# SUPREl.lE .COURT REPORTS {1962] SCINDIA STEAM NAVIGATION CO. LTD v. UNION OF JNDIA

- **Citation:** [1962] 3 S.C.R. 412
- **Court:** Supreme Court of India
- **Decided:** 1962
- **Bench:** P. B. Gajendragadkar, K. Sulll!A RAo, llf. H!DA¥A.'l'ULLAil
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/suprel-le-court-reports-1962-scindia-steam-navigation-co-ltd-v-union-of-jndia-2453
- **Pages:** 29

## Headnote

Partition of irufia-Diatrib1tion of rig/it and lialrili1i.--
Contr11ct ~ Go~·er"°r General in Council, if JOI' pv.rposPa of t'
Paki&Jan-Te8!-0wnership, if a relerant con•iderat;on-Indian
Independenu (Right•, l'roJl'rt.v and I.iabilitiea) Or~er 1947,
.Art.. 8(1), 6.
The appellant, a navigation company, claimed a sum of
Rs. 44,449/· as freight from the Union of India for carrying
IOgs of teak-wood from the fore.ts of Kanara to Karachi for
the use of !he North Western Railway on the ba>is of a contract
"'ith the Conservator of Forests, North Kanara, representing
the North Western Railway. Soon after tjle steamship arri""d
at Karachi, India was partitioned on Au1:ust 15, JM7, and in'
canstquen.ce the North Western Railway was di\'idcd into
two sections, the Pakistan .section ret•incd the original name
and t11e Indian section \\'a~ ca11ed the Eas~ern Punjab Railway.
The claim against the respondent, the :Union af India, was
based on Art. 8( 1) of the Indian I ndepecdcnee (Rights,
Property and Liabi!itie.) Order, 1947, and in ·the alternative
on a Press Communique issued by the respondent on ~fay
22, 1948. The re.<pondent denied the claim. The trial court
held that since the suit contract could not be said to be one -<.
exclusively for the purposes of Pakistan under Art. 8(l)(a)
of the order, the respondent was liable under Art. 8( I )(b) of
the order ; if, hov.•e-\·er, found that the Press C'Jmmunique
afforded no ba<is for the claim. The Court of Appral while
agreci~g in rejecting the claim on the basis of the Press
Communique, held that the contract frll within Art. 8(l)(a)
of the order and dismissed the suit.
J/eld (per G•jendragadkar and
Hidayatuallah, JJ.),
that the viev.· taken hy the Appeal Court that the contract fell
within Art. O(l)(a) ofthe order was co,,.ct and must he
affirmed.
•
Judged by either of the two tests approved by this c'.'~rt
in Union of India "· Chlman Lal J.oona as to the apphcab1hty
of Art. 8(1)(a) and (b) of the order namd)', (1) whether the
contract if it had been made on August 15, 1947, would have
been a ;,ntraet for the Dominion of Pakistan or (2) whether if the
Dominion of Pakistan had been in existence when the contract-
"'*
\vas entered into, it would have been a contract for the purposes of Pakistan, and looking at the substance of the contract,
-
'11 S.C.R.
SUPHElME COURTlREPORTS
and not its f01m, there could be no doubt that the contract
if> was exclusively for the purposes of Pakistan.
The alternative tests approved by this court are wholly
consistent with the consideration of ownership under Art. 6
of the order and such consideration is both relevant and
material in the application of tests.
Union of India v. Chaman Lal Laona, (1957) S.C.R.
1039, followed.
-..
Union of India v. Chinubhai Jeshingbhai, (1952) 54 B.L.R.
561 and Krishna Rajan Basu Ray v. /, nion of India, A.LR.
1954 Cal. 623, approved.
Union of India v. Lake Nath Saha; A.LR. -1952 Cal.
l 40A., disapproved.
Held, further, that the courts below were right in the
view that they took of the
Communique issued by the
respondent, since it could not be said to embody a specific
~ agreement between the two Dominions so as. to bring into
operation Art. 3( 1) of the Order.
The pleas of e8foppel ar.d noratio, involving as they do
questions of fact, ar.d can only be raised where rdevant facts
are pleaded.
Per Subba Rao, J. The word 'purposes' occurring in
Art. 8( I) of the order must be given its natural meaning
namely, the purpose for which the contract was made and
-" that purpose must be ascertoined from the terms of the con·
tract itself and not from any other extraneous consideratio~,
statutory or otherwise.
The Order made
an essential
distinction between the purpose of the contract under Art.
8( I) and any subsequent vesting of the goods ;n any of the
Dominions under Art. 6 of the Order and the rights and
liabilities of the respective Dominions und.er th.e contract
must be separately dealt with.
J
Since the purpose of the contract in t

## Text

_Characters 0–39,963 of 59,970. This is a partial read: ask again with offset=39963 for what follows._

412
.SUPREl.lE .COURT REPORTS
{1962]
SCINDIA STEAM NAVIGATION CO. LTD.
v.
UNION OF JNDIA
(P. B. GAJENDRAGADKAR, K. Sulll!A RAo and
llf. H!DA¥A.'l'ULLAil ' JJ.)
Partition of irufia-Diatrib1tion of rig/it and lialrili1i.--
Contr11ct ~ Go~·er"°r General in Council, if JOI' pv.rposPa of t'
Paki&Jan-Te8!-0wnership, if a relerant con•iderat;on-Indian
Independenu (Right•, l'roJl'rt.v and I.iabilitiea) Or~er 1947,
.Art.. 8(1), 6.
The appellant, a navigation company, claimed a sum of
Rs. 44,449/· as freight from the Union of India for carrying
IOgs of teak-wood from the fore.ts of Kanara to Karachi for
the use of !he North Western Railway on the ba>is of a contract
"'ith the Conservator of Forests, North Kanara, representing
the North Western Railway. Soon after tjle steamship arri""d
at Karachi, India was partitioned on Au1:ust 15, JM7, and in'
canstquen.ce the North Western Railway was di\'idcd into
two sections, the Pakistan .section ret•incd the original name
and t11e Indian section \\'a~ ca11ed the Eas~ern Punjab Railway.
The claim against the respondent, the :Union af India, was
based on Art. 8( 1) of the Indian I ndepecdcnee (Rights,
Property and Liabi!itie.) Order, 1947, and in ·the alternative
on a Press Communique issued by the respondent on ~fay
22, 1948. The re.<pondent denied the claim. The trial court
held that since the suit contract could not be said to be one -<.
exclusively for the purposes of Pakistan under Art. 8(l)(a)
of the order, the respondent was liable under Art. 8( I )(b) of
the order ; if, hov.•e-\·er, found that the Press C'Jmmunique
afforded no ba<is for the claim. The Court of Appral while
agreci~g in rejecting the claim on the basis of the Press
Communique, held that the contract frll within Art. 8(l)(a)
of the order and dismissed the suit.
J/eld (per G•jendragadkar and
Hidayatuallah, JJ.),
that the viev.· taken hy the Appeal Court that the contract fell
within Art. O(l)(a) ofthe order was co,,.ct and must he
affirmed.
•
Judged by either of the two tests approved by this c'.'~rt
in Union of India "· Chlman Lal J.oona as to the apphcab1hty
of Art. 8(1)(a) and (b) of the order namd)', (1) whether the
contract if it had been made on August 15, 1947, would have
been a ;,ntraet for the Dominion of Pakistan or (2) whether if the
Dominion of Pakistan had been in existence when the contract-
"'*
\vas entered into, it would have been a contract for the purposes of Pakistan, and looking at the substance of the contract,
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'11 S.C.R.
SUPHElME COURTlREPORTS
and not its f01m, there could be no doubt that the contract
if> was exclusively for the purposes of Pakistan.
The alternative tests approved by this court are wholly
consistent with the consideration of ownership under Art. 6
of the order and such consideration is both relevant and
material in the application of tests.
Union of India v. Chaman Lal Laona, (1957) S.C.R.
1039, followed.
-..
Union of India v. Chinubhai Jeshingbhai, (1952) 54 B.L.R.
561 and Krishna Rajan Basu Ray v. /, nion of India, A.LR.
1954 Cal. 623, approved.
Union of India v. Lake Nath Saha; A.LR. -1952 Cal.
l 40A., disapproved.
Held, further, that the courts below were right in the
view that they took of the
Communique issued by the
respondent, since it could not be said to embody a specific
~ agreement between the two Dominions so as. to bring into
operation Art. 3( 1) of the Order.
The pleas of e8foppel ar.d noratio, involving as they do
questions of fact, ar.d can only be raised where rdevant facts
are pleaded.
Per Subba Rao, J. The word 'purposes' occurring in
Art. 8( I) of the order must be given its natural meaning
namely, the purpose for which the contract was made and
-" that purpose must be ascertoined from the terms of the con·
tract itself and not from any other extraneous consideratio~,
statutory or otherwise.
The Order made
an essential
distinction between the purpose of the contract under Art.
8( I) and any subsequent vesting of the goods ;n any of the
Dominions under Art. 6 of the Order and the rights and
liabilities of the respective Dominions und.er th.e contract
must be separately dealt with.
J
Since the purpose of the contract in the instant case
was to convey the goods
to
the North Western Railway which was now in both the Dominions, the purposes of
the contract were not exclusively for the Dominion o~ l'akistan.
Consequently, the contract feil within Art. 8(l}(b) of the
Order and must be deemed to have been made on behalf of
the Dominion of India.
Unia" of India v. Chama1t IAl Laona, (1957) S.C,R..
~ 1939, referred to.
Union of India v. Ohinubhai Jeshingbhai, I.L.R. 1953
Born. 117, considered.
lffl
ScinJia Steam
.Navigatim Co. LtJ.
v.
·Union •f /niia
1961
Scindia Sttam
.,Vm.•igalitHJ lo. Lti.
y.
l,'nion of I ntfia
-1 ~ .. : - •
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•
SUPREME COURT REPORTS
[1952]
CIVIL APPELLATE JURISDICTIOX : Civil Appeal
N' o. JO of 1959.
"
Appeal from the judgment and decree dated March
22, 1956 of the Bombay High Court in Appeal No. to of 1955.
l'urshottam Triknmaa.•, S. i.·. Andley, J. B. Dadachanji,
Rarinder Narain and 0. C. Mathur, for the appellants.
M. C. Selafrad, Attorney-General for India, Xanak Cha1Hl
and T. M. Sm for the respondent.
1961. August 31.
The Judgments of the r
Court were delivered.
P. B. GAJENDIU.GADKAH, ,T.-This appeal by a
certificate issued by the Bomlmy High C'mrt 1111der
Art. 133 (l)(a) of the Curn;titution ,\risPs out of a
suit initially filed on the Original Side of tho
Bombay High Court (Suit No. 232 of 1951) by the
•
Bombay Steam :Navigation Co. Ltd. (hereafter
called the
B.S.~.), and
the Eastern Steam
Xavigation Co. Ltd. (hereafter called the :E.S.N.),
against the respondent., the Union of India to recover
a sum of Rs. (>4,699-6·0 by way of charges for carriage
oflogs oftl'akwood timber from the forests ofKan:.ra
to Karachi. A further sum of Rs. 445·4-0 was also
claimed for storage charges of the said logs at
Marmagoa.
This latter claim was given up at "
the time of the heari11g of the suit. The B.S.N. then
merged in the Scindia Steam ~avigation Co. Ltd.,
and so the latter company came on the record
in place of the B.S.N.
This company is the first
appellant before us.
The E.S.N. was in liquidation and so its liquidators hiwc joined thl' present .
litigation as plaintiff 2 and so they arc appellant 2 •
in this Court.
The E.S.N. had a
ship called Aza.di. It
appears that tho B.S.N. looked after the business
of tho E.S.N. and arranged on its behalf freight
to he carried by the ship belonging to it. In } 04 7
thero was an agreement between thl' B.S.N. as
rcprcsc11ting the E.S.N. on the one hand and the ..
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38.C.R.
SUPREME COURT REPORTS
415
Comervator of Forests, North Kanara, representing
the North-Western Railway on the other for the
carriage of logs of teakwood timber from the
forests in Kanara, first by rail . to Marmagoa and
then by a steamer belonging to the E.S.N. from
l\farmagoa to Karachi. Pursuant to this agreement
636 tons of timber were shipped by the Steamer
Azadi which left Marmagoa on July 23, 1947. It
is commcn ground that the conditions of the bill
of lading provided that the appellants had the
right to have the logs of wood remeasured at
Karachi but it was agreed between the railway and
appellants that freight should be paid on the basis
of 70% more than the measurements shown by the
records of the forest department of South Kanara.
In the plaint as it was originally filed freight had
been claimed on the said basis ; but it appears
that before the learned trial judge this claim was
given up and in consequence the . amount claimed
was reduced from Rs. 64,699-6-0 to Rs. 44,449/-.
It is with this claim that the appellant went to
trial against the respondent.
Soon after the Azadi reached Karachi the
partition of India into the two Dominions of India.
and Pakistan took place on August 15, 1947, and
that led to a good deal of correspondence between
the parties which shows that the appellants were
sent from pillar to post, from one authority to the
other, but utimately their efforts to recover the
amount due under the contract failed. That is why
the appellants had to file the present suit against the
respondent. Their claim agall;tst' the . respondent
is based on Art. 8 ( l)(b) of the Indian Independence
(Rights, Property and Liabilities) Order, 1947,
(hereafter called the Order). In the alternative
the same amount is claimed on the footing of a.
Press Communique alleged to have been issued by
the respondent on May 22, 1948.
The respondent denied this claim. It 'was
urged that the suit as framed was not maintainable
1911
Scindia St1am
Navigation Co. Ltd.
v.
Union of India
Cajend.racadkar J.
1!161
SdMiaSttf'f'"
i.¥o&ip/io• C1. l.tti.
v.
[,"nio1t. of India
4113
SUPREME COURT REPORTS
[1062]
and t.hat the plaint did not <liselosc a cause of
action. It was alleged that the suit was barred
by limitatiou. On the merits the respondent's
case wll.8 that the appellants' claim was not covered
by tho Pres.s Comm1111iquc and tl1at the Press
Communique could not afford the appellants a
valid cause of act io1>.
The appellants' contention
that the relevant, clause of the Orcler justified the
claim was also den iccl.
On these ple&dingH eleven substantive issues
were framed by the learned trial judge. On t~
princip&l issue between the parties which related to
the applicability of Art. 8 (I) (b) of t.hc Order
to tho appellants' claim the learned ju<l!!e found
that
the
appellants'
claim
attracted
lh<.:
provlB!ons
of the said article.
In <'oming
to this cool'lusion tho learned judge no doubt
not,icecl t"6 fact that on Augm-t Hi, 1947, the
:North-Western
Railway
which
originally
ran
through the Provinces which subsequently became
part of Pakist::m as well a.s through some of the
Provinces which formed part of India was divided
oetwecn the Dominions of India and Pakistan iuto
two sections, and the scrtiou that was allotted to
the share of Pakistan continued to be known as
:North-\Ve&tcrn Railway, while the ext~mtion of
the railway in the territory of India came to Le
known as Eastern Punja.L Railway. According
to the lca.n1ed judge "if the timber that was carried
to Karachi was for the purpo.scs of Xorth.\Vcsteru
Railway as a whole it was obviously at the date,
the 15th @f August, Hl!i, which i:; the appointed
date, for the purpose both of that part of the
Xorth-\Vestern Railway which went to the Dominion of Pakistan :1s well a.s for that part of tho
~orth-\Vestem Railway which came to the Dominion of In<lia and became the Easlem Punjab
Hailway''. On this view the learned trial judge
re:whed the conclm;ion that tI1c
suit contract
cannot be said to be exclusively for the purp•W'S
..
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38.C.R.
SUPREME COURT REPORTS
417
of the Dominion of Pakistan as required by
Art. S(l)(a) and so it must be deemed to be a contract
falling under Art. (S)(l)(b). The learned judge
then considered the alternativ.e claim made by
the appellants on the Press Communique in question
and came to the conclusion that the said Communique did not afford a valid basis for 1he elaim.
It was not an
agreement
between the two
Dominions, and so it could not attract the provisions of Art. 3(1) of the Order. The appellants'
case was that the said Communique represented an
agreement between the two Dominions and so it
fell within Art. 3(1) of the Order and that made
the n·spondent liable for their claim. This contention has been rejected by the learned trial
judge. The plea of limitation raised by the respondent was rejected by the learned judge on
the ground that the claim made by the appellants
was
saved by
acknowledgment
made
by the
respondent. With the findings recorded by the learned judge on the other issues
we are not concerned in the present appeal. In
the result the appellants' claim for Rs. 42,449/- was
referred to the Commissioner for taking accounts
in order to ascertain the amount due to the
appellants having regard to the terms of the
contract.
This decree was challenged by the respondent
by its appeal before the Court of Appeal in the
said High Court. The Appeal Court agreed with
the trial judge in rejecting the alternative bMis on
which the appellants had ma.de the claim. On the
question about the applicability of Art. 8 (l} (b) @f
the Order the Appeal Court differed from the trial
judge, and held that the suit contract fell withm
Art. S(l)(a) of the Order. Ac0ording to the finding
of the Appeal Court the contract was for purposes
which as from the relevant date were exclusively
purposes of the Dominion of Pakistan and w tllle
respondent was not l:i&ble under it. On thil view
•.
1901
Scinditz. Ste111n
Navizalilm Co. Lld.
v.
UniM1 of India
GajendraglHikar J.
. 1961
Scindia Sr,am
}.'aL'italiort Co. l.Jd.
•\',
l'11io11 of !mlin
Ga)tndrbtadl.nr ].
, ...
+
..... ;.. ...
SUPREME COURT REPORTS
(1962]
the Appeal Court did not think it necessary to
consider the question of limitation. Two additional
grounds wcro sought to be raisecl before the Appeal
lJourt on behalf of the appellants in support of the
decree passed by tbe trial court. It was urged that
by its conduct the respondent was estoppcd from
disputing the validity of the appellant's claim and
that there wa8 novatio ,,·hich made the respondent
liable.. Th!l Appeal Court took the view that both
these pleas were pleas of foet which could not be
allowed to be raised for the first time in the appeal.
As a result of t-1.io conclusion th.it the suit contract
fell under Art. S(l){a) of the Order the decree passed
by the trial court \¥as reversed and the appellants'
suit was dismissed with costs. Certain cross-objections had been filed by the appellants claiming
additional relief against the respondent, but since
. the appellants failed on the prinripal question
cross-objections were also dismi~sed with costs. The
uppellants then applied for and obtained a certificate from the High Court and with the' said certificate t)ley havo como to this Court with the present
.appeal..
Before dealing with the merits of the conten-
. tions raised by Mr. Purshottam in this Court on
behalf of the appellants it is necessary to read the
relevant provisions of the Order. This Order was
issued on August 14, 194i, and was made by tho
Bovernor-Ckncral in exorciso of the powers conferred
. on him by s. 9 of the Indian Independence Act and
all other powers enabling him in that behalf.
The
appointed day under the Order was August 15,1947.
Under Art. 3 (I) it WM provicled that the provisions
of the Order related to the initial distribution on
rights, property and . liabilities consequential on
the setting up of the Dominions of India and
Pakistan, and that the same shall have effect,
inter alia, Rubject to any agreement bet'ween the two
Dominions. Articles 4 and 5 dealt with land and
vestu1g thereof iii the two Dominions as therein
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•
3 S.C.R.
SUPREME COURT REPORTS
419
prescribed. Article 6 provided that the provisions
of Atts. 4 and 5 shall apply in relation to all goods,
coins, bank notes, and currency notes which immediately before the appointed day vested in His
Majesty for the purposes of the Governor-General
in Council or of a Province as they applied in relation to land so vested. Article 8 (l} with which we
are concerned in the present appeal reads thus :
"8 (l} Any contract made on behalf of
the Governor-General in Council before, the
appointed day shall, as from that day~
(a} if the contract is for the purposes
which as from that day are exclusively
purposes of the Dominion of Pakistan, be
deemed to have been made on behalf of
the Dominion of Pakistan instead of the
Governor-General in Council; and
(b} in any other case, be deemed to
have been made no behalf of the Dominion of India instead of the GovernorGeneral in Council ;
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 Governor-General in Council; be
rights or liabilities of ·the, Dominion of
Pakistan or the Dominion of India, as the
case may be."
It is unnecessary to set out the rest of ,the provisions of the Order.
The question about the scope and efFect of the
provisions of Art. 8 (l) (;,,) and (b) bas been considered by this Court in Union of Inrlia v. Chaman
Lal Loona (1 ). In that case two previous decisions
of the High Courts have been expressly approved,
and so it may be convenient to refer to those two
decisions :first. The first decision which bas been
( l) [1957] S.C.R.. !039.
1111
s,imiia Stettm
.Navigation Co. L~d.
v.
Union qf lridi&
Gajendrofadkll.1 J.
1911
Scirulla .t::ft«m
.l•la..tiarim Co. I.rt!.
v.
t''iiio1l e/ lndic
Coj1nir(lfb.iitftr]
420
SUPREME COURT REPORTS
[1962}
approYed by thi8 Court is the judgment of the
Bombay High Court in Tke Union of lndi.a v.
Chi1mbh,M. J lldingbai (•).
[n that case the fil'!YI of
Chinubhai Jm1hingba.i was doi11g business at Baroda.
By three sale notes exrcuted on .March IO, !!)47, it
had purchased from t!Mi Go\·ormnent of India eor.
tain quantitif'.i of long·cloth whi<:h wore lying at the
Ordinance Parachute Factory a.t Lahore. Under
the sa.W sale notes R~. 37,oOO/· a.nd odd had been
paid by the. plaintiff firm of 8hinubhai Jeshingbai
to tho defendant the Union of India. Ono of tho
terms of the contract was that the goodg, the subjcct·matter of the contract, had to be stamped.
Owing to the distul'banccs caused by serious com·
munal riots in Lahore in Angust, 1!14 i, the goods
could not be stamped aml rcmainc<l unstamped
even after pa.i:tition. Tho plaintiff thus failed to so·
cmo the performance of the contract cir refuncl of
the money paid by it in respect of the saicl contract
either from the Government of India or from
the Government of Pakistan, and so it filed tlrn
au it in question for recl}very of the amount. Justice
Coyajoc, who..hea,rd tho suit, decreed the plaintiff's
claim.
On appeal the decreo was set aside and the
caae was rc111anded for the trial of ru1 issue framed
by the Cow:t of Appeal.
The if;SllO thus remanded
was whether tho goods covered by the three salo
no.tea wero lying in the territory constituting the
Dominion of Pakistan by the Independence Act of
August 15, 1947.
Considering Art. 8(l}(a.) ancl (b) tl1c High
Court held that in gi\·ing effect to the said article
an artificial test hatl been prescribed "~nd tho t('st
mav be eit11cr, if the contract had been entered into
on :\ugust 15, HH7, whether it would h:we been a
contract for tlic purposes of the Dominion of Paki·
·stan, or, if the Dominion of Pa!istan had been in
existence when tne contract was entered into, '~he·
tbcr it would ha'l"e been a contract for the purposes
of Pakistan." It was then pointed out that it was
\ll (1952J 34 B.L.R. 561.
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I
'
3 S.C.R.
SUPREME OOURT REPORTS
.421
difficult to understand how it was possible to argue
that "when a State or a Dominion enters into a
contract in respect of property or goods belonging
to it, it is not a c Jn'tract for the purposes of that
State or Dominion". In other word~, according to
this decision, in applying the tests prescribed by
Art. 8 it would be relevant to enquire to whom the
property or goods which is the subject-matter of the
contract belonged on the appointed day. In that
particular case no finding had been recorded by the
trial court as to where the goods lay on the relevant
date and so an issue was framed in that behalf and
remanded for a finding. In other words, the Appeal
Court took the view that if the goods lay in Pakistan and thus became the property of Pakistan the
contract in question would undoubtedly fall under
.Art. 8 (l)(a) and not under Art. 8 (l)(b) .
The second decision to which reference must
be made is the judgement of the the, Calcutta High
Cour.t in Krishna Ranjan Basu Ray v. Union of
India, representing Eastern Railway & Ors. (1) According to this decision a suit for compensation for nondelivery of goods consigned with the Bengal and
Assam Railway prior to August 15, 1947, for delivery at .a place which had fallen to Pakistan is not
maintainable against the Union of India. In coming
to this conclusion the High Court held that "it was
wrong to consider the earning of profit as the purpose of thJ contract. The purpose of the contract
was the carriage of goods, and where the destination
was some point in Pakistan it seems to be reasonable to hold that the purpose was the purpose .of
Dominion of Pakistan. Where, on the contrary, the
c.arriaze was to a point which remained in the
Indian Dominion it would be a purposo of the
Dominion of India.''
A contrary view taken l;>y
the
said High Court in Union of India v.
Loke Nath Saha (')was dissented from.
We will now revert to the decision of this
Court in Ohaman·Lal Loona's case('). S. K. Das, J.,
(I} A.LR. 195i Cal. f,23:
(2) A.LR. 1952 Col. 140 {A).
t3) [[957] S.C.R. 1039.
', .. ,
1961
SciN!ia Stum
J{alJigation Co. I.td,
•"
-
·v.
.
,Union ·of India
,CajentkSfad!(ar J.
1961
SeWlirz s,,.,,,
.\'aui:ati•n Co. 1.td,
v.
Union of JN/ia
Gajtnir•:ail:or ].
422
SuPREME COURT REPORTS
(1962)
who spoke for tho Court, posed the question raised
for the decision of the Court in these words : "what
is the proper meaning of the expression 'a contract
fur the exclusiv<i purposes of the Dominion of
Pakistan", :md he answered it with tho observation
that "we assent to the view expressed by Chagla, C.
J ., in Union of India v. ChinubhaiJesliingbhai (')and
quoted with approval to the tests to which we have
already referred." The learned judge has also expressly approved of the decision in Krishna RanjanRasu'.•
case(') and disapproved the contrary \·iew expressed
in Union of India v. Loke Nath Salm('). Tn the ca.se
of Cha man JAi, Loona (') this Court was dealing with
a eontrnct entered into on behalf of the GovernorGencral in Council for the supply of fodder to the
Manag<'r, Military Farms, Lahore Cantonment, which
was in Pakistan on August 15, l!l47.
The trial
Con rt had founrl that the contract was not enforceable against the Union of India, but this conclusion
was re\•ersed by the High Court on the ground that
the fodder constituted military stores under the
exrlusive control of the joint Dcft•nce Council on
the appointoo day, aud that it was liable to Im
transferred to anywlwrc in India.
This Court held
that C\·en if it be assumed that the High Court was
right in holding that tho fodder was
liable
to be transferred to anywhere in
India, tho
contract
must
ne\•crthcless be held to
bo
one excluRivoly for the purposes of Pakistan
and the Union of India could not made liable
thereunder. This conclusion was based on the fact
that the purpose of a contract'is not to be confused
with the ultimate disposal of the goods supplied
thereunder, since such di~posal can in 110 way determine or morlifiy the contract. It. would thus be
~cen that in considering the natnrc of the contract
in the present appeal either of the two artificial
tests approved by this Court must be applied.
Does the application of either of the said tests
jnstify the answer gi\·en by the Appeal Court ?
That is tho main question which arises for decision
before us.
(I) (1952) 54 B.L.R. 561.
(2) A.I.R. 1954 Cal. 623.
(3) A.!.R. 1952 Cal. 140 (Al.
(4) [1957] S.C.R. 1039.
).·
...
-
-
,J
3S.C.R.
SUPREME COURT REPORTS
423It is clear that the fact that the contract in
question was made by the Couservator of Forests,
Kanara, is immaterial in determining jts character
under Art. 8( 1 ), nor is it relevant to consider the
fact that the contract had been made on behalf of
tho North-Western Railway. It is obvious that all
contracts prior to the appointed day wore made by
the officers of the Government of India or by or rm
behalf of the said Government; and so both the
Courts below are rightly agreed that .in determining
the character of the contract who initially made
the contract with the appellants is of no relevance.
Similarly the respondent cannot rely on the fact
that the contract was ma,de on behalf of the NorthWestern Railway and the original North-Western
Railway has now been split up into two sections,
the Pakistan section being known by the name of
North.'Western Railway and the Indian section being
known by the name of Eastern Punjab Railway.
It may be that the North-Western Railway on
whose behalf the contract was made now runs in
Pakistan alone, but that is hardly relevant for
determining the character of the contract. In dealing with this question we must look at the substance
of the contract and not its form.
It is true that the timber which was carried
to Karachi under the contract was for the purposes
of the North-Western Railway as a whole and
there is no evidence on the record to show that it
was intended to be used for that section of the said
Railway which ran either through Sind or Western
Punjab which subsequently formed part of Paki·
stan. On the other hand, the Appeal Court has
found that the goods were lying in Karachi from
August 15, 1947, to December 1947, and that it
can be taken to be established that these goods
were in the Dominion of Pakistan on the relevant
!
,
date, and had been in fact used for the purposes of
' the North-Western Railway which was in the Dominion of Pakistan. We have already seen that the
J96I
S&india Steam
Navigatian Co~ Ltd,
V.'
Uni'on of India
Gajendraeodktzr :.J.
!ff I
.~i•St.a
._'t'cii,..,i• C.. LJI.
v.
Union of I.Ji•
Caj,.Jrqdl= ].
•
' -
424
SUPREME COURT REPORTS
(1962]
purpose of the contract is not to be confused with the
ultimllt.e user or disposal of the good~, but it appears that the learned trial judge was somewhat influenced by th<' fact that the goods under the contract were originally intended for the use of the
North-'\Vestern Railway as a whole and since the us3
of the said railway as a whok could not be said to
be limited to the use of Pakistan alone the contract
was not exclusively for the purposes of Pakistan.
It. is <mly in that context that we have referred to
the finding of the Appeal Court that in the circumstances of this case there can be no doubt tliat the
goods whiclt lay in Karachi from August 15, l!J4 7,
to Deoember 19!i, havf' in fact been used bv the
North-Western Railway whic'h fell to the share of
the Dominion of Pakistan.
Xow, applying the tests approved by this
Court the question which wo havo to ask ourselves
is: If the said contract had been made on August
15, l94i, ·would it 1iave been a contrac·t for the
Dominion of Pakistan or not ? \Ve have seen the
nature of the contract. It was a contract for the
carrhgc of logs of teakwood timber from the
Kanara forests to Karaehi for the purposo of the
railway. The dcsti nation of the delivery of goods
wa.s Karachi, and tJie object of securing the goods
w8.ll to me them for the railway. In such a case it iR
difficult tu resist the conclu'!ion that if this contract
had been mad(\ on August 15, UH7, it would not
have been exclu.oively for tho purposes of the
Dominion of Pakistan. It is inconceivable that on
the appointed <lay a contract could ha,·o been made
for the shipment of goods to Karaehi unless the
eoutract was for the 1mrposcs of the Dominion of
Pakistan. If the contract had beon cvon partially
for the- purposes of India shipment of all the goods
to Karachi would not havo been th~ term of the
contract. The same result follows if we apply the
e.lterna.tive test. If Pakistan bad existed on the
date of the contract, in our opinion, the contract
-
...
' .
i
3g.C.R.
SUPREME COURT REPORTS
425
as made would obviously and clearly be for the
purposes of Pakistan. That is the view taken by
the Appeal Court, and we see no reason to difi'.ir
from it.
In this connection the Appeal Court has taken
into account the fact that the goods had become
the property of Pakistan by virtue of Art. 6 of the
Order so that on the appointed day the goods the
shipment of which was the subject matter of the
contract were the property of Pakistan. If that be
so, we do not see how we cau escape the conclusion
that the application of either of the two artificial
tests prescribed by Art. 8( 1) will inevitably lead to
the conclusion that the contract had been made exclusively for the purposes of Pakistan. We have already
seen that the tests enunciated by the Bombay
High Court in the case of Ohinubhai J eshinghbai (')
have been expressly approved by this Court in
th\l case of Chaman Lal Laona ('). It is true that in
terms the significance of the vesting of the title in
the goods by the operation of Art. 6 of the Order to
which the Bombay High Court attached considerable
importance in the case of Chinubhai Jeshingbhai (')
has not been noticed by this Court, and so in
that sense it may be permissible to urge that that
part of the judgment had not been expressly
approved. However, such a contention, in our
opinion is purely technical. We are inclined to hold
that the alternative tests which have been expressly approved by this Court are wholly consistent
with the consideration of ownership to which the
Bombay High Court attached importance, and is
both relevant and material in the application of
the said tests. If the goods which are the subject
matter of the contract have become the goods of
Pakistan that would be a relevant and material
fact in considering whether the contract in qmistion
if made on· the appointed day would have heen
made by Pakistan, or whether Pakistan would have
made the said contract if it had been in existence
( l) ( 1952) 54 B.L.R. 561.
(2) [1957] S.C.R. 1039.
. 1961
Scindia SI..,.
Navigation CO. Ltd.
v.
Union of lmlia
GajmdratHk•r J.
StilUiia St•am
.X<WitaJion C.. Lid.
v.
Unicn of /niia
·f?ajtniratatil;ar J.
... ··- ..... ..
--
\
426
SUPREME COURT REPORTS
[1962]
on the nctual date of the contract. Therefore in
our opinion, t~e Appeal Con~t was right in com'ing
to the conclus10n that the s111t contract foll within
the scope of Art. 8(l){a) and the assumption made
by the appellants that Art. S(l)(b) could be invoked against the respondent is not well founded.
The noxt question which requires to be coneidered is whether the appellant·s claim on the
alternative ground of the Press Communique is
well-founded. Let us first read the Press Communique:
"The GO\·ernment of India has been considering for some time the question of arranging for the speedy payment of the outstanding claims in respect of supplies and services
rendered to the undivided Government of
India up to and before the date of partition.
At the time of the partition there was
an arrangement between the Dominions that
each Dominion would pay the claims arising
in its area subject to subsequent adjustment,
particularly those rclatin~ to areas now included in Pakistan, are still outstanding due
partly to disturbances in the Punjab and
large-scale movement of population and
partly to the discontinuance of payment by
the Pakistan GO\·ernment, from about the
middle of December last owing to diffcr<'ncc
of opinion between the two Governments
about the liability for these payments. In
order to avoid hardship to the suppliers and
contractors the Government of India, after
careful consideration have decided that they
should undertake the initial liability for these
payments and reco\·cr
Pakistan's share
through Debts Settlement."
Mr. Purshottam contends that this Communique
represents an agreement between the two Dominions and so under Art. 3( 1) of the Order the appel·
' •
3S.C.R.
SUPREME COURT REPORTS
427
!ants' claim can be justified on the strength of this
agreement alone even if the said claim fails under
Art. S(l)(b).
The Courts below have held that the
appellants had failed to prove that the Communique
in question represents an agreement between the
two Dominions. They have construed the Communique as amounting to no more than a uniJ
lateral declaration ma.de by the Union to which
Art. 3(1) cannot apply. Mr. Purshottam quarrel
with the correctness of this conclusion.
In support
of his argument Mr. Purshottam has taken
us
through the whole of the relevant correspondence.
We may briefly indicate the broad features of the
said correspondence. It appears that on July 10,
19i8, the Director-General, Railway Department,
• Government of Pakistan, Karachi, wrote to the
General Manager, N.W. Railway, Lahore, in regard
to the question about the disposal of pre-partition
claims outstanding against the undivided Government of India. In this letter he set out the contents of the Press Communique on which the appellants rely.
The Collector of Stores, Karachi,
.-
drew attention of the appellants to the said
Communique by Jiis letter dated July 19, 194S.
In their correspondence with the railway authorities the
appellants
have sometimes described this Communique as joint press notification. Similarly, in their letters written to appellant 1 the railway authorities in Pakistan also have
J described the said Communique as joint notification
"said to have been issued by the Dominions of
India and Pakistan''. Then we have some letters
from the railway authorities in India which would
show that the appellants' claim was being considered
by them. We have, for instance, a letter addressed
to the Stores Accounts Officer, E. P. Raihvay, Delhi,
by the Headquarters Office at Delhi in which the
• -, appellants' chim is indicated at serial numbers
·4 and 5, and the Stores Accounts Officer is asked to
deal with it. The Administrative Officer, E. P. Railway, Delhi, wrote to appellant 1 to sa_v, that its
1961
Scindia Steam
.NaDigation Co. Ltd~
v.
Union of India
Gajendrag4dk" r ].
1~1
&inliia St1om
N'1>i1alion Co. Lid.
v,
Union of 1"'"4
Gaj.Mr.,adkar ].
428
SUPREME COURT REPORTS
[1962]
claim had been registered and that further action •
would be taken when orders of the Railway Bo11.rd
had been received.
The appellants then reminded
the railway officers from time to time and on
August 5, 1950, their attorneys were told that the
claim was still under verification by the N. W.
Railway and until it is verified by the }'.A.&C.A.O.,
N. W. Railway, Lahore, it could not be finahserl.
")..
The attorneys of the appellants then nnquired
as to how much time the process of verification
would take; but since no satisfactory answer was
given the appellants filed the present suit. It is,
however, clear that some attcm pts were made by
the railway authorities in India for getting tho
appellants' claim verified but the said attempts did
•
not succeed. Indoed, the lear1H'd Attorney-General,
for the respondent, has filed an affidavit by
Mr. R. L. Takyar. Legal Assistant, Northern Railway, Baroda House, New Delhi, which shows that
in pursuance to the assurance 11;iven by the learned
Advocate-General before the Bombay High Court
attempts were ma.de by the respondent to have the
appellants' claim verified but the said attempt.a
failed, and it adds that "in the absence of the veri-
-
fication of the claim and the authorisation by the
Pakistan Government, the Union of India was not
in a position to make any payment ex gratia to the
appellants". We sympathise with the grievance
made by the appellants that they have been d1frcn
from pillar to post and have yet recci,·ed no satis-
,
faction to their claim either from the Pakistan
'
Government or from the respondent; but the
difficulty in the way of the appellants is that the
statements in the eorre.spondenee to which we have
been referred do not at all justify the appellants'
claim that the Communique repreRents an agreement between tho two Dominions. First of all the
appellant.II
should
have
taken
proper steps
to
prove tbe
said Communique
and should1
11
have called upon the respondent to produce all
relevant documents in respect of the alleged agree-
• ..
..
I
3 S.C.R.
S UPR.EME COURT REPORTS
429
ment &n which the appellants relied. Besides, the
.it terms of the Communique themselves negative the
theory that the Communique represents an agreement between the two Dominions. The communique expressly refers to the discontinuance of payment by the Pakistan Government from about the
middle of December owing to difference of opinion
between the two Governments about the liability of
-<
these payments, and it proceeds to state the decision
of the respondent that in order to avoid hardships
to suppliers and
contractors the respondent had
decided that it should undertake initial liability
for these payments and recover Pakistan's share
through Debt Settlement. That sometimes in the
course of the correspondence the Pakistan authori-
~
ties referred to the Press Communique as a joint
• Communique can hardly assist the appellants in
showing that the Communique was the result of an
agreement between the two Dominions. It is not
unlikely that there may have been some agreement
between the two Dominions because the conduct of
the railway authorities in India can be satisfactorily explained only on the basis of some agreement
or other, but unfortunately the appellants have not
,_,., produced sufficient or satisfactory material to prove
their case that there was a specific agreement between the two Dominions which brought into play
the provisions of Art. 3(1) of the Order. On the
material produced by the appellants the Courts
below have made a concurrent finding that no such
1 agreement had been proved. Having gone through
the correspondence to which our attention was
drawn we are satisfied that the appellants cannot
successfully attack the validity or correctness of the
said concurrent conclusion. Therefore, if the theory
of an agreement between the two Dominions fails
the Press Communique cannot help to sustain the
appellants' claim against the respondent. It is not
\ suggested by the appellants that the unilateral
•
-statement
which
is
contained in the Press
Communique can itself without anything more help
to sustain the appellants' claim.
1961
Scindia Steam
Navigation Co. Ltd.
v.
Union of India
Gajdndra1adkar J.
. .
1961
Scmdia Stta1tt
·.\d::ifation Co. Ltd.
V,
L'nfon of fniia
Gajnidra~aiku J.
Sl<boa Rae J.
~ ....
---·~·-.............
430
SUPREME COURT REPORTS
[1962)
Then lllr. Purshottam wanted to cont<>nd that,.
the respondent was estopped from disputing its
liability under the contract, and he also wanted to
urge the ground of no\·atio.
His contention was
that the facts necessary for the purpose of pleading
estoppcl an<l novatio were ;wailable on the record
aml in the int~rest of justice he should not be precluded from urging those points on the gro1md that
the appdlants had not taken the said points in tho ).
trial court. \Ve are not imprcs,cd by this ;irgumeut.
There can be no doubt that both the pleas are picas
which can be effectively raised only after pleading
the relevant and material facts ; aml since no relevant or material fact had been m·crrcd in the
plaint on which either of tlw t\1·0 picas can be
~
raised and no issue was asked for in the tria I co mt
in respect of either of the said picas the Appeal •
Court was justified in refusing leave to the appellants to raise the said pleas for the first time in
appeal. In our opinion, Mr. Purshottam io not right
in contending that the Appeal Court was unduly
tcl'hnical when it refused leave to tlw appellants
tu raise the said picas. We have already seen that
on the pleadings as many as elornn issues were , ~
framed by the learned trial judge. The plaint itself is an elaborately drawn document, and so the
appellants cannot Le heard to complain if for their
failure to make adequate and proper pleadings they
.,
are not a lie, wed to raise the plea of cstoppel or
novatio :it the appellate Htage.
[n our opinion,
therefore, the Appeal Court \\·as right in not permit· \
ting tho saicl picas to be raised in appeal.
In the result the appeal faib and is dismissed
with costs.
SOBBA RAu, .J.-1 regret my inability to
agree in regard to the application of Art. 8(1) of the
Indian lndcpe11dence (Rights, Property :rnd Liabilities1 Order, l !Hi (hereinafter called the Order), tQ r •
the facts of the case.
•
J
. '\
3S.C.R.
SUPREME COURT REPORTS
431
The facts are fully stated in the judgment of
my learned brother, Gajendragadkar, J.