# STATE OF PUNJAB v. OKARA GRAIN BUYERS SYNDICATE

- **Citation:** [1964] 5 S.C.R. 387
- **Court:** Supreme Court of India
- **Decided:** 1964
- **Bench:** P.B. Gajendragadkar, K. Sobba Rao, K.N. Wanchoo, N. Rajagopala Ayyangarand J.R. Mudholkar
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/state-of-punjab-v-okara-grain-buyers-syndicate-2984
- **Pages:** 40

## Headnote

Statute, interpretation of-State, if bound by statute-"Person",
if includes State-Displaced persons' (Debts Adjustment) Act,
1951, scope of.
The thirteen respondents who were displaced creditors from
West Pakistan filed at various places before the Tribunals created
under the Displaced Persons' (Debts Adjustment) Act, 1951, petitions
(1) [1963) Supp. I S.C.R. 730.
1963
November Jj
388
SUPREME COURT REPORTS
[1964]
under s. 13 of the Act claiming certain amounts from the State
of Punjab. A preliminary objection was raised by the appellant
State of Punjab that these petitions were not maintainable against the State. The
v
objections were rejected by the Tribunals which held that the
1963
·
.
claims were maintainable. The State went in revision to the High
Okara Gram
Court but those revisions were also rejected. The State came to
Buyers Syndicate this Court by Special Leave.
Ltd. and others
The contentions raised before this Court were that what was
claimed from the Government was not a "debt" within the meaning
of the Act of 1951 and that the State of the Punjab was not a
"person" against whom an application under s. 13 of the Act
could be made. It was also contended that the State was not
bound by the statute.
Held: What was claimed from the State was a debt and the
applications under s. 13 of the Act against the State of the Punjab
were maintainable.
The test for determining whether tbe Government is bound
by a statute is whether it is expressly named in the provision which
it is contended binds it, or whether it is manifest from the terms
of the statute that it was the intention of the legislature that it
shall be bound and the intention to bind would be clearly made out
if the beneficient purpose of the statute would be wholly frustrated
unless the Government were bound.
Section 32 of tjte Act provides that the debts owing by the
State to a displaced debtor ought to be ascertained for determining
the paying capacity of the debtor and relief afforded to the displaced
debtor on the basis that such debts dne to him are realisable assets
within ihe scope of the Act. It follows that the debt due by the
Government or by the State is within the Act by necessary implication because the same is necessary for working out the relief
to which a displaced debtor who files an application under s. 5
or s. 11(2) is entitled. Section 32 contemplates a balancing of
credits and debits with a view to adjust them in a manner consonant with equity and justice of the case as felt by the legislature.
The entire scheme will go awry and the balance and harmony
which are intended to be brought in would be nullified and disharmony brought into the working of the Act if the contention of the
appellant that the State is not bound by the Act is accepted.
The rule of interpretation of statutes that the State is not
bound by a statute unless it is so provided in express terms or
by necessary implication is good law in India.
As it cannot be said of the State that it either voluntarily
resides or carries on business or personally works for gain, the
State may not be within the contemplation of the expression
"person" against whom claims could be made under s. 13 on .that
basis. However, it is not correct to say that the State is not. a
constitutional or even juristic entity for the reason it does not
partake the characteristics of or satisfy in whole the definition
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5S.C.R.
SUPREME COURT REPORTS
389
of a corporation. The State is an organised political institution
1963
which has several of the attributes of a corporation. Under
Art. 300 of the Constitution, the Government of the Union and State of Punjab
the Government of a State are enabled to sue and be sued
v
in the name of Union of India and the Government of the State
·
.
as the case may be. It is not improper to speak of the Union
Okara Gra.m
and the State as constitutional entities which have attributes de- Buyers Syndicate
fined by the Constitution. So in order to carry out t

## Text

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..
SS.C.R .
SUPREME COURT REPORTS
387
dustrial Society v. Workmen and others( 1> the question
1963
as to whether a transfer has been effected so as to
-
attract s. 25FF must ultimately depend upon the Managementof
evaluation of all the relevant factors and it cannot R.S. Madhoram
be answered by treating any one of them as of over·
& Sons
riding or conclusive significance.
Having regard to
v.
the facts which are relevant in the present case, we Its Workmen
are satisfied that the appellant cannot claim to be G . -;;- dk
a successor-in-interest of the firm so as to attract
a1en ';ga ar
the provisions of s. 25FF of the Act. The transfer
·
which has been affected by the firm in favour of the
appellant does not, in our opinion, amount to the
transfer of the ownership or management of an under·
taking and so, the Tribunal wa~ right in holding that
s. 25FF and the proviso to it did not apply to the
present case.
The result is, the appeal fails and is dismissed
with costs.
Appeal dismissed.
STATE OF PUNJAB
v.
OKARA GRAIN BUYERS SYNDICATE
AND ORS.
(AND CONNECTED APPEALS)
LTD.
(P.B. GAJENDRAGADKAR, K. SOBBA RAO, K.N.
WANCHOO, N. RAJAGOPALA AYYANGARAND
J.R. MUDHOLKAR JJ.)
Statute, interpretation of-State, if bound by statute-"Person",
if includes State-Displaced persons' (Debts Adjustment) Act,
1951, scope of.
The thirteen respondents who were displaced creditors from
West Pakistan filed at various places before the Tribunals created
under the Displaced Persons' (Debts Adjustment) Act, 1951, petitions
(1) [1963) Supp. I S.C.R. 730.
1963
November Jj
388
SUPREME COURT REPORTS
[1964]
under s. 13 of the Act claiming certain amounts from the State
of Punjab. A preliminary objection was raised by the appellant
State of Punjab that these petitions were not maintainable against the State. The
v
objections were rejected by the Tribunals which held that the
1963
·
.
claims were maintainable. The State went in revision to the High
Okara Gram
Court but those revisions were also rejected. The State came to
Buyers Syndicate this Court by Special Leave.
Ltd. and others
The contentions raised before this Court were that what was
claimed from the Government was not a "debt" within the meaning
of the Act of 1951 and that the State of the Punjab was not a
"person" against whom an application under s. 13 of the Act
could be made. It was also contended that the State was not
bound by the statute.
Held: What was claimed from the State was a debt and the
applications under s. 13 of the Act against the State of the Punjab
were maintainable.
The test for determining whether tbe Government is bound
by a statute is whether it is expressly named in the provision which
it is contended binds it, or whether it is manifest from the terms
of the statute that it was the intention of the legislature that it
shall be bound and the intention to bind would be clearly made out
if the beneficient purpose of the statute would be wholly frustrated
unless the Government were bound.
Section 32 of tjte Act provides that the debts owing by the
State to a displaced debtor ought to be ascertained for determining
the paying capacity of the debtor and relief afforded to the displaced
debtor on the basis that such debts dne to him are realisable assets
within ihe scope of the Act. It follows that the debt due by the
Government or by the State is within the Act by necessary implication because the same is necessary for working out the relief
to which a displaced debtor who files an application under s. 5
or s. 11(2) is entitled. Section 32 contemplates a balancing of
credits and debits with a view to adjust them in a manner consonant with equity and justice of the case as felt by the legislature.
The entire scheme will go awry and the balance and harmony
which are intended to be brought in would be nullified and disharmony brought into the working of the Act if the contention of the
appellant that the State is not bound by the Act is accepted.
The rule of interpretation of statutes that the State is not
bound by a statute unless it is so provided in express terms or
by necessary implication is good law in India.
As it cannot be said of the State that it either voluntarily
resides or carries on business or personally works for gain, the
State may not be within the contemplation of the expression
"person" against whom claims could be made under s. 13 on .that
basis. However, it is not correct to say that the State is not. a
constitutional or even juristic entity for the reason it does not
partake the characteristics of or satisfy in whole the definition
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(
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-
5S.C.R.
SUPREME COURT REPORTS
389
of a corporation. The State is an organised political institution
1963
which has several of the attributes of a corporation. Under
Art. 300 of the Constitution, the Government of the Union and State of Punjab
the Government of a State are enabled to sue and be sued
v
in the name of Union of India and the Government of the State
·
.
as the case may be. It is not improper to speak of the Union
Okara Gra.m
and the State as constitutional entities which have attributes de- Buyers Syndicate
fined by the Constitution. So in order to carry out the beneficent Ltd. and others
purpose of the statute it must be held to be a person under s. 13.
A comparison of the Displaced Persons (Institution of Suits)
Act, 1948 with that of the Displaced Persons (Debts Adjustment)
Act, 1951 shows that the later Act has definitely a more extended
scope and is designed to secure substantive advantages to displaced
persons which were wholly foreign to the Act of 1948 which had
a very limited scope.
Roberts v. Ahern, I C.L.R. 406, Director of Rationing and
Distribution v. The Corporation of Calcutta, [1961] I S.C.R. 158,
M/s. Nagi Brothers v. The Dominion of India, LL.R. 4 Punjab
358, Province of Bombay v. Municipal Corporation of the City of
Bombay, (1946) L.R. 73 I.A. 271, State of Bihar v. Rani Sonabati
Kumari, [1961] I S.C.R. 728, State of West Bengal v. Union of
India, [1964] I S.C.R. 371 and Advani v. Union of India, I.L.R.
1955 Born. 970, referred to.
CIVIL APPEALS Nos. 439 TO 451 OF 1961.
. Appeal3 by special leave from the judgment
and order dated August l, 1958, of the Punjab High
Court in Civil Revisions Nos. 229 to 241of19)3.
S.M. Sikri, Advocate-General for the State of
Punjab, N.S. Bindra and R.N. Sachthey, for the appellants.
S.K. Kapur, K.K. Jain for B.P. Maheshwari
for respondent No. l(A) (in C.A. No. 439/61.)
'
Sardar Singh, for respondents Nos. 2(A), 3(A)
4(A), 5,6,7,8(A),9,10,11,12, and 13tA).
Dau/at Ram Prem and R.N. Sachthey for respondent No. 13 (B) (Union of India).
'
November .15, 1963.
The Judgment of the
Court was dehvered by
AYYA~GAR J.--Section 13 of the Displaced Persons
Ayyangar J.
(Debts Adjustment) Act, 1951 (Central Act LXX of
1951) which will be referred to hereafter as the Act
enacts:
'
390
SUPREME COURT REPORTS
[1964]
1963
"13. Claims by displaced creditors against perState of Punjab
sons who are not displaced debtors. At any time
within one year after the date on which this
v.
Act comes into force in any local area, any displaOkara Grain
Buyers Syndicate
ced creditor claiming a debt from any other
person who is not a displaced person may make
Ltd, and others
Ayyangar J.
an application, in such form as may hie prescribed, to the Tribunal within the local limits
of whose jurisdiction he or the respondent or,
if there are more respondents than one, any
of such respondents, actually and voluntarily
resides, or carries on business or personally
works for gain, together with a statement of
the debt owing to him with full particulars thereof."
The respondents in each of these 13 appeals,
which have been consolidated for hearing are "displaced credit01 s" and the point arising for decision
in them is whether they could make a claim under
this provision against the State of Punjab. A petition
claiming such relief was filed by the respondent in
Civil Appeal 439 of 1961 before the Subordinate
Judge, Amritsar who was the Tribunal created under
the Act for the purpose of receiving claims under s. 13
and, similarly, the contestmg respondents m the other
12 appeals 440-45lof 1961 made similar claims before
the Subordinate Judge, Hissar. Immediately the claims
were filed and notices issued to the State of Punjab,
a preliminary objection to the maintainability of the
applications was raised by the State and the Tribunal
at Amritsar passed an order on May 7, 1953 rejecting
the preliminary objection and holding that on a proper
construction of s.13 the claim was maintainable
before it. Similar objections were also rais,ed before
the Subordinate Judge, Hissar who, by orde:rs passed
on May 25, 1953, similarly over-ruled the preliminary
objections and held that the claims were maintainable
before him. The State thereafter filed revisions in
all the 13 cases to the High Court of Punjab. These
petitions came in the first instance before a learned
Single Judge who directed that they should be placed
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5S.C.R.
SUPREME COURT REPORTS
391
before a Division Bench and the two learned Judges
1963
constituting the Division Bench after referring briefly
-
.
to the arguments urged on behalf of the State in support State 01 Pun1ab
of their contention that the State was not a 'person'
v.
against whom a claim could be made under s.13 Okara Grain
of the Act, expressed their opinion that the matter Buyers Syndicate
deserved to be decided by a larger Bench and the Ltd. and others
cases were thereupon placed before the Chief Justice
--
for constituting a Full Bench for deciding the point
Ayyangar J.
of law which was formulated in these terms:
"Whether an a2plication under s.13 of the
Displaced Persons (Debts Adjustment) Act, 1951
i~ not maintainable against the State of Punjab".
A Full Bench of three Judges accordingly heard arguments upon the pomt raised and held by a unanimous
judgment that the applications were maintainable and
in doing so over-ruled two earlier decision~ which
had taken a contrary view. The revision petitions
were thereafter posted for final hearing before the
learned Chief Justice who had originally heard them
as a Single Judge and who, giving effect to the views
expressed by the Full Bench, dismissed them. The
State ot Punjab thereafter applied to this Court for
special leave and this being granted, the appeals
are now before us.
As would be seen from the foregoing, the only
question that arises for consideration is whether
under s. 13 of the Act a "displaced creditor" Could
make a claim against the Government either of the
State or of the Union, subject to the limitation of
one year referred to in the opening words of the
provision. It is not in dispute that each one of the
~o!1testing resp~:mdents is "a displaced person" nor
is 1t the contention that.the State is a displaced person.
These two matters bemg put aside the submission
!'f th~ app~llant in br!ef !s t~o fold: (1) that what
~s claimed m the apphcat1ons filed against the State
~s not "a debt" within the definition of the term
~n .the Act to be presently referred to and (2) that even
!f 1t be h~ld that. the sum claimed 1s a "debt" the same
is not being claIIDed from a person of whom it could
392
SUPREME COURT REPORTS
[1964]
1963
be said that he or it "actually and voluntarily resides
--
. or carrie1> on bu1>iness or personally works for gain;
State 0! Pun;ab Both these arguments stem from a single postulate
· v.
.
and that is that the State i~ not within the scope of
Okara Gram the enactment, not being named expressly or by neBuyers Syndicate cessary implication, and hence is not bound in resLtd. and others pect of the liabilities, if any which the respondents
--
might have against it by the provisions of the Act,
.Ayyangar 1· and therefore is not subject to the jurisdiction of the
tribunals created by the Act. It is the further contention that far from the intention of the enactment being
to bind the State, the language that it employs and
the provisions that it enacts, both from the point
of view of the positive provisions as we!l as the omissions, tend strongly to establish that the State. was
outside the Act. These submissions were supported
by an elaborate and able argument· which covered
a very wide ground of constitutional law and general
jurisprudence which we shall notice and deal with,
in their proper place. It would be seen from this
brief statement of the points invloved that nothing
very much turns on the facts of the case. We would,
however, set out the facts in one otthe appeals, Civil
Appeal 439 of 1961, merely as illustrative of the type
of claims involved in these appeals. We should,
however, hasten to add that in regard to most of
these applications made by the respondents to the
Tribunal there is a dispute about the facts themselves
and about the genuineness and the quantum of the
claim which have not yet been investigated, since
only the preliminary objection to the maintainability
of the applications has been decided and not the
merhs of the claims or the defence.
In Civil Appeal 439 of 1961 the facts as stated.
in the application were briefly as follows: The
respondent• are M/s. Okara Grain Buyers Syndicate
Ltd.
They were originally carrying on business
in Okara in District Montgomery of the undivided
Punjab-now in Pakistan. The Government of the
then undivided Punjab instructed the respondents
to suJlply 210 bags of imported maize to ~"1/s Anil
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5S.C.R.
SUPREME COURT REPORTS
393
Starch Products Ltd., Ahmedabad in August 1947.
1963
The respondents accordingly carried out these instructions and despatched the goods by train. Delivery Staie of Punjab
of the same was taken by M/s Anil Starch Products.
v.
.
Subsequent to the partition of India the respondents Okara Gram
transferred their place of business from Okara to Buyers Syndicate
Amritsar and the Company was duly registered with Ltd. and others
the Registrar of Companies in the State of Punjab.
--
In July 1948 after the respondents moved over to
Ayyangar J.
Amritsar, they submitted to the State Government
their bill for the value of the maize supplied, being
a sum of Rs. 3059/9/-. The respondents were then
informed that the Ami Starch Products had made
payment of the said sum of Rs. 3059/9/- to the DirectorGeneral of Food Supplie,, East Punjab in or about
October-November, 1948.
This was brought to the
notice of the Government of the State of Punjab
which was required to make the payment to the respondents but as no payment was made, they made an
application against the Government under s. 13 of
the Act to the Subordinate Judge who was constituted as the Tribunal under the Act. In this they
claimed payment of Rs. 3059/9/- together with interest
at 6% from the 15th August, 1947 till the date of
the application. We might mention that it was not
in dispute that under the relevant constitutional
instruments to which we shall refer later, if the claim
were true, it would be enforceable by suit against
the appellant-State.
As stated earlier, nothing turns in these appeals
on the merits of the claim or about the defence to it
on the merits by the State, but we are only concerned
with the preliminary objection to the maintainability
of the application based upon the provisions of the
Act on the ground that what is claimed from the
Government of the State is not a "debt" within the
Act and that the State of Punjab is not a "person"
against whom an application under s. 13 of the Act
could be made.
As a step leading to the consideration of these
submissions it would be necessary to advert to and
394
SUPREME COURT REPORTS
[1964]
1963
read certain of the provisions of the Act which have
-
. a bearing on the matter in controversy. Section 2
State of Pun1ab contains the definitions of the terms used in the Act
v ·
and it enacts :
Okara Grain
Buyers Syndicate
"2. Definitions.-In this Act, unless the context
Ltd. and others
otherwise requires.-·
Ayyangar J.
(6) 'debt' means any pecuniary liability, whether
payable presently or in future, or under a decree
or order of a civil or revenue court or otherwise,
or whether ascertained or to be ascertained,
which-
(c) is due to a displaced person from any other
person (whether a displaced person or not)
ordinarily residing in the territories to which
this Act extends;
.
.
.
.
but does not include
any pecuniary liability due under a decree passed
after the 15th day of August, 1947, by any court
situate in West Pakistan or any pecuniary liability
the proof of which depends merely on an oral
agreement;''
to quote only what is material for these appeals.
A definition of the expression "displaced person"
used in cl. (c) above is to be found in sub s. (10) which
reads:
"2. (10) 'displaced person' means any person
who, on account of the setting up of the Dominions of ndia and Pakistan, or on account of
civil disturbances or the fear of such disturbances
in any area now forming part of West Pakistan,
has, after the 1st day of March, 1947, left, or
been displaced from, his place of residence in such
area and who has been subsequently residing in
India, and includes any person who is rc:sident in
any place now forming part of India and who for
that reason is unable or has been rendered unable
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5S.C.R.
SUPREME COURT REPORTS
395
to manage supervise or control any immovable
1963
property belonging to him in West Pakistan, but
.
does not include a banking company;"
State 01 Pun;ab
Special provisions have been made in the Act in regard
Ok
vG.
.
l .
d
d. l
d b
k"
.
d
ara
ram
to c auns
u~ to1
1dsp acnke . anbmg cbomp(a7mes and Buyers Syndicate
the phrase 'dtsp ace
ba ' JS,
y su -s.
), state Ltd
d th
to mean:
. an o ers
"2. (7) 'Displaced bank' means a banking comAyyangar J.
pany which, before the 15th day of August, 1947,
carried on the business of banking, whether
wholly or partially, in any area now forming
part of West Pakistan and is declared to be
a displaced bank within the meaning of this Act
by the Central Government by notification in the
Official Gazette;"
Sub-section (8) contains the definition of 'displaced
creditor' which it states means:
"(8). 'Displaced creditor' means a displaced person to whom a debt is due from any other person,
whether a displaced person or not;"
while sub-s. (9) defines 'displaced debtor' and it
runs:
"(9). 'Displaced debtor' means a displaced person
from whom a debt is due or is being claimed;"
Sub-section (12) defines 'Tribunal' and it runs:
"(12). 'Tribunal' means any civil court specified
under section 4 as having authority to exercise
jurisdiction under this Act;"
There are, however, some substantive provisions which
have a bearing on the proper construction of s. 13,
but we shall defer reference to them at this stage.
On the terms of s. 13 of the Act set out earlier
the matters in controversy may be i.tated thus:
Start~
ing from the premise, as to which there is no contest,
that the respondent is "a displaced person", the questions to be considered are: ( 1) Is he a <lisp laced
creditor? This would, having regard to the definition of the term 'displaced creditor' in s. 2(8),
depend upon (2) whether the claim made by him is
a "debt" which would be the second point for con-
396
SUPREME COURT REPORTS
[1964]
1963
sideration viz., is the sum claimed as due from the
-
State a "debt" within the meaning of s. 2(6) (c)
State 0! Punjab and lastly (3) Would the State be 'any other person'
v.
within s. 13?
Okara Grain
Now, what is invoked by the learned AdvocateBuyers Syndicate General is the well-known rule of construction which
Ltd. and others in the phraseology which is apt to the constitutional
Ayyangar J
set up in the U.K. is expressed in the proposition
· that "the Crown is not bound by a statute unless
it appears that it is brought within it by express words
or by necessary intendment." We shall in due course
consider the scope of this rule of construction which ·
has been held by this Court to be applicable to the
interpretation of Indian statutes both pre as well
as post-Constitution, but at this stage it is sufficient
to mention three matters in relation to it. The first
is that the expression "Crown" or "King" in the
rule has to be understood as referring to the Executive
Government of the State in the context of our Constitution. If authority were needed for what we
consider so obvious a proposition it is to be found in
the judgment of Griffith, C.J. in Roberts v. Ahernc 1>.
The next is that it is common ground that there is
no ex.press mention of the State or the Government
of the State in the Act now under consideration.
Lastly, the rule is merely one of construction which
raises an initial presumption in its favour, not any
hard and fast rule. It 1s a rule intended to give effect
to the intentions of the legislature and consequently
if there is either in the purpose of the Act or in its
provisions a manifestation of a clear intention to
the contrary, the presumption would be rebutted
and the State would be bound. There being, in the
cases before us, no contention that there is any lack
of legislative power for the Union Parliament to
bring in the debts due to or owing by the Government of the State and the Union within the ambit
of the enactment, the whole question is whether
by the provisions it has enacted Parliament has manifested a clear intention to include these debts also
within the scheme of the Act.
(1) 1 C.L.R. 406 at p. 418.
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5 S.C.R.
SUPREME COURT REPORTS
397
As preliminary to the detailed consideration of
1963
the provisions of the Act, it would be useful to appre-
--
.
ciate the historical background of this legislation which State of Pun1ab
seeks to confer certain substantive and adjectival
v.
benefits on persons, who owing to the situation created
Okara Gt~in
by the partition of the country in 1947 were forced Buyers Syndicate
to migrate from what is now West Pakistan into Ltd. and others
the present State of Punjab.
Prior to partition, under s. 176 of the Government
of India Act, 193) the Provincial Government of the
Punjab could be sued by the name of the Province
in regard to claims arising against the State on contracts
entered into by it. When the partition of India was
effected and the State of the Punjab was divided between Pakistan and the rest of India, provision had
necessarily to be made in regard to the claims which
persons had against the former province of undivided
Punjab. This was effected by the Indian Independence (Rights, Property & Liabilities) Order, 1947
which in its 8th paragraph dealt with contracts entered into by the Governor-General before the 15th
August, 1947 (the appointed day) as well as by the
undivided province of the Punjab. Paragraph 8(3)
ran:
"8. (3) Any contract made on behalf of the Province of the Punjab before the appointed day
shall, as from that day,-
(a) if the contract is for purposes which as from
that day are exclusively purposes of the Province
of East Punjab, be deemed to have been made
on behalf of that Province instead of the Province
of the Punjab; and
(b) in any other case be deemed to have been
made on behalf of the Province of West Punjab
instead of the Province of the Punjab;
and all rights and liabilities which have accrued
or may accrue under any such contract shall, to
the extent to which they would have been rights or
liabilities of the Province of the Punjab, be rights
Ayyangar J.
398
SUPREME COURT REPORTS
[1964]
1963
or liabilities of the Province of East Punjab or the
--
Province of West Punjab, as the case may be".
State of Puniab
.
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v
It was not disputed that rn regard to the claims which
Okara Grain were the subject of the applications from which the
Buyers Syndicate appeals before us arise, if tenable on the merits,
Ltd and others would be claims which could be properly made against
·
the State of Punjab. Reading this provisiolll in conAyyangar J. junction with Art. 300 of the Constitution the result
would be that if a suit for enforcing the claim were
filed against the appellant State, apart from any contention on the merits or based on any plea of limitation, there could be no defence to the suit, save
that untler procedural law of India as eriacted in the
Civil Procedure Code, as understood by a long course
of decisions interpreting the provisions of the Code,
the suit would have to be filed in the Court having
territorial jurisdiction over the area where the cause
of action for the suit arose. Very soon after partition the Indian legislature enacted the Displaced
Persons (Institution of Suits) Act, 1948 which received the assent of the Governor-General on September 4, 1948. It was a temporary enactment which
was to be in force for three years and it replaced an
earlier ordinance of the same name--Ordinance
XVIII of 1948 containing identical provisions. Its
principal object was to provide for and validate certain
suits which had been instituted in India, though
the cause of action therefor had arisen in tierritories
which became Pakistan and for extending the period
of limitation for the institution of suits by displaced
persons. Section 4 of the enactment which constituted its core ran:
"4. Notwithstanding anything contained in section 20 of the Code of Civil Procedure, 1908
(V of 1908) or in any other law relating to the
local limits of the
jurisdiction of Courts or
in any agreement to the contrary, a displaced
person may institute a suit in a Court within the
local limits of whose jurisdiction he or the defendant or any of the defendants, whi:re there
are more than one at the time of the commence-
•
..
(
5 S.C.R.
SUPREME COURT REPORTS
399
ment of the suit, actually and voluntarily resides,
1963
or carries on business, or personally works for
--
gain, ifState of Punjab
(i) the defendant, or where there are more
v.
than one, each of the defendants, actually Okara Gra.in
and voluntarily resides or carries on business, Buyers Syndicate
or personally works for gain in India and Ltd. and others
is not a displaced person;
--
Ayyangar J.
(ii) the cause of action, wholly or in part, arises
or has arisen in a place now situate within
the territories of Pakistan;
(iii) the Court in whicli the suit is instituted
is otherwise competent to try it; and
(iv) the suit does not relate to immovable
property."
At the time when this enactment lapsed on the expiry of the period of 3 years which was its life, came
the Act which was a comprehensive piece of legislation designed to redress not merely the procedural
difficulties to obviate which was the main object
of the temporary Act of 1948, but the enactment
of substantive provisions to alleviate the hardships
of those who after suffering, in most cases, grievous
Joss of property in Pakistan were forced to migrate
to the Punjab.
Pausing here, we might mention, and there
was no dispute as to this, that so far as private individuals i.e., all parties other than the Government of
the Union or of the State, were concerned, the enactments of 1948 and 1951 effected the necessary alterations in the procedural law as to the forum to which
displaced persons could resort in which proceedings
should be instituted to overcome the difficulties consequent on the entire cause of action having arisen
in Pakistan. The contention of the appellant-State
before us was that as regards causes of action against
the State, the matter was left where it was.
The judgment of the Full Bench of the High
Court negativing this contention is an elaborate
one, but its reasoning may be summarised as resting
on the following postulates: (I) unless there was
400
SUPREME COURT REPORTS
(1964]
r
1963
an explicit exemption of the State from the operation
--
. of any particular statute, the State was bound by its
Stare 0! Pun1ab provisions, (2) that the object of the Displaced Persons
v.
.
(Institution of Suits) Act of 1948 and the present Act
Okara Gram.r was to supplement the Independence (LiabiJ:ities)
Buyers Syndicate order, 1947 and to furnish the adjectival relief to the
Ltd. and others substantive rights conferred by it against the State,
-
(3) that unless the construction contended for by
Ayyangar 1· the respondent was accepted, most persons who had
claims against the State of the type contemplated
by para 8(3) of the Independence (Liabilities) Order,
1947 would be remedyless-a circumstance which would
be repugnant to the basic idea underlying the Indian Independence (Rights, Property & Liabilities) Order,
(1947). The learned Advocate-General contested the
correctness of each one of these and submitted to us
an elaborate argument which may be summarised thus:
(1) This Court has, in Director of Rationing
and Distribution v. The Corporation of Calcutta &
Ors .,Cl> accepted as correct the rule of construction
adopted in the U.K. that the State is not bound by
a statute unless it is so provided in express terms
or by necessary implication. Applying this principle
of interpretation to the terms of the Act, far from
the State being expressly named as being bound,
there are indications arising from the nature and description of the persons brought within the scope of
the enactment which clearly exclude the State and
the obligations of the State from its purview.
(2) The Act was preceded by the Displaced
Persons Suits Act 1948 which employed substantially
the same phraseology as the Act now under consideration. The scope of the earlier Act, viz., the liability
of the Government was the subject of adjudication
before the High Court of Punjab in Mis Nagi Bros.
v. The Dominion of India< 21, where it had been held that
the provisions of its s. 4 was held not to permit suits
against the Dominion of India for the reason that
the State was not a "person" within its terms. The
re-enactment of the law, on the expiry of the Act
(I) [1961] I.S.C.R. 158.
(2) I.L.R. 4 Punjab 358.
"
5 S.C.R.
SUPREME COURT REPORTS
401
of 1948, adopting substantially the same phraseology
1963
•
in s. 13 and other relevant sections to indicate the
"person" against whom the claim could be made State 01 Punjab
was. therefore a legislative confirmation of that ruling
v.
.
and a strong indication that Parliament intended Okara Gram
the same result.
Buyers Syndicate
I
h.
.
. h b
d Ltd. and others
( 3) Last y, the hards 1p which m1g t e cause
__
in cases where claimants might be left without remedy
Ayyangar J.
in case the construction for which he contended
was accepted, must in the nature of things be in a
few marginal cases at the most, and even if they were
more widespread, would not by itself be a factor
which could weigh either to rebut the presumptive
rule that statutes do not bind the State, or the other
argument arising from legislative confirmation of
previous judicial construction, particularly when according to him no ambiguity existed in the construction
of the Act or the language employed in its various
relevant provisions.
We shall now proceed to deal with the submissions
in the order in which we have set them out. The
learned Advocate-General is
right when he says
that this Court in Director of Rationing and Distribution
v.
The
Corporation
of Calcutta
and
Ors.<ll
has accepted the continued applicability of the
principle of construction of statutes laid down by
the Privy Council in Province of Bombay v. Municipal
Corporation of the City of Bombay.< 2l Jn the case of
Director of Rationing<1 J, s. 386(1) of the Calcutta
r.1unicipal Act forbade any "person" to use or permit
to be used any premises for the purposes named
otherwise than or in conformity with the terms of
the licence granted by the corporation. The question
that was considered by this Court was
whether the
Director of Rationing representing the Food Department of the Government of West Bengal was subject
to this provision. The High Court of Calcutta
had held that in the absence of any provision in the
enactment exempting the Government from the operation of s. 386 the Government of West Bengal as well
(I) [1961] T S.C.R. 158
(2) [1946] L.R. 73 I.A. 271.
l/SCI/64-26
402
SUPREME COURT REPORTS
[1964]
~
1963
as the Director of Rationing were also bound. It
--
was from this decision that the appeal was preferred to
State of Punjab this Court. This Court allowed the appeal and held
v.
.
that the decision of the Privy Council in Province of
Okara Gram Bombay v.
Municipal Corporation of the City of
Buyers Syndicate Bombay<lJ
laid
down
the
correct
rule
of
Ltd. and others interpretation of statutes and that the coming into
-
force of the Constitution did not make any difference
Ayyangar 1· as regards the applicability of that rule. Sinha C.J.
observed:
"The rule of interpretation of statutes adopted
in England and applied by the Privy Council
to an Indian statute in Province of Bombay
v. Municipal Corporation of the City of Bombay
(1946) L.R. 73 I.A. 271) that the State is not
bound by a statute unless it is so provided in
express terms or by necessary implication, is
still good law."
The next question to be considered is the scope
of this rule of construction. In this connection learned counsel for the respondent drew our attention
to the following paragraph:
"It is well-established that the common law of
j
•
1
England is that the King's prerogative is illust-
~
rated by the rule that the Sovereign is not necest
sarily bound by a statutory law which binds
the subject. This is further enforced by the rule
.I
that the King is not bound by a statute unless
1
he is expressly named or unless he is bound by
..:
necessary implication or unless the statute, being
for the public good, it would be absurd to exclude
the King from it. Blackstone's Commentaries,
(Vol. I, 261-262) accurately summed up the legal
position as follows:-
"The King is not bound by any act of Parliament, unless he be named therein by special
and particular words. The most general words
that can be devised ...... affect not him in the
least, if they may tend to restrain or diminish
(!) [1946] L.R. 73 I.A. 271
~ 5 S.C.R.
SUPREME COURT REPORTS
403
-- .
-"
•
-
\-
-
any of his rights or interests. For it would
1963
be of most mischievous consequence to the
-
public, if the strength of the executive power State of Punjab
were liable to be curtailed without its own exv.
press consent by constructions and implication
Okara Grain
of the subject. Yet, when an act of Parliament Buyers Syndical'
is expressly made for the preservation of public Ltd. and others
rights and the suppression of public wrongs, and
does not interfere with the established rights of the
Ayyangar J.
crown, it is said to be binding as well upon the
king as upon the subject; and, likewise, the king
may take the benefit of any particular act, though
he be not specially named". (Quoted at p. 355 of
Holdsworth, A History of English Law, Vol.X)
(italics ours).
Based on this passage, particularly the words italicised,
his submission was that the Act now for interpretation
is one enacted for the public good and that consequen·
tly the presumption would be that the executive govern·
ment was bound by it. We consider that the passage
extracted is not capable of that construction. It
has to be read not in vacuo and divorced from the
rest of the judgment but in conjunction with the
express approval of the rule of construction as explained by the Privy Council in Province of Bombay
v. Municipal Corporation of the City of Bombay(1 )
Lord du Parcq dealt with the submission regarding
statutes "enacted for the public good" being exceptions to the rule in these terms:
"It was contended on behalf of the respondents
that whenever a statute is enacted 'for the public
good' the Crown, though not expressly named,
must be held to be bound by its provisions and
that, as the Act in question was manifestly intended to secure the public welfare, it must
bind the Crown. This contention, which did
not meet with success in the High Court, was
again raised before their Lordships. The proposition which the respondents thus sought to maintain
is supported by early authority, and is to be
found in Bacon's Abridgment and other text-books
(I) [1946] L.R. 73 I.A. 271
1963
State of Punjab
v.
Okara Grain
Buyers Syndicate
Ltd. and others
Ayyangar J.
404
SUPREME COURT REPORTS
[1964] /-
but in their Lordships' opinion it cannot now be
regarded as sound except in a strictly limited
sense. Every statute might be supposed to be
'for the public good', at least in intention, and
even when, as in the present case, it is apparent
that one object of the legislature is to promote
the welfare and convenience of a large body
of the King's subjects by giving extensive powers
to a local authority, it cannot be said, consistently
with the decided cases, that the Crown is necessarily bound by the enactment."
We consider that the principle here explained should
<
also be deemed to have been approved of and accepted
by this Court in the Director of Rationing case<1>
In another
passage
in
the
same
judgment
Lord du Parcq explained the scope and ambit of
,
the rule which have in terms relevance to the question
arising in these appeals. The learned Lord said:
"The general principle to be applied in considering whether or not the Crown is bound
by general words in a statute is not in doubt.
The maxim of the law in early times was that no
statute bound the Crown unless the Crown was
expressly named therein .............. But the .
rule so laid down is subject to at least one ex-
,.
ception. The Crown may be bound, as has r
often been said, 'by necessary implication'. If,
that is to say, it is manifest from the very terms -
of the statute, that it was the intention of the
legislature that the Crown should be bound,
._ {
then the result is the same as if the Crown had
been expressly named. It must then be inferred
that the Crown, by assenting to the law, agreed
to be bound by its provisions'"
He added a little later:
"In the present case the High Court disposed
of the submission by a finding that, on the material
before them, it was not shown to be for the
public good that the Crown should be bound
by the Municipal Act. This is, perhaps, not
a wholly satisfactory way of dealing with the --
(1) [1961] l S.C.R. 158.
'
-; 5 S.C.R.
SUPREME COURT REPORTS
405
respondents' contention, which was, not that
1963
the court must consider whether it is for the
public good that the Crown should be bound State of Punjab
by a particular Act, but that wherever an Act
v.
is 'for the public good' it must be taken to bind
Okara Grain
the Crown. Their Lordships prefer to say that Buyers Syndicate
the apparent purpose of the statute is one element, Ltd. and others
and may be an important element, to be consi-
-
dered when an intention to bind the Crown is
Ayyangar J.,
alleged. If it can be affirmed that, at the time
when the statute was passed and received the
royal sanction, it was apparent from its terms
that its beneficent purpose must be wholly frustrated unless the Crown were bound, then it may
be inferred that the Crown has agreed to be
bound"·
In the view we take of the construction of the provisions of the Act before us, in the light of the principles
of construction formulated by Lord du Parcq, we
do not consider it necessary to examine whether there
are any further limitations, qualifications or exceptions to the rule as applied to Indian statutes as
have been accepted in the United Kingdom which
have been set out and expounded at pages 438-443
of the sixth edition of Craies on Statute Law. We shall
therefore proceed to examine the provisions of the
Act on the footing that the test for determining whether
the Government is bound by a statute is whether it
is expressly named in the provision which it is contended binds it, or whether it "is manifest that from the
terms of the statute, that it was the intention of the
legislature that it shall be bound", and that the intention to bind would be clearly made out if the beneficent purpose of the statute would be wholly frustrated
un~ess the Government ~ere bound.