, the municipal courts
had no jurisdiction in the matter. The act of State did not
come to an end when Government allowed the claims to be preferred or the Claims Officer made his report. The enquiry was
for the benefit of the State and not for conferring rights on the
claimants. Till there was an acceptance of the claims by the
Government or some officer who could be said to bind the
Government, the act of State was still open.
Dalmia Dadri Cement Co. Ltd. v. Commissioner of Income-tax,
[1959] S.C.R. 729, State of Saurashtra v. Memon Haji Ismail Haji,
[1960] l S.C.R. 537 and Vaje Singh Ji Joravar Singh v. S.cretary
of State for India, (1924) L.R. 51 I.A. 357, relied on.
CrVIL APPELLATE JURISDICTION: Civil Appeals Nos.
666 and 667 of 1957.
N. C. Chatterjee and G. C. Mathur, for the appellant.
A. V. Viswanatha Sastri, K. N. Rajagopala Sastri
and T. M. Sen, for the respondents.
1961. March 8.
The judgment of the Court was
delivered by
Hidayatullah J.
HIDAYATULLAH, J.-These "two appeals raise a
common question of law, and it is convenient to deal
with them together. They have been filed (with
certificate) against a judgment of the High Court of
Orissa, by Jagannath Agarwala, who sought to enforce
a claim he had against the former State of Mayurbhauj and the ex-Ruler of Mayurbhanj. They arise out
of two petitions under Art. 226 of the Constitution,
for writs of mandamus, etc., which the High Court of
Orissa dismissed by its order under appeal.
It appears that in the year 1943 the Maharaja of
•
·•
.....
-
1 S.C.R.
SUPREME COURT REPORTS
207
Mayurbhanj entered into an agreement or arranger96r
ment with Jagannath Agarwala for establishing a
Jagannath
business for the manufacture of industrial alcohol and
Agarwala
essential oils and for purchases of wheat and barley in
v.
the Punjab. Civil Appeal No. 666 of 1957 relates to State oJ Orissa
the establishment of the manufacturing business, aud
Civil Appea

## Text

y
II S.C.R. SUPREME COURT REPORTS
205
any case the case has to go back to the Special Judge
for re-framing the charges and there is time enough
for the Government to consider whether it should
accord sanction to the prosecution of the various
accused for the non-cognizable offences alleged to have
been committed by them in pursuance of conspiracy,
assuming of course, that sanction is necessary.
In the result we allow the appeal and set aside the
order of the High Court and direct the Special Judge
to frame fresh charges and proceed with the trial.
The matter has been pending for a long time and we
direct that the trial will proceed with all expedition.
Appeal allowed.
Retrial ordered.
JAGANNATH AGARWALA
v.
STATE OF ORISSA
(J. L. KAPUR, M. HIDAYATULLAH and J.C. SHAH, JJ.)
Act of State-Duration of-State allowing claims to be preferred and enquired into-Act of State, if at an end-Administration
of Mayurbhanj State Order, 1949, cl. 9.
The appellant had two money claims against the Maharaja
of. Mayurbhanj State. From January r, i949, the .State merged
with the Provmce of Onssa. Clause 9 of the Admrn1stration of
Mayurbhanj State Order, i949, promulgated by the Government
of Orissa, provided f?r the iss';'ing of .a notification for calling
upon all persons having pecuniary claims against the Maharaja
to notify the same to an officer authorised in that behalf. After
issue of the notification the appellant preferred his two claims
before the Claims Officer. The Claims Officer made a report substantially accepting the claims. This report was submitted to the
Member (third), Board of Revenue. Without giving the appellant any hearing the claims were rejected on the ground that
they were barred by limitation. The appellant applied for a
review and submitted the documents 6n which he relied but
again without giving the appellant a hearing the Board of Revenue declined to review the matter. The appellant contended
The State of
A ndhra Pradesh
v.
Kandirnalla Sub~:
baiah r§.. Another
Mudholkar ].
z96z
March 8.
z96z
Jagannath
Agarwala
v.
State of Orissa
206
SUPREME COURT REPORTS
[1962)
that there was a breach of the principles of natural justice in
the Board of Revenue deciding the matter without giving the
appellant a proper hearing. The respondent contended that
the rejection of the claims was an act of State, that the new
Sovereign State could nol be compelled by the courts to accept
the liability of the old Ruler, that though the new Sovereign
State might make such enquiry as it chose it was not compelled
to give a hearing to the appellant. The appellant replied that
the act of State was over when the claims were invited and
accepted by the Claims Officer.
Held, that the rejection of the claims was an act of State
and could not be challenged. Unless the new Sovereign, either
expressly or impliedly, admitted the claims, the municipal courts
had no jurisdiction in the matter. The act of State did not
come to an end when Government allowed the claims to be preferred or the Claims Officer made his report. The enquiry was
for the benefit of the State and not for conferring rights on the
claimants. Till there was an acceptance of the claims by the
Government or some officer who could be said to bind the
Government, the act of State was still open.
Dalmia Dadri Cement Co. Ltd. v. Commissioner of Income-tax,
[1959] S.C.R. 729, State of Saurashtra v. Memon Haji Ismail Haji,
[1960] l S.C.R. 537 and Vaje Singh Ji Joravar Singh v. S.cretary
of State for India, (1924) L.R. 51 I.A. 357, relied on.
CrVIL APPELLATE JURISDICTION: Civil Appeals Nos.
666 and 667 of 1957.
N. C. Chatterjee and G. C. Mathur, for the appellant.
A. V. Viswanatha Sastri, K. N. Rajagopala Sastri
and T. M. Sen, for the respondents.
1961. March 8.
The judgment of the Court was
delivered by
Hidayatullah J.
HIDAYATULLAH, J.-These "two appeals raise a
common question of law, and it is convenient to deal
with them together. They have been filed (with
certificate) against a judgment of the High Court of
Orissa, by Jagannath Agarwala, who sought to enforce
a claim he had against the former State of Mayurbhauj and the ex-Ruler of Mayurbhanj. They arise out
of two petitions under Art. 226 of the Constitution,
for writs of mandamus, etc., which the High Court of
Orissa dismissed by its order under appeal.
It appears that in the year 1943 the Maharaja of
•
·•
.....
-
1 S.C.R.
SUPREME COURT REPORTS
207
Mayurbhanj entered into an agreement or arranger96r
ment with Jagannath Agarwala for establishing a
Jagannath
business for the manufacture of industrial alcohol and
Agarwala
essential oils and for purchases of wheat and barley in
v.
the Punjab. Civil Appeal No. 666 of 1957 relates to State oJ Orissa
the establishment of the manufacturing business, aud
Civil Appeal No. 667 of 1957, to the purchases of Hidayatullah f.
wheat and barley. With reference to the establishment of the business, the appellant urges that it was
agreed that the capital required would be contributed
by the parties in equal shares, and that the profit and
loss would also be shared equally. As regards the
purchases, the appellant was to advance such money
as might be required, and the State of Mayurbhanj
was to provide necessary permits and facilities for
transport.
In furtherance of this agreement, the appellant
urges that he established a factory and started the
business, but the Maharaja, instead of contributing his
share of the capital, asked the appellant to do so on
his behalf, promising to pay him the amount. The
factory was constructed, and, it appears, it went into
production, but later closed down, suffering a total
loss of Rs. 2,80,875-9-3. In the first case, therefore, the
claim of the appellant against the Maharaja and the
State was Rs. 1,40,400 odd. In the second case, the
appellant advanced a sum of Rs. 50,000 and also
incurred a further expenditure of Rs. 3, 741-7-9. The
State of Mayurbhanj failed in its promise of procuring
the necessary permits and facilities for transport, and
the appellant was, therefore, required to sell the foodgrains in the Punjab, and thus incurred a loss of
Rs. 14,844-0-3. The appellant alleges that the Maharaju promised to pay the amount.
From January 1, 1949, the Mayurbhanj State merged
with the Province of Orissa, and on the same day, the
Government of Orissa promulgated the Administration of Mayurbhanj State Order, 1949 under s. 4 of the
Extra Provincial Jurisdiction Act, 1947 (47 of 1947).
That Order allowed claims against the State of
Mayurbhanj to be preferred to Government for its
Jagannath
Agarwala
v.
State of Orissa
Hidayatullah ].
208
SUPREME COURT REPORTS
[1962]
consideration.
Clause 9 of the Order, in so far as it is
material, is as follows:
"9. Claims against Ruler of the State. (a) The
Administrator shall as soon as possible publish a
notification in the Gazette in English and in vernacular calling upon all persons having pecuniary
claims, whether immediately enforceable or not,
against the State or the Ruler of the State in his
capacity as R'bler of that State, to notify the same
in writing to the officer authorised by the Administrator in this behalf (hereinafter called the said
officer) within three months from the date of the
notification.
(b) The notice shall also be published at snch
places and in such other manner as the Administrator may by special or general order direct ..
(c) Every such claimant shall, within the period
specified in sub-paragraph (a) notify to the said
officer in writing his claim with full particulars
thereof and any claim presented after the expiration of such period shall be summarily rejected.
(d) Every document including entries in books of
account in the possession of or under the control of
the claimant on which he bases his claim shall be
produced before the said officer along with the statement of the claim:
................................................................
(f) Nothing in the preceding sub-paragraphs shall
apply to any pecuniary claim of Government or any
local authority.
(g) The said officer shall after making such
enquiry as he may deem fit, decide which claims .
notified under sub-paragraph (c) are to be allowed
in whole or in part and which are to be disallowed,
and on his decision being confirmed by the Administrator, the said officer shall give written notice
of the same to the claimants. The decision of the
Administrator shall be final and shall not be liable
to be called into question in any Court whatsoever.
(h) No court shall have jurisdiction to investigate
·-
1 S.C.R. SUPREME COURT REPORTS
209
any pecuniary claim against the State or against the
Ruler of the State in his capacity as Ruler of that
State and such claim shall be determined only in
accordance with the provisions of this paragraph.
{i) The Administrator may delegate his powers
under this paragraph to any officer subordinate . to
him not below the rank of an Additional District
Magistrate.
(j) The provisions of this paragraph shall not
apply to any claim against the State based on a
cause of action which arose on or after the !st
January 1949 and such claim shall be disposed of in
accordance with the laws applied or continued in
force under paragraph 5."
The appellant preferred his two claims for the consideration of the Claims Officer, who was dealing with
such claims on behalf of the Administrator. The
Claims Officer made a report to the Administrator on
June 20, 1951 in respect of the first claim, and after
examining the merits, gave his conclusions as follows:
"Considering the evidence laid by the Claimant
before me in support of his claim, I find that he is
entitled to a sum of Rs. 1,37 ,785.13· 7!. It has been
urged by the Claimant that interest @ Rs. 4 per
cent. per annum should be allowed to him till the
date of repayment of his dues. He has been allowed interest from 1-4-43 to 28-2-49 and, I think, he
should get interest thereafter @ Rs. 4 per cent. per
annum till the date of repayment of his dues. As
regards the Claimant's demand for half share of
further advances made by the Claimant after filing
of this claim case, it cannot be entertained in this
case.
Submitted to the Revenue Commissioner, Orissa,
Cuttack through the District Magistrate, Mayurbhanj as required under Clause 9(g) of the Administration of Mayurbhanj State Order, 1949."
In the other case, he made a report on November 5,
1951 that the appellant had substantiated his claim
for Rs. 14,844-0-3, and was also liable to be paid interest a.mounting to Rs. 5,303-14-0.
This report was
27
·'
jagannath
Agarwala
v.
State oj Orissa
Hidayatullah J.
]agannath
Agarwala
v.
State oj Orissa
Hi~ayatullah J.
210
SUPREME COURT REPORTS
[1962J
submitted to the Member (Third), Board of Revenue,
Orissa, Cuttack, through the District Magistrate,
Mayurbhanj.
On June 28, 1952, the appellant received a Memorandum from the Deputy Secretary, Board of Revenue,
Orissa, Cuttack, which read as follows :
"Dear Sri Agarwalla,
With reference to your petitions dated 1-10-51
and 7-9-50, I am direbted to say that the claims
have been rejected as Government have been advised that they are barred by limitation.
Yours sincerely,
Sd. Govind Tripathy".
It appears that the appellant applied for review, and
' .
he was asked on November 8, 1952 to produce before
••
the Board any document or documents in his possession to show that these were continuing businesses
and also to point out the law that no claim of a continuing business could be barred by limitation. The
documents on which the appellant presumably relied
before the Board of Revenue have not been printed
•
in the record of this Court, but on April 2, 1953, the
·1
solicitors of the appellant were informed that the
-
Board of Revenue had declined to review the matter.
It appears also that, in the first case, even before the
merger the Revenue Minister, Mayurbhanj State, had
rejected the claim put forward by the appellant by
his order dated October 26, 1948, to the following
.
effect:
"The State need not recognise the claims put for-
,
ward by Mr. J. Agarwalla, as there was really no
formation of any Joint Stock Company nor any
written agreement entered into and finally settled.
Sd. B. Mohapatra
(Revenue Minister, Mayurbhanj)''.
It was, in these circumstances, that the two petitions under Art. 226 of the Constitution were filed.
The High Court dismissed them. From the order of the
High Court, it appears that two points alone were
~ <-
urged before it. The first was that the decision of the
.. •
1 S.C.R. SUPREME COURT REPORTS
211
Claims Officer should have gone to the Board of Revenue as a whole and not to a single Member; and
the second was that the appellant should have been
served with a notice by the Board before the recommendations of the Claims Officer were rejected, and,
as has now been argued before this Court, allowed a
hearing.
The first point was not argued before us, and it
seems that the appellant has accepted the decision of
the High Court that the Third Member was competent
to hear and dispose of these cases. The second point
alone has been argued, and needs to be considered.
The case was argued by Mr. N, C. Chatterjee on behalf
of the appellant as illustrating a patent breach of the
principles of natural justice. He contended that his
client was entitled to a proper hearing before the report
in his favour was rejected, and relied upon the following cases: Shivji Nathubai v. The Union of India('),
New Prakash Transport Co. Ltd. v. New Suwarna
Transport Co. Ltd. ('), Nagendra Nath Bora v. The
Commissioner of Hills Division and Appeals, Assam(')
and Gullapalli Nageswara Rao v. Andhra Pradesh State
Road Transport Corporation ('). In reply, Mr. A. V.
Viswanatha Sastri contended that the rejection of the
claim was an act of State, and that the new Sovereign
State could not be compelled by a process of 'the
municipal courts to accept a liability of the old Ruler,
and though the new Sovereign State might make such
enquiry as it chose, it was not compelled to give a
hearing to the claimant. In his rejoinder, Mr. Chatterjee contended that the act of State was over, when
the new Sovereign State invited claims under a law
passed for the purpose, and proceeded to consider the
evidence tendered in support of the claim. He also
contended that by the admission of the claim by the
Claims Officer the act of State was over, and that any
further consideration of the report had to comply
with the rules of natural justice, laid down by this
Court in the cases cited by him.
What is an act of State and when it ceases to apply
between a new Sovereign and the subjects of a State
(l) [1960] 2;s.c.R. 775·
\2) [1957] S.C.R. 98.
(3) [1958] S.C.R. 1240,
(4) [1959] Supp. l S.C.R. 319.
Jagannath
Agarwala
v.
State of Orissa
Hidayalullah J.
jagannath
.Agarwala
v.
Staf6 of Ori5sa
Hidayatullah ].
212
SUPREME COURT REPORTS
[196~!]
conquered, acquired or ceded to the new Sovereign,
has been the subject of several decisions of this Coure.
In M/s. J)almia Dadri Cement Co. Ltd. v. The Commi8sioner of Income-tax (') and The State of Saurashtra v.
Memon Haji Ismail Haji ('), it has been held that unless the new Sovereign, either expressly or impliedly
admits the claim, the municipal courts have no jurisdiction in the matter. The question to consider is
whether sueh a stage had been reached in the enquirv
which had been commenced. No doubt, the plea that
this was a part of an act of State was not specifically
raised before the High Court; but, as pointed out by
the Judicial Committee in Vaje Singh Ji Joravar
Singh v. Secretary of State for India('), no plea fo
really needed. It is clear from the Order, which was
made under the Extra Provincial Jurisdiction Act,
that claims were being asked to be entertained only
for investigation and not for acceptance. It is thۥ
acceptance of the claim which would have bound
the new Sovereign State and the act of State would
then have come to an end.
But short of an acceptance, either express or implied, the time for the
exercise of the sovereign right to reject a claim
was still open. In Vaje Singh Ji's case('), enquiries
were made by Captain Buckle and again in 1868, and
the two enquiries lasted 16 years before the rejection
of the claims, and the rejection was still upheld as an
act of State. Vaje Singh Ji's case(') has been reUed
upon by this Court in the two cases referred to, in the
argument of Mr. A. V. Viswanatha Sastri. It would,
therefore, appear that the act of State could not be
said to have come to an end, when the Government
allowed claims to be preferred, or when their own Officer made his report. The Claims Officer was not a part
of the municipal courts, and Government cannot be
said to have submitted itself to the jurisdiction of the
municipal courts, when it entrusted the enquiry to
him. Nor can the investigation of claims be said to
have conferred a civil right upon the claimants to
enforce their claims against the State. In our opinion,
the enquiry was for the benefit of the State and not
(1) [•959] S.C.R. 729.
(2) [1960] I S.C.R. 537.
(3) (192-1) L.R. 51 I.A. 357·
...
- ,..;
1 S.C.R.
SUPREME COURT REPORTS
'213
for conferring rights upon likely Claimants. It was
always open to the Government to admit any claim,
even though reported adversely by the Claims Officer,
though such a contingency might have been very
remote. Equally, therefore, the Government had the
paramount right to reject a claim, which its Claims
Officer considered good but on which the Government
held a different opinion. In short, till there was an
acceptance by the Government or some officer of the
Government, who could be said to bind the Government, the act of State was still open, and, in our
opinion, it was so exercised in this case.
Mr. Chatterjee contended that at least within the
four corners of the Order, the appellant had a right to
be heard, and that he did not have a proper hearing.
If the Member, Board of Revenue, entertained some
doubt about the claim being within time, he might
have heard the party. That this was an enquiry
mainly to ascertain whether a claim should or should
not be recognised is obvious enough. It was in no
sense a trial of any issue between the appellant and
the Government. To judge such an action with the
same rigour with which a judicial enquiry or trial is
judged is to convert the enquiry into a civil suit. The
appellant was fully heard by the Claims Officer, and
the only question was whether the claim was within
time. Even there, the Member, Board of Revenue,
asked the appellant to submit all documents and arguments in support of his contention that the claim was
'within limitation, and to that extent, the appellant
had his say. Whether the Member, Board of Revenue should have gone further and given a viva voce
hearing was a matter entirely for that Officer to
choose, and there was nothing under the law to compel him. Though we think that such an opportunity
might have been afforded to the appellant, we cannot
say that this was a matter which entitled him to a
writ.
In this view of the matter, the appeals fail, and are
dismissed. But, in the circumstances of the case, there
shall be no order as to costs.
Apper;,ls dismissed.
jagannath
Agarwal a
v.
State of Orissa
Hidayatullah J.