# Th• Unicn ef India v. Chaman Lal L«ina

- **Citation:** [1957] 1 S.C.R. 1039
- **Court:** Supreme Court of India
- **Decided:** 1957
- **Case number:** Civil Suit No. 134 of 1949
- **Bench:** S. R. Das C.J, Jafer Imam, s. K. DAS, GoVINDA MENON, A. K. Sarkar J
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/th-unicn-ef-india-v-chaman-lal-l-ina-1296
- **Pages:** 13

## Headnote

Partition of India-Distribution
of
rights
and liabilitiesContract by Governor-General in Council, if and when for the purposes
of Pakistan-Test-Such purpose, if can be modified by powers of
control vested in /oint Defence Council-Adjudication of. rights and
liabilities
under
such
contract-Indian
Independence
(Rights,
Property and Liabilities) Order, 1947, Arts. 8(1), 3(2)-/oint Defence
Council Order, 1947, Art. B(c).
The correct test to determine whether a contract made before
the partition
of India on behalf
of the
Governor-General
in
Council comes within the purview of cl. (a) 'of Art. 8(1) of the
Indian
Independence
(RightS; Property and
Liabilities)
Order,
1957
B1JJhiruddi11 khmf
v..
Thi Stat• ef Bilw
Imam].
1957
April 30.
1957
Th• Unicn ef India
v.
Chaman Lal L«ina
1040
SUPREME COURT REPORTS
[1957]
1947,
so ·as to be deemed
to
have
been made on behalf of the
Dominion of Pakistan, is-either (I) if the contract was 1nade on
AubTUSt I?,. 1947, it \V?ul<l have been a contract for the purposes of
the Dom1n1on of Pakistan ; or (2) if Pakistan had existed on the
day the contract was made, it would be a contract for. the purposes
of Pakista1:.
·
Union of India '" Chinu Bhai feshingbhai, I.L.R. 1953 Bom.
ll7, approved.
1~he purpose of a contract is not to be confused with
the
Ultimate disposal of the goods supplied thereunder since such
disposal can in no way detcnnine or modify it. Nor do the po\vers
of
control
over
military
stores
vested
in
the
Joint l)cfencc
Council by Art. 8(c) of the Joint Defence Council Order, J947, and
saved by Art. 3(2) of the Indian Independence (Rights, Property
and Liabilities) Order, 1947, whereby the goods might be transferred anywhere in India, make any difference and the rights and
liabilities accruing from such contracts fall entirely to be adjudged
by the provisions of the Indian Independence Order and not by
the Joint Defence Council Order.
The concluding part of Art. 8( I) makes it quite dear that the
Article makes no distinction between contracts \vhere
the consideration is either executed or executory in nature and applies
equally to both.
Elahi Bux v. Union of India, A.I.R. 1952 Cal.
471
and
Krishna~Ranjan v. Union of India, A.I.R. 1954 Cal. 623, approved.
Union of l:idia
v.
Loke Nath,
A.LR.
1952
Cal.
140,
disapproved.
Consequently, in a case where the Union of India was sought
to be made liable on the basis oi a contract entered into on behalf
of the Governor-General of India in Council for the supply of
fodder to
the Manager, Military Farms,
Lahore
Cantonment,
which was in Pakistan on August 15, 1947, and the trial Court
found for the Union of India but the High Court, taking the view
that the· fodder constituted military
stores under the exclusive
control of the Joint Defence Council on August 15, 1947, liable to
be
transferred
anywhere in
India,
reversed
that finding, ,the
contract, even assuming that view to be correct, must be held to be
one exclusively for the purposes of Pakistan as from that date and
the Union of India could not be made liable thereunder.
CIVIL APPELLATE
JURISDICTION :
24 of 1954.
Civil Appeal No.
Appeal under Article 132 re.ad with Article 147 and
Article 133 (I) ( c) of the Constitution of India from the
judgment and order dated July 17, 1952, of the Punjab
High Court in First Appeal from Order No. Y of 1949
against the judgment and decree of the Sub-f udgc 1st
S.C.R.
SUPREME.COURT REPORTS
1041
Class, Fcrozepur dated February 9, 1949, in Civil Suit
No. 134 of 1949.
Porus A. Mehta, R. Gopalakrishnan and R. H. Dhebar,
for the appellant.
Hardayal Hardy, for the respondents.
1957. April 30. The Judgment of the Court was
delivered by
I
S. K. DAs J.-This is an appeal on the strength of
a certificate granted by the High Court of Punjab at
Simla. The appellant is the Union of India and the
respondent Messrs. Chaman Lal Loona and Company,
military contractors at Muktsar in the district of
Ferozepur, now in the Indian State of Punjab.
The relevant facts are these. In the C

## Text

S.C.R.
SUPREME COURT REPORTS
1039
This objection, however, does not require a detailed
consideration because the Sessions Judge clearly stated
in his judgment that apart from the onus, he
w~s
satisfied that the prosecution had fully established on
the evidence that the appellant had failed to send a
copy of the budget as required by law.
It was also pointed out that s. 65 does not provide
for any imprisonment in default . of payment of fine,
but the
appellant
was sentenced to 15 days simple
imprisonment in default of payment of fine. · Section 33
of the Code of Criminal Procedure read with ss. 40 and
67 of the Indian Penal Code appears to us to be a clear
answer to this contention.
It was also pointed out that under s. 65 of the Act
a sentence of fine extending upto five hundred rupees
could be imposed for a second or for a subsequent
offence. We need not, however, consider that matter
in the present appeal as it was conceded on behalf of
the appellant that the sentence of fine imposed upon
him in the present case was for a first offence. ·
The appeal is accordingly dismissed.
Appeal dismissed.
UNION OF INDIA
v.
CHAMAN L:(\.L LOONA
(S. R. DAS C.J., JAFER IMAM, s. K. DAS,
GoVINDA MENON and A. K. SARKAR J J.)
Partition of India-Distribution
of
rights
and liabilitiesContract by Governor-General in Council, if and when for the purposes
of Pakistan-Test-Such purpose, if can be modified by powers of
control vested in /oint Defence Council-Adjudication of. rights and
liabilities
under
such
contract-Indian
Independence
(Rights,
Property and Liabilities) Order, 1947, Arts. 8(1), 3(2)-/oint Defence
Council Order, 1947, Art. B(c).
The correct test to determine whether a contract made before
the partition
of India on behalf
of the
Governor-General
in
Council comes within the purview of cl. (a) 'of Art. 8(1) of the
Indian
Independence
(RightS; Property and
Liabilities)
Order,
1957
B1JJhiruddi11 khmf
v..
Thi Stat• ef Bilw
Imam].
1957
April 30.
1957
Th• Unicn ef India
v.
Chaman Lal L«ina
1040
SUPREME COURT REPORTS
[1957]
1947,
so ·as to be deemed
to
have
been made on behalf of the
Dominion of Pakistan, is-either (I) if the contract was 1nade on
AubTUSt I?,. 1947, it \V?ul<l have been a contract for the purposes of
the Dom1n1on of Pakistan ; or (2) if Pakistan had existed on the
day the contract was made, it would be a contract for. the purposes
of Pakista1:.
·
Union of India '" Chinu Bhai feshingbhai, I.L.R. 1953 Bom.
ll7, approved.
1~he purpose of a contract is not to be confused with
the
Ultimate disposal of the goods supplied thereunder since such
disposal can in no way detcnnine or modify it. Nor do the po\vers
of
control
over
military
stores
vested
in
the
Joint l)cfencc
Council by Art. 8(c) of the Joint Defence Council Order, J947, and
saved by Art. 3(2) of the Indian Independence (Rights, Property
and Liabilities) Order, 1947, whereby the goods might be transferred anywhere in India, make any difference and the rights and
liabilities accruing from such contracts fall entirely to be adjudged
by the provisions of the Indian Independence Order and not by
the Joint Defence Council Order.
The concluding part of Art. 8( I) makes it quite dear that the
Article makes no distinction between contracts \vhere
the consideration is either executed or executory in nature and applies
equally to both.
Elahi Bux v. Union of India, A.I.R. 1952 Cal.
471
and
Krishna~Ranjan v. Union of India, A.I.R. 1954 Cal. 623, approved.
Union of l:idia
v.
Loke Nath,
A.LR.
1952
Cal.
140,
disapproved.
Consequently, in a case where the Union of India was sought
to be made liable on the basis oi a contract entered into on behalf
of the Governor-General of India in Council for the supply of
fodder to
the Manager, Military Farms,
Lahore
Cantonment,
which was in Pakistan on August 15, 1947, and the trial Court
found for the Union of India but the High Court, taking the view
that the· fodder constituted military
stores under the exclusive
control of the Joint Defence Council on August 15, 1947, liable to
be
transferred
anywhere in
India,
reversed
that finding, ,the
contract, even assuming that view to be correct, must be held to be
one exclusively for the purposes of Pakistan as from that date and
the Union of India could not be made liable thereunder.
CIVIL APPELLATE
JURISDICTION :
24 of 1954.
Civil Appeal No.
Appeal under Article 132 re.ad with Article 147 and
Article 133 (I) ( c) of the Constitution of India from the
judgment and order dated July 17, 1952, of the Punjab
High Court in First Appeal from Order No. Y of 1949
against the judgment and decree of the Sub-f udgc 1st
S.C.R.
SUPREME.COURT REPORTS
1041
Class, Fcrozepur dated February 9, 1949, in Civil Suit
No. 134 of 1949.
Porus A. Mehta, R. Gopalakrishnan and R. H. Dhebar,
for the appellant.
Hardayal Hardy, for the respondents.
1957. April 30. The Judgment of the Court was
delivered by
I
S. K. DAs J.-This is an appeal on the strength of
a certificate granted by the High Court of Punjab at
Simla. The appellant is the Union of India and the
respondent Messrs. Chaman Lal Loona and Company,
military contractors at Muktsar in the district of
Ferozepur, now in the Indian State of Punjab.
The relevant facts are these. In the Court . of the
senior Subordinate Judge
at Ferozepur, in August,
1948, the respondent Company made an application,
purporting to be an application under s. 8(2) and s. 20
of the Arbitration Act, 10 of 1940, wherein the respondent alleged that in 1945 the respondent had entered
into a contract for the supply of "bhoosa" (fodder)
to the military department of
the
then
undivided
India through the Manager,
Military Farms, Lahore
Cantonment. The contract. it was alleged, was signed
by the Assistant Director. Military Farms, on behalf of
the then Government of India. The agreement . between
the parties was that the said Manager would also supply,
on payment of price, wire coiis in connection with the
supply of blwosa presumably for the purpose of tying
the bundles of fodder. and on the supply being made
and on return of the wire coils, the military department
would give credit for the price of the coils already paid
by the respondent. In November, 1945, the respondent
supplied fodder and returned 152 bundles of wire
coik The Manager, Military Farms, Lahore, informed
the resoondent. however. that out of 152 bundles of
wire c~ils. said to have . been sent, 24 bundles had not
been received,
though no
note
of such non-delivery
was made at the time
the consignment was received.
The respondent had also deposited Rs. 11,026 by way
of security with the military department connection
with
the
contract.
The
agreement
contained
an
1957
Union of India
v.
Chaman Lal Loona
S. Jr. Das J.
1957
Union of India
v.
Chaman Lal Loona
S. K. Das].
1042
SUPREME COURT REPORTS
[19571
arbitration clause to the effect that if a dispute arose
between · the parties,
it should be decided by ·the
arbitrator named therein, viz., the District Commander
concerned. The respondent so.id that he had a claim
agai;ist the appellant for Rs. 720, the price of 24
bundles of wire coils at Rs. 30 per bundle, and for
refund of Rs. 11,026, .and prayed in terms of s. 20 of
the Arbitration 1\ct that the appel!ant be directed to
file the agreement and other reievarrt documents, and
that the Court do refer the dispute to the arbitrator
named for the purpose of filing an award.
As required by sub-s. (2) of s. 20 of the Arbitration
Act, the application was registered as a suit, and a
notice was issued to the appellant to show cause. The
appellant showed cause by a written statement filed on
November 4, 1948, in which the two substantial pleas
taken were-( 1) that by reason of the provisions of
the
India
Independence
(Rights,
Property
and
Liabilities) Order, 1947, hereinafter referred to as the
Independence Order, 1947, the Dominion of India, and
later the Union of India, had no liability in respect of
the contract in question, the purposes of which contract
as from August 15, 1947, were purposes exclusively for
the Dominion of Pakistan; and (2) the Court at Ferw,eporc had no jurisdiction to trv the suit. as the cause of
action did not arise within its territorial jurisdiction.
The two issues which were tried by the learned
Subordinate Judge were the aforesaid issues of liability
and jurisdiction. On jurisdiction, he found in favour
of the respondent, on the ground that the respondent
was a 'displaced person' living in Muktsar which is in
Ferozepore and therefore the· Court at Ferozepore had
jurisdiction to try the suit. The High· Court affirmed
this finding, and as nothing now turns upon this issue,
we are not called upon to make any pronouncement
thereon. The issue as to the liability of the appellant
on the basis of the contract in question is,
however,
very much a live issue. The learned Subodinatc Judge
found in favour of the appellant on
this issue, and
dismissed the application. The High Court reversed
that finding, and allowed the appeal. In reversing the
finning of the learned Subordinate Judge, the High
S.C.R.
SUPREME COURT REPORTS
1043
Court relied on the provisions of the Joint Defence
Cou.ncil Order, 1947, to be referred to hereinafter as the
Defence Order, 1947. The precise ground on which the
High Court proceeded may best be put in the words of
Khosla J. who gave the leading judgment. Khosla J.
said:
"In the present case the Lahore Military farm is
situated at Lahore and whether the fodder was supplied
in 1945 or after the 15th of August 1947, the purpose
will be deemed to be a purpose of the Dominion of
Pakistan on account of the territorial situation of
Lahore. But in the present case, the fodder was to be
supplied to a Military Farm and the fodder, therefore,
constituted Military Stores. Military Stores were
kept
joint and under the exclusive control of the
Joint
Defence Council who had the power of allocating these
stores among the two Dominions and for transferring
them from one place to another. Therefore, fodder
lying in the Military Farm, Lahore, was not, on 15th
August 1947, the exclusive property of the Dominion
of Pakistan but was under the exclusive control of the
Joint Defence Council.
This fodder could
be
transferred to a farm in India and thus could become the
property of the Dominion of India. In the circumstances, it cannot be said that the contract for supply
of fodder to the Military Farm, Lahore, was a contract
exclusively for the purposes of the Dominion of Pakistan
if the contract were viewed on the 15th of August 1947,
and,· that .. being so, it must be held that the c~ntract
was not a contract exclusively for the purposes of the
Dominion -of Pakistan. The decision. of the learned trial
Judge on this point must, therefore, be set as1de."
The principal question in this appeal is wl:ether the
High Court is right in its view as to the true scope and
effect of the relevant provisions of the Independence
Order, 1947, and
the Defence Order, 1947. Learned
counsel for the appellant has challenged the correctness
of that view, and has submitted-(1) that on a true
construction of Art. 8 of the Independence Order, 1947, .
the contract under consideration in this case was as
from the· appointed day (i.e., August 15, 1947), a conuact exclusively for the purposes of the Dominion of
1957
U11ion of India
v.
C!iaman Lal loona
S. K. Dar J.
1957
Union of India
v.
Chaman Lal Loono
S. K. Das].
1044
SUPREME COURT REPORTS
(1957]
Pakistan and si)all be deemed to have been made on
behalf of that Dominion, and all rights aiid liabilities
which have accrued or may accrue under such contract
shall be .the rights and liabilities of the Dominion of
Pakistan; (2) that the Defence Order, 1947, which set
up a Joint Defence Council and provides for the exercise of certain powers of control by the said Council
under Art. 8 of that Order did not in any way affect
the rights and liabilities arising out of the contract,
which rights and liabilities
were
governed
by
the
relevant provisions of
the Independence Order, 1947;
and (3) that, in any view, the claim in the present case
did not relate to military stores as the High Court
wrongly assumed, and the Defence Order, 1947, had
no application at .all to the facts of this case.
•
On behalf of the respondent, the correctness of each
of the above submissions has been seriously contested,
and learned . counsel for the respondent has strongly
contended that the view of the High Court as to the
relevant articles of the Independence Order, 1947, and
the' Defence Order, 1947, is correct. Learned counsel
also raised a preliminary point of objection to the effect
that on an application imder s. 20. Arbitration Act,
the only point for decision was if there was an arbitration agreement ar.d the question of liability w_as one
for the arbitrator and not for · the Court to decide.
Ordinarily, that would be so.
When, however, we
pointed out to learned counsel tha.t the Union of India
.as such was admittedly not a party to the arbitration
agreement and could not be dragged, therefore, to an
arbitration proceeding on the strength of an agreement
to which it was not a party unless by operation of law
it was deemed to be a party to the agreement, learned
counsel gave up his preliminary objection and conceded
that the question of liability must be decided in this
case with reference to the provisions of the Independence Order. 1947, and the Defence Order, 1947.
It is
c~nvenient at this stage to set out the relevant
provisions of the two Orders. ..The Defence Order, 1947,
was made in exercise of the powers. conferred by
sub-s. (1) of s. 9 and in pursuance ofsub-s. (1) of s. 11 of
the Indian Independence Act, 1947, and was published
S.C.R.
SUPREME COURT REPORTS
1045
on August 11, 1947. The Independence Order, 1947,
was made in exercise of the powers conrerred bv s. 9
of
the Indian Independence Act,
1947,
and' was
published on August 14, 1947.
Both came into force
at once. Article 3 of the Defence Order, 1947, states :
"(l) As from the 15th day of August, 1947, there
shall be set up a Council to be known as the Joint
Defence Council for India and Pakistan.
(2) The said Council, hereinafter referred to as the
Joint Defence Council, shall consist of-
( i) the
Governor-General . of
India,
(ii)
the
Defence Minister of India, (iii) the Defence Minister
of Pakistan, and (iv) the Supreme Commander of His
Majesty's
forces in
India and Pakistan
(hereinafter
referred to as the Supreme Commander)."
Article 8, so far as it is relevant, is' in these terms :
"The Joint Defence Council shall be in exclusive
control of-
( a) the division of
the Indian forces between
the Dominions and their reconstitutions as two separate
Dominion forces;
(b) the allocation,
transfer
and
movement
of
officers and men belonging to the Indian forces for
the purposes of such re-constitution :
.
( c) the
allocation,
transfer and
movement for
the purposes of such reconstitution of plant, machinery
equipment and stores held by the Governor-General in
Council immediately before the 15th' day of August,
1947, for the purposes of the Indian forces; etc."
·
The · Independence Order, 1947. states in Art. 2 that
the
'appointed
day'
means
the
fifteenth ,'\ugust,
1947. Artide 3 so far as it is relevant for our purpose,
States :
·
" ( 1) The provisions of this Order relate to the
initial distribution of rights, property and liabilities
consequential on the setting up of the Dominions of
India and Pakistan, and shall have effect subject to
any agreement between the two Dominions or the
Provinces concerned and to any award that may be
made by the Arbitral Tribunal.
·
(2) Nothing in this Order affects the powers of
control
over military
plant, machinery, equipment
1957
Union of India
v.
C!iaman Lat LooTIJJ
S. K. Das].
1957
Union of India
v.
Chaman Lal Loona
S. K. Das].
1046
SUPREME COURT REPORTS
[1957]
and stores conferred on the Joint Defence Council by
the Joint Defence Council Order, 1947.
..
. . . . . . . . . . . . . . . . . . . .
Article 8(1), which is very important for our purpose,
is in these terms :
" ( l) Any contract made on behal.f of the Governor-General in Council 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 Dominion
of Pakistan, be deemed to have been made on behalf
of the Dominion of Pakistan instead of the GovernorGeneral in Council; and
(b) in any other case, be deemed to have been
made on behalf of the Dominion of India instead of the
Governor-General 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."
The first question is, what is the true scope and
effect of Art. 8(1) of the Independence Order, 1947?
Does it apply to the contract in question, and; if so,
does the contract fall within the purview of cl. (a) or
cl. (b) ? At one stage of the argument, learned counsel
for the respondent contended that Art. 8 ( l) did not
apply
to what is sometimes described
as
executed
contracts; this point was also urged before the Kapur J.
of the Punjab High Court (as he then was) and one
of the reasons given by him for a reference of the case
to a larger bench was the difficulty he felt if the
contract in question which has been performed and
executed long before August 15, 1947, so far as the
respondent was concerned, attracted the operation of
cl. (a) 0£ Art. 8(1). It is necessJTy to appreciate clearly
the distinction between the
two classes of contracts
where the consideration is either executed or executory.
"An executed consideration consists of an act
for a
promise. It is the act which forms the consideration
...... No contract is formed unless and until the act
S.C.R.
SUPREME COURT REPORTS
1047
is performed, e.g., the-payment for a railway ticket,
but the act stipulated for
exha~sts the consideration,
so
that any
subsequent
promise,
without
further
consideration, is merely a nudum pactum ........ In an
executed consideration the liability is outstanding on
one side only ; it is " present as opposed to a future
consideration.
In
an
executory
consideration
the
liability is outstanding on both sides. It is in fact a
promise for a promie ; one promise is brought by the
other .......... The contract is concluded as soon_ as the
promises are exchange<l. In mercantile oontracts this
is by far the most common variety.
In other words, a
contract becomes binding on the
exchange of valid
promises, one being the consideration for the other. It
is clear, therefore, that there is nothing to prevent one
of the parties from carrying out his promise at once,
i.e., performing his part of the contract ; whereas the
other party who provides the consideration for the act
of or detriment to the first may not carry out his part
of the bargain simultaneously with the first party."
(Chitty on Contracts, Vol. I, 21st Edn. pp. 43-44). On
a plain reading of Art. 8(1) of the Independence Order,
1947, it is clear that it applies to both classes of cases ;
it says, in its concluding part, that "all rights and
liabilities which have accrued or may accrue under any
such contract, shall. ....... be rights or liabilities of the
Dominion of Pakistan or the Dominion of India, as the
case may be." If the contract has been fully and
completely performed on both sides, no question of
any further rights and liabilities under the contract is
likclv to arise. If. however, the contract is one in
which the consideration is. ~xecuted on one side, there
will be a right on one side and ·an outstanding liability
on the other. If the consideration is cxecutory on both
sides, there will be outstanding rights and liabilities on
both sides. In talking of "all rights and liabilities
which have accrued or may accrue" under the contract
the Article clearly contemplates both classes of cases.
On this question, we approve of the view taken in
Elahi Bu.-.: v. Union of India (1) and Krishna Ranian v.
(l)A.I.R. 1952 Cal. 471.
7~1 S. C. India/59
1957
Union •f lttdia
v.
Ckaman Lal Laona
S. K. Dru].
1957
Union nf lndfr1.
Y•
Clzaman Lr,! loo11a
1048
SUPREME COURT REPORTS
Jl957J
Union of India ( 1) and disapprove of the view expressed
by Roxburgh J. in Union of India v. Loke Nath (2).
It is further clear that the first part of Art. 8(1)
creates a legal fiction.
The contract is actually made
before August 15, 1947, (the appointed day) ; but as
from that date, the contract shall be deemed to have
been made on behalf of the Dominion of Pakistan, if
the contract is for purposes which as from that day are
exclusively purposes of the Dominion of Pakistan, and
in anv other case it shall be decme<l to have been made
on behalf of the Dominion of India.
What is the
proper meaning of the expression "a contract for the
exclusive purposes of the Dominion of Pakistan" ? We
assent
to
the
view
expressed
by Chagla C.J. in
Union of India v. Chi nu Bhai feshingbhai (' ). .'3id the
learned Chief Justice-
"lt is clear from the language tised in art. 8 that
the test to be applied with regard to this contract is
not whether the contract was for the purposes of the
Dominion of Pakistan at the date when it was made.
Er /1ypothesi
that test
is clearly inapplicable.
All
contracts contemplated by art. 8 must be
contracts
which when made were made by undivided India by
the Governor-General in Council.
The test that must
be applied is an artificial test and the test may be
either if the contract had been entered into on August
15, 1947, whether it would have been a contract for
the purposes of the Dominion of Pakistan, or if the
Dominion of Pakistan had been in existence when the
contract was entered into, whether it would have been
a contract for the purposes of Pakistan."
This, we think, is the correct test to apply for determining the true scope and effect of Art. 8(1) of the
Independence .Order, 1947, and applying this test, there
is no doubt that the contract in question comes under
cl. (a) of the said Article.
The purpose of the contract
was to supply fodder to the Manager, Military Farms,
Lahore Cantonment, which farms were in Pakistan on
the
appointed {lay.
The
contract
was,
therefore
(II A.l.R. 1954 (;al. 623.
(2) A.J.R. 1952 Cal. 140.
13) l.L.R. 1953 Born. 117, 130.
S.C.R.
SUPREME COURT REPORTS
1049
. exclusively for the purposes of the Dominion of Pakistan as from the appointed day.
The second question is-do the provisions of the
Defence Order, 1947, make any difference in the legal
position ? The High Court thought, erroneously in our
opinion, that they did. It is true that cl. (2) of Art. 3
of the Independence Order, 1947, says that nothing in
that Order affects the powers of control over military
plant, ma<Zhinery, equipment and stores conferred on
the Joint Defence Council by the Defence Order, 1947.
Clause (3) of Art. 3 of the Independence Order, 1947,
states that the powers of .control over property conferre_d upon each Dominion by the Order shall include all
powers of use, consumption, management etc.
This,
however, is subject to such powers of control as are
given to the Joint Defence Council. Those powers of
control are laid down in Art. 8 of the Defence Order,
1947, cl. ( c) of which relates to "the allocation, transfer
and movement for the purposes of such reconstitution
of plant, machinery, equipment and stores held by the
GovernorcGeneral in Council immediately before the
15th day of August, 1947, for the purposes of the
Indian forces."
The point which is to be emphasised
. is that what is saved by cl. (2) of Art. 3 of the
Independence order, 1947, is 'powers of control' of the
Joint Defence Council with regard to certain essential
military equipment etc. including stores. There is no
provision in the Defence Order. 1947, which affects the
rights and liabilities of any of the two Dominions arising out of a contract,
and those rights and liabilities
are dealt with by the Independence Order, 1947. The
learned Judges of the
Hi~h Court thought that the
Defence Order, 1947, made a difference in the legal
position in so far as the purpose of the contract was
concerned. They realised and said that ordinarily the
purpose of supplying fodder to the Military Farms at
Lahore was a purpose exclusively for the Dominion of
Pakistan ; but they thought that on the assumption
that 'bhoosa' was military store,
the Joint Defence
Council had powers of control over it and could send it
wherever they wanted it to be sent ; therefore, they
1957
Union of India
v.
Chaman Lal Loona
S.K. Das].
1957
Union of /Mia
v.
CAamon Lal lAona
S. K. DIUJ.
1050
SUPREME COURT REPORTS
(1957]
said that the purpose of the contract was not a purpose
exclusively for the Dominion of Pakistan.
We say this with great respect, but this line of
reasoning appears to us to be due to a lack of proper
appreciation of the distinction between the "purpose of
the contract" and the 'ultimate disposal of the goods"
supplied under the contract. The purpose of the contract is not determined nor modified by the ultimate
disposal of the goods supplied under the .contract, nor
even by the powers of control exercised over the goods
after the contract had been performed by the respondent. \Vherever the goods might be ultimately sent, the:
purpose of the contract remained what it was, that is,
to supply fodder
to the Manager, Military Farms,
Lahore, which, on the test laid down by us, was clearly
a purpose exclusively for the Dominion of Pakistan.
The Independence Order, 1947, determines the respective rights and liabilities under contracts. If, under the
Defence Order, 1947, some goods the liability for the
price of which under the Independence Order, 1947,
falls on, say, India, are allotted to Pakistan, then the
value thereof
will have to be adjusted
in
accounts.
Such allotment does not alter the rights or liabilities
determined uooer the Independence Order, 1947.
We
are, therefore, of the view that the High Court of
Punjab was in error in inferring that on the strength
of certain provisions of the Defence Order, 1947, the
contract in question came within cl. (b) of Art. 8(1 ),
and not cl. (a). We think that the learned Subordinate
Judge correctly held that cl. (a) applied and the Union
of India had no liability under the contract.
Only a few words arc necessary to dispose of the
third contention urged before us.
The claim in the
present case was a Claim for a refund of the price paid
for 24 bundles of wire coils and of the security deposit.
Such a claim <lid not relate to military stores, and the
Defence Order, 1947, had no direct application to such
a claim. It was only for examining the purpose of the
contract that the question
of 'bhoosa'
bcin.~ military
store arose.
The High Court assumed that 'bhoosa' was
military store. Without deciding whether 'bhoosa' is
military store or not, we have also proceeded on the
-
S.C.R.
SUPREME COURT REPORTS
1051
same assumption ; but even on that assumption, there
is no difference in the legal position.
The purpose of
the contract was still a purpose which, as from the
appointed day, was a
purpose exclusively for
the
Dominion of Pakistan.
It is worthy of note that cl. (c)
of Art. 8 of the Defence Order, 1947, relates inter alia
to stores held by the Governor-General in Council
immediately before August 15, 1947. for the purposes of
the Indian forces.
There was nothing in the record to
show that the 'bhoosa' supplied by the respondent in
1945 was held bv the Governor-General . in Council
immediately bef'Ord August 15'. 1947. so as to vest the
power of control in the Joint Defence Council and
thereby affect the purpose of the contract, assuming,
though we do not so decide. that such power of control
can affect the purpose of the contract.
The original contract was not produced in this case,
as it was not available in the appropriate office in India.
The respondent did not even produce a copy thereof,
but gave oral evidence as to the purpose of the contract.
The Courts below proceeded on that oral evidence, and
the appeal was argued before us on that footing. We
have determined the purpose of the contract as on
August 15, 1947, on the basis of that evidence, without
deciding the further question if oral evidence was
admissible in this case as to the purpose of the contract.
For the reasons given above, we allow this appeal,
set aside the judgment and decree of the High Court,
and restore those of the learned Subordinate Judge.
The appeallant will get costs throughout.
Appeal allowed.
1957
Union of India
v.
Cluunan Lal Loo11a
. K. Das J.