# STATE OF GUJARAT • _ v. DR.R.B.CHANDRACHUD •

- **Citation:** [1969] 2 S.C.R. 755
- **Court:** Supreme Court of India
- **Decided:** 1968-11-19
- **Case number:** Civil Appeal No. 579 of 1965
- **Bench:** S. M. S!Kri, R. S. Bachawat, K. S. Hegde
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/state-of-gujarat-v-dr-r-b-chandrachud-4588
- **Pages:** 11

## Headnote

..
Baroda State Merger-Huzur order passed by Mahara;a .relating to
.,.
retirement terms of members of Executive Council prior to transferring
full executive authority to new Council-New Council purporting to revoke earlier order passed in exercise of Maharaja's prerogative powersIf valid-Whether provisions of Baroda Merger Agreement and subse-
•
quent continuance of all laws previously in force amounted to recognition
c
of clailns relating to retirement benefits.
On August 15, 1947 upon the passing of the Indian Independence
Act, 1947 when paramountcy of the British crown lapsed, the erstwhile
State of Baroda acceded to India.
By a proclamation on August 25,
1948 the Maharaja of Baroda announced inter alia that the entire 'executive authority of the State would immediately vest in his Executive Coun-
..
cil. On March 21, 1949 he executed the Baroda Merger Agreement
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whereby the full powers in relation to the governance of the State were
transferred to the Indian Government from May 1, 1949. These powers
were then delegated to the Provincial Government of,Bombay_
The respondent was an official member of the Maharaja's Executive
Council of the State of Baroda. in January, 1948 when it was considered
likely that in view of the imminent constitutional changes m the State
E
the members of the old Executive Council might be prematurely retired,
the Maharaja enhanced the respondents' salary, and by 'a Huzur order
dated February 8, 1948, he fixed the pension and other retirement 1!enefits of the resoondent and another member of the Executive Council. It
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was provided that in the event of their pre-mature retirement, they would
get as compensation an amount equivalent to what they would have received if they continued in service upto the date of retirement and a
full pension of Rs. 500.00 per month from the date of the pre-mature
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retirement. On May 18, 1948, the Maharaja directed compulsory retirement of the respondent with effect from June 1, 1948 and he therefore
drew Rs. 95,196.00 on account of his compensation. At the instance of
a new Executive Council the Mah·araja passed another Huzur order on
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July 22, 1948 modifying his previous orders and directing that the respondent and the other officials would draw pension only when they reached
the age of retirement and would in addition draw the salary to which they
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were eligible under the Account Rules.
On April 22, 1949, the new Executive Council purported to review
and set aside the Huzur orders with respect to p·ayment of compensation
to the retired officials and directed, inter alia, that a sum of Rs. 77,416.00
o~t of the compensation received by the respondent be recovered from
him under •ectton 148 of the Baroda
Land Revenue code.
He was
compelled to refu_lld Rs. 65,000.00 and a balance of Rs. 12,416.00 was
H
de!lland~d from him by the Collector of Baroda. The respondent filed a
-. ,,,,
smt agamst the State of Bombay asking inter alia for a declaration that
the Huzur order dated Febn;ary 8, 1948 as modified by the Huzur Order
dated July 22, 1948 was bmdtng on the defendants and that the order
of the Executive Council of April 22, 1949 was invalid. The
Trial
756
SUPREME COURT REPORTS
(1969] 2 S.C.R.
Court decreed the suit and the High Court, in. appeal, substantially upheld
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the respondent's case but reduced the amount of the decree.
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Apart from the validity of the Executive Council's order of April 22,
1949, the other questions arising for· detel"!llination in the appeal to this
Court were whether the Government of Baroda was liable to pay the
sum of Rs. 65,000 .to the respondent; and if so, whether the liability
devolved upon the appellant State of Gujarat.
HELO : Llismissing the. appeal :
B
(i) The Huzur order of February 8, 1948 was passed by the Maharaja
· fin the exercise of his prerogative and inherent powers. The Executive
Council had no authority to revoke that order and until the Maharaja
passed the entire executiv!' authority to the Council on Augus

## Text

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STATE OF GUJARAT
• _..,
v.
DR.R.B.CHANDRACHUD
•
November 19, 1968
B
[S. M. S!KRI, R. S. BACHAWAT AND K. S. HEGDE, JJ.]
..
Baroda State Merger-Huzur order passed by Mahara;a .relating to
.,.
retirement terms of members of Executive Council prior to transferring
full executive authority to new Council-New Council purporting to revoke earlier order passed in exercise of Maharaja's prerogative powersIf valid-Whether provisions of Baroda Merger Agreement and subse-
•
quent continuance of all laws previously in force amounted to recognition
c
of clailns relating to retirement benefits.
On August 15, 1947 upon the passing of the Indian Independence
Act, 1947 when paramountcy of the British crown lapsed, the erstwhile
State of Baroda acceded to India.
By a proclamation on August 25,
1948 the Maharaja of Baroda announced inter alia that the entire 'executive authority of the State would immediately vest in his Executive Coun-
..
cil. On March 21, 1949 he executed the Baroda Merger Agreement
f
l>
whereby the full powers in relation to the governance of the State were
transferred to the Indian Government from May 1, 1949. These powers
were then delegated to the Provincial Government of,Bombay_
The respondent was an official member of the Maharaja's Executive
Council of the State of Baroda. in January, 1948 when it was considered
likely that in view of the imminent constitutional changes m the State
E
the members of the old Executive Council might be prematurely retired,
the Maharaja enhanced the respondents' salary, and by 'a Huzur order
dated February 8, 1948, he fixed the pension and other retirement 1!enefits of the resoondent and another member of the Executive Council. It
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was provided that in the event of their pre-mature retirement, they would
get as compensation an amount equivalent to what they would have received if they continued in service upto the date of retirement and a
full pension of Rs. 500.00 per month from the date of the pre-mature
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retirement. On May 18, 1948, the Maharaja directed compulsory retirement of the respondent with effect from June 1, 1948 and he therefore
drew Rs. 95,196.00 on account of his compensation. At the instance of
a new Executive Council the Mah·araja passed another Huzur order on
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July 22, 1948 modifying his previous orders and directing that the respondent and the other officials would draw pension only when they reached
the age of retirement and would in addition draw the salary to which they
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were eligible under the Account Rules.
On April 22, 1949, the new Executive Council purported to review
and set aside the Huzur orders with respect to p·ayment of compensation
to the retired officials and directed, inter alia, that a sum of Rs. 77,416.00
o~t of the compensation received by the respondent be recovered from
him under •ectton 148 of the Baroda
Land Revenue code.
He was
compelled to refu_lld Rs. 65,000.00 and a balance of Rs. 12,416.00 was
H
de!lland~d from him by the Collector of Baroda. The respondent filed a
-. ,,,,
smt agamst the State of Bombay asking inter alia for a declaration that
the Huzur order dated Febn;ary 8, 1948 as modified by the Huzur Order
dated July 22, 1948 was bmdtng on the defendants and that the order
of the Executive Council of April 22, 1949 was invalid. The
Trial
756
SUPREME COURT REPORTS
(1969] 2 S.C.R.
Court decreed the suit and the High Court, in. appeal, substantially upheld
A
the respondent's case but reduced the amount of the decree.
,-. '
Apart from the validity of the Executive Council's order of April 22,
1949, the other questions arising for· detel"!llination in the appeal to this
Court were whether the Government of Baroda was liable to pay the
sum of Rs. 65,000 .to the respondent; and if so, whether the liability
devolved upon the appellant State of Gujarat.
HELO : Llismissing the. appeal :
B
(i) The Huzur order of February 8, 1948 was passed by the Maharaja
· fin the exercise of his prerogative and inherent powers. The Executive
Council had no authority to revoke that order and until the Maharaja
passed the entire executiv!' authority to the Council on August 25, 1948,
he was still the sovereign ruler. The order of the Executive Council
•
dated April 22, 1949 was therefore ultra vires and not binding upon the
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respondent. [7 61 GI
(ii) The direction in the order of April 22, 1949 for the recovery
of monies under s. 148 of the Baroda Land Revenue Code was illegal.
That section did not allow recovery of moneys payable under an order of
the Executive Council. The result of the illegal re~overy of Rs. 65,000
from the respondent was that to the extent of that ·amount, the liability
of the Baroda Government under the Huzur order dated February 8,
1948 remained outstanding. [762 Al
·
(iii) Clause ( 1) of Article VIII of the Baroda Merger Agreement
guaranteed payment of reasonable compensation to officials whose ~erviccs
were dispensed with by the new Government.
Clause (:\) guaranteed the
continuance of pension and leave salaries sanctioned by the Maharaja to
officers who had retired before the date of the merger. Article VIII thus
furnishes strong evidence of recognition by the Government of India of
the liability to pay retirement compensation under the Huzur order of
February 8, 1948.
Furthermore, the successor Governments continued
the. old laws of the Baroda State until they were repealed or altered. The
appellant resisted the respondent's claim on the basis only of. the order
of April 22, 1949 but as this was invalid, it must be held that the successor
·Governments recognised and took over liability under the Huzur order
of February 8, 1948,
whic)t
liability
had
since
devolved
on
the
appellant State of Gujarat.
Considering that the object of. Article VIII was. to guarantee payment
of retirement benefits to retired public servants of the merged State, the
word "pensions" could not be .given any narrow interpretati_on and would
include the lump sum payable to the respondent as compensation under
the Huzur order dated February 8, 1948 as modified by the Huzur order
dated July 22, 1948. [765 A-DI
Ml s. Dalniia Dadri Cement Co. v. The Commissioner of
JncomeTax. [1959] S.C.R. 729; Perna Chibar v. Union of India, [.19661 I S.C.R.
357; Jagannath Agarwala v. State of Orissa, [1962] I S.C.R. 205; Firm
Bansidhar Premsukhdeo v. Stale of Rajasthan, A.LR. !967 S.C. 40; State
of Gujarat v. Fiddali, [1964] 6 S.C.R. 461; Vajesinghji Joravarsingji v.
Secretary· of State for India, [1924] L.R. 51 I.A. 357, 361; R.N. Pratap
Singh Deo v. Stote of Orissa, [1964] 7 S.C.R. 112; Union of India v.
Gwalior Rayon Silk Manufacturing (Weaving) Co., [1964] 7 S.C.R. 892;
State of Madhya Pradesh v. Lal Bhargavendra Singh, [19'66] 2 S.C.R. 56
Maharaia Shri Umaid Mills Ltd. v. Unl'on of India, [1963] Supp. 2, S.C.R.
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GUJARAT v. R. B. CHANDRACHUD (Bachawat, J.)
757
515; State of Madhya Pradesh v. Col. Ram Pal, [1966] 2 S.C.R. 53; M/s.
Dalmia Dadri
Cement Co. Ltd. v.
The Commissioner of Income-tax
[1964] 7 S.C.R. 124; Nawab Bahadur of Murshidabad v. Karnani Industrial Bank Lid., L.R. [1931] 58 I.A. 215, 219-20; and Secretary of State
v. Khemchand Jeychand, I.LR. (1880) 4 Born. 432, 436; referred to.
CIVIL APPELLATE JURISDICTION:
Civil Appeal No. 579 of
1965.
Appeal from the judgment and decree dated April 20, 28,
1960 of the Bombay IJigh Court (Now Gujarat High Court) in
AppeaJ No. 172 of 1956 from Original Decree.
N. S. Bindra, M. S. K. Sastri and S. P. Nayar, for the appellant.
S. T. Desai, Y. S. Chitale and D. N. Misra. for the respondent.
The Judgment of the Court was delivered by
Bacbawat, J. In January 1948 in
view of the
imminent
constitutional changes in the Baroda Stace, it was considered likely
that the services of the Diwan Sri Sudhalkar, the appellant and
Sri Gaekwad, the three official members of the Executive Council
of the State would be prematurely terminated.
The respondent
was then ·drawing a salary of Rs. 2,000/- per month and was to
retire on February 14, 1952 on reaching the superannuation age
of 56 years. On January 28, 1948 His Highness the Maharaja
of Baroda enhanced the respondents salary to Rs. 2,500/- per
month.
By separate orders the sailaries of other official members
also were enhanced. By a Huzur order dated February 8, 1948
the Maharaja fixed the pension and other retirement benefits of
the respondent and Sri Gaekwad.
The order was in these terms;-
"His Highness the Maharaja Saheb has been pleased
to order that in the event of premature retirement of the
Government Members, Messrs. D. V. Gaekwad
and
Chandrachud, they will get forthwith as compensation
an amount equivalent to the total mnount they would
have received had they continued in service up to the
date of reirement and a full pension of Rs. 500 per
month from the date of the premature retirement.
2. Mr. D. V. Gaekwad's salary is raised to
Rs. 2,000/- from the date of his confirmation as Naib
Dewan."
On the same date the Maharaja by a separate order fixed the
pension and retirement benefits of Sri Sudhalkar.
On May 18,
1948, the Maharaja directed the compulsory retirement of the
respondent with effect from June 1, 1948.
Soon thereafter the
respondent drew from the State Treasury Rs. 95,196/4/-
on
account of compensation a,llowance. On June 1, 1948 he retired
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SUPREME COURT REPORTS
[1969] 2 S.C.R.
from service. ·On the same date Dr. Jivraj Mehta became the
Diwan and President of the Executive Council in place of Sri Sudhalkar. On the representations of Dr. Jivraj Mehta the Maharaja
p~ssed another H~ur ~rder on July 22, 1948 modifying his previous orders and drrectmg that the respondent _and the other officials woul.d draw pension only as and when they would reach the
age of retirement and that the respondent would in addition draw
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the salary to which he might be eligible under the Account Rules.
In October 1948 there was correspondence touching the Huzur
Orders between the Maharaja and Dr. Jivraj Mehta.
On April
22, 1949 the Executive Council of the State of Baroda headed by
Dr. Jivraj Mehta purported to review 'and set aside the Huzur
Orders with respect to payment of compensation to the retiring
officials and directed that ( 1) the respondent would get 4 months'
privilege leave salary and as from April l, 1949 the pension of
Rs. 5001- per month sanctioned by the Maharaja, (2) the amount
received by the respondent as compensation be forfeited to the
State and returned by him to the Treasury; . (3) Rs. 77,416/-
consequently due from him after taking into account his salary
and pension up to March 31, 1949 be recovered from him under
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s. 148 of the Baroda Land Revenue Code.
Pursuant to this
order the respondent's properties were attached on April 26, 1949.
The respondent was compelled to refund to the State Treasury
Rs. 55,000/- on April 27, 1949 and Rs. 10,000/ on April 29,
1949. On March 14, 1952 the Collector of Baroda sent ·a notice to
the respondent demanding payment of the balance of Rs. 12,416/-.
The respondent continued to draw pension at the rate of Rs. 500/-
per month from April 1, 1949. On April 17, 1952 he gave notice
of his intention to file the present suit under s. 80 of the Code of
Civil Procedure. On June 23, 1952 he instituted the suit against
the State of Bombay asking for a declaration that the Huzur order
dated February 8, 1948 as modified by the Hurur order dated July
22, 1948 was valid and binding on the defendant, a declaration
that the, order of the Executive Council dated April 22, 1949 was
invalid, an injunction restraining the defendant from recovering
Rs. 12,416/- and a decree for Rs. 65,000/- and interest thereon
tofalling Rs. 77,300/-, future interest and costs.
On August 31,
1955, the Trial Court decreed tlle suit.
On appeal, the High
Court held that tlle respondent was entitled to recover Rs. 65,000/-
only wtiliout interest and was liable to refund Rs. 17 ,250 /- drawn
on account of pension from April 1, 1949 up to February 14,
1952. Consequently, the High Court reduced the money decree
to Rs. 4 7, 7 50 /- give proportionate costs and confirmed the rest
of the decree. The present appeal has been filed by the State of
Gujarat after obtaining a certificate from the High Court.
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It is necessary at this stage to refer to the constitutional and
political changes culminating in the merger of Baroda State in the
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GUJARAT v. R. B. CHANDRACHUD (Bachawat, J.)
75,!>
Province of Bombay. The Maharaja of Baroda enjoyed internal
sovereignty in the State under the suzerainty of the British crown.
In 1940 the Maharaja enacted the Government of Baroda Act 1940
(Act No. VI of 1940). Section 3 provided that Baroda would
continue to be governed by the Maharaja and that all rights,
authority and jurisdiction appertaining to its government was exercisable by him except as provided in the Act or "as may be otherwise directed by His Highness."
Section 4 preserved all thy.
Maharaja's powers, legislative, executive and judicial, in relation
to the State and its government and his right and prerogative to
make laws, and issue proclamations, orders and ordinances by
virtue of his inherent authority.
Section 5 vested the executive
authority of the State in an Executive Council consisting of the
Dewan and other members chosen by the Maharaja and holding
office during his pleasure subject to the other provisions of the
Act and the directions given by the Maharaj a.
Section 18 ( d)
provided that no Bi1l affecting any order passed by the Maharaja
in exercise of his prerogative could be moved in the Dhara Sabha
without the previous sanction of the Maharaja.
Section 32(f)
provided that pen8ions and gratuities sanctioned by the Maharaja
. would be expenditure charged on the revenues oi the State.
On
August 15, 1947 the Indian Independence Act, 1947 was passed
and the paramountcy of the British crown lapsed. On the same
date the State of Baroda acceded to the Dominion of India. Under
the Instrument of Accession the Maharaja of Baroda ceded to the
Dominion legislature the power to legislate for the State of Baroda
with respect of defence, external affairs and communications. The
advent of independence in India gave momentum to the popular
movement for transfer of power from the Maharaja to the people
and for formation of a responsible government in the State.
On
January 9, 1948 the Maharaja issued a proclamation directing
the formation of a body elected on the basis of adult franchise to
frame a Constitution for the State subject to certain reservations
and announcing his intention to appoint popular representatives
to the Executive Council. By another proclamation dated August
25, 1948 the Maharaj a announced that (1) the Constitution framing asse_mb!y would have fu~l and unrestricted authority to frame
a Constltu!J~m for th~ State m respect of all matters and subjects;
( 2) the entJTe executive authority of the State would inunediately
vest in the Executive Council, the Government of Baroda Act
would _stan~ amended ·~cc~rdingly and th~ words "or as may be
otherwise dJTected by His Highness" occurnng in s. 3 and the whole
of s. 4 of the Act wo~d be deemed to be omitted; On September
16, 1948 the Mahara3a promulgated the Baroda State Executive
Rules.
Rule 6 provided that "the Executive Council shall have
the entire executive authority in regard to the administration of the
State in all matters without any reservation." On March 21 1949
the Maharaja executed the Baroda Merger Agreement whereby
760
SUPREME COURT REPORTS
[ 1969] 2 S.C.R.
he ceded to the Dominion Government full authority, jurisdiction
and powers for and in relation to the governance of the State and
~greed to transfer the administration of the State to the Dominion
Government on May 1, 1949. On May 1, 1949 the administra-
,tion of the State was made over to the Dominion Government. As
from that date, all sovereign powers of the Maharaja of Baroda
·ceased and the Dominion Government acquired full and exclusive
.extra provincial jurisdiction for and in relation to the governance
0of the State of Baroda. By a notification No. 101-P dated May
1, 1949 the Central Government in exercise of its powers under
1>. 3(2) of the Extra-Provincial Jurisdiction Act, 1947 delegated
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:to the Provincial Government of Bombay its aforesaid extra provincial jurisdiction including the powers conferred by s. 4 of that . C
Act to make orders for the exercise of the jurisdiction. By noti-
.fication No. 4530/46F of the same date, the Government of
.Bombay in exercise of the powers conferred by s. 4 oi the ExtraProvincial Jurisdiction Act, 1947 repealed the provisions of the
·Government of Baroda Act excepting ss. 1, 2 and 36 to 45 with
immediate effect. On the same date the Government of Bombay
,promulgated the Administration of the Baroda State Order.
.Paragraph 3 of the Order vested the executive authority of the ·
.State in a special commissioner, subject to the supervision and
.control of the Bombay Government.
Paragraph 4(i) (b) provided for the continuance of (a) of any law, or (b) of any notifi-
<cation, order, scheme, rule, form or bye-law issued, made or pres-
.cribed under any law as were in ;force immediately before May 1,
1949 in the Baroda State. On July 23, 1949 the Government of
Bombay promulgated the Bombay State (Application of Laws)
>Order 1949. Paragraph 3 of the Order provided for the extension
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and continuance of certain laws to the Baroda State. Paragraph
:5 repealed ss. 1, 2, and 36 to 45 of the Government of Baroda
Act and certain other enactments. Paragraph 5(iii) (a) provided
ihat the repeal would not affect any right, title, obligation or
liability already acquired, accrued or incurred, or any remedy or
vroceeding in respect thereof. On July 27, 1949 the GovernorGeneral in exercise of his powers under s. 290A of the Government of India Act, 1935 promulgated the States' Merger (Governors Provinces) Order 1949. Paragraph 3 of the Order provided
that Baroda would be merged in the province of Bombay and
administered in all respects as i·f it formed part of that Province.
Paragraph 4 provided for the continuance .of laws then !n !?~ce
in the merged State. Paragraph 7 ( 1) prov1decj. th.a~ all ~1~btl~t1es
In respect of such loans, guarantees and other fina.ncial obligations
-of the Dominion Government 'as arose out of the governance of a
merged State, would as from August I, 1949 be liabilities of t~e
absorbing Province, unless the loan, guarantee or other financial
.obligation was relatable to central purposes.
Paragraph 9 provided that any proceedings which if the order had not been passed
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GUJARAT v. R. B. CHANDRACHUD (Bachawat, !.)
761
might lawfully have been brought in the merged State against the
Dominion might in the case of any liability arising before August
l, 1949 be brought (a) against the Dominion if the proceedings
could have been brought against the Dominion had the liability
arisen after that date and (b) otherwise against the absorbing
Province.
The questions arising for determination in this appeal are as
follows:-
(1) Was the order of the Executive Council dated April 22,
1949 ultra vires its powers and invalid and not binding on the.
respondent; (2) Was the Government of Baroda liable to pay the
sum of Rs. 65,000/- to the respondent; and (3) if so, has the
liability devolved upon the State of Gujarat.
The Executive Council Rules made by the Maharaja of Baroda
on September 16, 1948 vested in the Executive Council the entire
executive authority in regard to the administration of the Baroda
State in a][ matters without any reservation. The Executive Council had very wide powers, but, in our opinion, they had no authority to override and rescind the Huzur orders passed by the Maharaja himself. The prerogative and inherent powers of the Maharaja was not delegated to the Executive Council. The Maharaja
was still the sovereign ruler. The members of the Executive
Council were responsible to him and held office during his pleasure.
No appeal lay from his order to the Executive CounciJ.
On the
contrary under Rule 46 of the Privy Council Rules promulgated
on December 18, 194 7 an appeal lay to the Maharaj a from an
order passed by the Executive Council. In view of s. 18(d) of the
Baroda Constitution Act 1940 even a legislative bill affecting an
order passed by the Maharaja in the exercise of his prerogative
rights could not be moved in the Ohara Sabha without his previous
sanction.
Under s. 32(f) pensions and gratuities sanctioned by
the Maharaja were charged on the revenues of the State.
The
Huzur order was passed by the Maharaja on February 8, 1948 in
the exercise of his prerogative and inherent powers. The order
was executed and the monies were paid under it to the respondent.
The Executive Council had no authority to revoke the Huzur order
and to forfeit the monies. We hold that the order of the Executive
Council dated April 22, 1949 was ultra vires its powers and was
iJJegal and not binding upon the respondent.
It is now conc;eded that the direction in the order dated April
22, 1949 for the recovery of monies under s. 148 of the Baroda
Land Revenue Code was illegal. That section did not allow
recovery of moneys payable under an order of the Executive.
SUPREME COURT REPORTS
[1969] 2 S.C.R.
Council.
The attachment levied on the respondent's properties
was unlawfuJ.
The recovery of Rs. 65,000/- from the respondent
under the invalid order of the Executive Council cannot be justified as an act of State.
The Courts below rightly found that the
respondent was compelled to pay Rs. 65,000/- under coercion.
The result of the illegal recovery was that to the extent of
Rs. 65,000/- the liability of the Baroda Government under the
Huzur Order dated February 8, 1948 remained outstanding.
The main question arising in the appeal is whether the liability
of the Baroda Government under the Huzur order dated February
8, 1948 _devolved upon the successor governments after the merger
of the Baroda State on May 1, 1949. The view which currently
prevails in this Court is that in cases where the Government of
India has acquired the territory of ·a sovereign Indian State either
by conquest, treaty, cession or otherwise the privileges and rights
obtained from the predecessor State cannot be enforced by action
against the Government of India, see Mis. Dalmia Dadri Cement
Co. v. The Commissioner of Income-tax(') (cession of Jind),
Perna Chibar v. Union of lndia( 2 ) (conquest of Daman), nor can
it be sued in the municipal courts for the debts •and contractual
liabilities of the predecessor, see Jagannath Agarwala v. State of
Orissa( 8 ) (Cession of Mayrbhunj), Firm Bansidhar Premsukhdeo
v. State of Rajasthan(') (Bharatpur), unless it has chosen, to recognise the right, privilege, debt or liability by legislation,
agreement, or otherwise.
The rule extends to the acts of the
predecessor State after its accession to the Dominion of India on
August 15, 1947 and before its complete merger in the Dominion.
In State of Gujarat v. Fiddali( 5 ) the Ruler of Sant State issued a
resolution or Tharao granting certain forest rights on March 12,
1948 after the accession of the State to the Dominion. On June
10, 1948 he transferred the administration of the State to the
Dominion under a merger agreement dated March 19, 1948. The
Court held that the Tharao was not binding upon the successor
government. It was said that the Rulers of the Indian States
parted with their sovereignty in successive stage.s, firstly on accession, and finally on merger. As a result of accession, the Dominion
of Indra acquired power to legisJate for the territories of the
acceding state in respect of defence, external affairs, and communications. Under s. 5 of the Indian Independence Act the Dominion was as from August 15, 1947 a union comprising the acceding
State. But the acceding State continued to retain its separate
existence and individual sovereignty until its complete merger in
the Dominion.
·
(1) [1959] S.C.R. 729.
(2) [1966] 1 S.C.R. 357.
(3) [1962] 1 S.C.R. 205,
(4) A.l.R. 1967 S.C. 40.
(5) [1964] 6 S.C.R. 461.
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GUJARAT v. R. B. CHANDRACHUD (Bachawat, J.)
763
The question then is whether. the successor governments recognized the rights and liabilities under the Huzur order dated February 8, 1948. The onus of proving the recognition is upon the
respondent, see Vajesinghji Joravarsingji v. Secretary of State for
India(').
The recognition "may be either express or may be
implied from circumstances and evidence appearing from the
mode of dealing with those rights of the new sovereign," see State
of Gujarat v. Fiddali( 2 ) •
On behalf of the respondent it was argued that the Huzur
Order dated February 8, 1948 was a law and as such was recognised and continued in force by the Government oi India. We are
unable to accept this contention. A graJ11t made by the Ruler of
an Indian State is not a law, see State of Gujarat v. Fidda/i( 2 ),
461 (grant of forest rights), R. N. Pratap Singh Dea v. State of
Orissa(') (grant of khorposh allowance), Union of India v.
Gwalior Rayon Silk Manufacturing (Weaving) Co.,(') (grant of
exemption from taxation), State of Madhya Pradesh v. Lal Bhargavendra Singh ( 5 ) (grant of maintenance allowance), nor is an
agreement executed by the Ruler a law, see Maharaja Shri Umaid
Mills Ltd. v. Union of India( 6 ). Accordingly, it was
held in
State of Madhya Pradesh v. Col. Ram Pal(') that an order granting retirement pension in relaxation of the State Pension and
Gratuity Rules was not a law. The Huzur order dated February
8, 1948 did not lay down a rule conduct for the official members
of the Executive Council generally. It fixed the retirement benefits of the respondent and of Gaekwad and enhanced Gaekwad's
salary. A separate order fixed the retirement benefits of Sudhalkar, the other official member. The order concerning the respondent was an executive act and had none of the characteristics of
law unlike other laws it was not published in the Adnya Patrika
or the official gazette of Baroda State.
We hold that the order
was not a law.
The next question is whether the Baroda merger agreement
dated March 21, 1949 recognised the rights and liabilities under
the Huz:ur Order dated February 8, 1948. Now the Articles of
the merger agreement may furnish valuable evidence of the affirmance of rights conferred by the predecessor State, see M / s. Dalmia Dadri Cement Co. Ltd. v.
The Commissioner of lncometax(8). In the State of Madhya Pradesh v.
Shyam Lal( 9 ) a
recognition of those rights was inferred from articles in merger
agreements providing for the continuance of the laws of the merging State and for the taking over its assets and the liabilities by the
new State. In the present case Art. VIII of the merger agreement
(1) (1924) L.R. 51 I.A. 357, 361.
(2) (.1964] 6 S.C.R. 461 at p. 510.
(3) [1964] 7 S.C.R. 112.
(4) (1964] 7 S.C.R. 892.
(5) [1966] 2 S.C.R. 56.
(6) [1963] Supp. 2 S.C.R. 515.
(7) [1966] 2 S.C.R. 53.
(8) [1959] S C.R. 729 at p. 748.
(9) [1964] 7 S.C.R. 124.
764
SUPREME COURT REPORTS
(1969] 2 S.C.R.
dated March 21, 1951 provided:-"'
( 1) The Government of Indra hereby guarantees
. either the continuance in service of the permanent
members of the Public Services of Baroda on conditions
which will be Jess advantageous than those on which
they were serving before the date on which the administration of Baroda is made over to the Government
of India or the payment of reasonable compensation.
( 2) The Government of India further guarantees
the continuance of pensions and leave salaries sanctioned
by His Highness the Maharaja to the members of the
public services of the State who have retired or proceeded on leave preparatory to retirement, before the
date on which the administration of Baroda is made over
to the Government of India.
Clause ( 2) of Art. VIII applies to the respondent. · He was a
member of the public services oi the Baroda State, and he retired
before the date of the merger. It guarantees the continuance of
the pension and leave salary sanctioned to him by the Maharaja.
Now what does the word "pension" in clause (2) of Art. VIII
mean? Ordinarily the word "pension" means a periodical allowance of money granted by the Government in consideration or
recognition of meritorious services.
The word "pension" in the
Pensions Act, 1871, s. 60(1)(g) of the Code of Civil Procedure,
1908 and s. 6(g) of the Transfer of Property Act, 1882 implies
periodical payments of money by Government to the pensioner,
see Nawab Bahadur of Murshidabad v. Karnani Industrial Bank
Ltd. (1) Pension, gratuity and provident fund are three distinct
types of retirement benefits. But the word "pension" (pensionem,
payment) in its widest etymological sense can be construed as including all payments of every kind and description to a retiring
government servant, see Secretary of State v. Khemchand Jeychand('). The term "pension" is frequently, particularly in recent
years, used in the broad sense of retirement allowance or adjusted
compensation for services rendered, see Corpus Juris Secundurri,
Vol. 67, page 331; Vol. 70, page 425. It has received the wider
connotation in the definition sections of many modem statutes.
To give a few illustrations, the word "pension" includes "any
payment of a lump sum in respect of a person's employment",
see Fatal Accidents Act, 1959 (7 & 8 Eliz, 2c. 65) s. 2(2), "a
superannuation allowance", see Midwives Act, 1936 (26 Geo.
5 & 1 Edw. Sc. 40) s. 2(6), a "gratuity" and a return of contributions to a pension fund with or without interest thereon or any
other addition thereto, see Transport Act, 194 7, (10 & 11 Geo.
6c. 49) s. 125(1), Gas Act, 1948 (11 & 12-Geo. 6c. 67) s.
74(1).
(1) L.R. (1931) 58 I.A. 215, 219-20.
(2) l.L.R. [1880] 4 Born. 432, 436,
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GUJARAT v. R. B. CHANDRACHUD (Bachawat, J.)
765
Now clause (I) of article VIiI of the merger agreement guarantees payment of reasonable compensation to officials whose
services are dispensed with by the new Government.
Clause 2
guarantees the continuance of pensions and leave salaries sanctioned by the Maharaja to officers who had retired before the date
of the merger. Consideri1i.g that the object of article VIII is to
guarantee payment of retirement benefits to tetired public servants
of the merged State, we are not inelined to give the word
"pensions" a narrow interpretation.
In our opinion, the word
"pensions" ·in clause 2 of article YIU includes the lump ·sum
payable to the respondent as compensation under the Huzur order
dated February 8, 1948 as modified by the Huzur order dated
July 22, 1948. In substance, the Huzur order directed that the
respondent would get his full salary as his pension from the date
of his premature retirement up to the completion of his superan~
nuation age and allowed him to draw immediately the entire
allowance for the period in one lump sum. The allowance so payable to the respondent, a retiring government servant, in recognition of his past services is "pension" within the meaning of cl. 2
of article VIII of the merger agreement.
Article VIII of the merger agreement thus furnishes strong
evidence of recognition by the Government of India of the liability
to pay retirement compensation under the Huzur order· dated
February 8, 1948. We have also noticed that the successor governments continued the old laws of the Baroda State until they
were repealed or altered. The successor governments resisted the
respondent's claim on the ground that the order of forfeiture passed by the Executive Council on April 22, 1949 was lawful. There
was no question of their disclaiming liability under the Huzur
order of February 8, 1948 in case it was found that the order of
the Executive·council ·dated April 22, 1949 was invalid. 'Iri the
circumstances, we hold that the successor governments recognized
and took over the liability under the Huzur order dated February
8, 1958. If so, it is not disputed that the liability has now devolved on the State of Gujarat. It follows that the Courts below.
rightly decreed the suit.
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This concl~s~on is sufficient t~ d~spose of the appeaJ ·1111d we
express no O~IIllon whether the !Iab1hty was also reeognized 'by
paragraph 4(~?_(b) of the Administration of Baroda State Order;
paragraph 5 ( 111) (a) of the Baroda State (Application of Laws)
Orde;, 1.949 .or,para,graph,7.(L) pf the.States' Merger (Governp~'.
Provmces),Orde~, 1949.
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_ In the result, the appeal is dismissed. There will be no order
as to costs in this Court.
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R.K.P.S.
USupCI/69-16
Appeal dismissed.