# TILAK RAM RAM BUX v. STATE OF PUNJAB AND OTHERl3

- **Citation:** [1963] 2 S.C.R. 353
- **Court:** Supreme Court of India
- **Decided:** 1963
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/tilak-ram-ram-bux-v-state-of-punjab-and-otherl3-2492
- **Pages:** 52

## Headnote

I
2 S.C.R.
SUPREME COUR'l' REPORTS
LACHHMAN DAS ON BEHALF OF FIRM
TILAK RAM RAM BUX
v.
STATE OF PUNJAB AND OTHERl3
[And Connected Petition And Appeals].
353
(B. P. SINHA, c. J., K. SUBBA RAO, N. RAJAGOPALA
AYYANGAR, J. R. MUDHOLKAR and T. L.
'{
VENKATARAMA AIYAR, JJ.)
81,ate Ban/c-State Dues-Determination and reooveryStatute providing for special procedure-Constitutional validityMerger of States-Powers of Rule.,, of erstwhile States after
meger-Enactment,
if in force-Patiala Reoovery of State
Dues Act, JV of 2002 BK, ss. 2, 3, 4, 5, · 6, 11-0onsUtution of
India, Arts. 14, 19(1) (!), 19(1) (g), 363.
On May 5, I948, the rulers of .eight States, including the
States of
Patiala and Nabha, entered into a covenant
merging all the said States for the establishment of a new
State, called the Pepsu Union. By Art. VI of the covenant
all the rights, authority and jurisdiction of the Ruler in
relation to Government was vest in the Union.
The exe ..
cutive authority of the State was to vest in the Rajpramukh.
Article X provided that "until a constitution framed by the
Constituent Assembly comes into operation .. the Raj Pramukh,
shall have power to make and promulgate ordinance for the
peace and good Government of the, Union or any part thereof, and any ordinance so ruade shall, for the space of not more
than six mcnths from its promulgation have the like force of
law as an Act passed by the Constituent Assembly .... " The
new State came into existence on August 20, 1948, with the
Ruler of Patiala as its Raj Pralnukh. On the same date he
issued an Ordinance applying all the laws obtaining· in the
State of Patiala to the entire territories of the new State, and
as this Ordinance would have expired on February·20, 1948,
he promulgated another Ordinance on February 15, 1949, on
the same terms as the previous one.
On April 9, 1949, all the
Rulers entered into a Supplementary Covenant, whereby Art.X
was amended by omitting the words " for the space of not
more than six months from its promulgation." The object of
this was to continue in force all the laws which had been
brought into forC'e by the Ordinances until repealed by fresh
legislation. After the Constitution of India came into force
Pepsu became a Part B State, and subsequently under the States
Reorganisation Act, 1956, Prpsu became part of the State of
1961
364
SUPREME COURT REPORTS (1963]
116!
Punjab, and all the laws in force in Pepsu continued to have
force in that area.
J..aclrllmon Doi tm
behlJlj of Finn
Tilok Rom Rom Bux
v.
Sfot1 of Punj,b
The Patiala State Bank was established in 1917 by the
then Ruler of the State of Patiala. The appellant had an
account in one of the branches of the Bank in the State of
Patiala, while the petitioner, in the connected case, had a
similar account in a Branch of the Bank in the State of
Nabha.
The amounts due under the aforesaid accounl3 were
outstanding after the Constitution of India had come into
force.
The Bank proceeded to realise the same in accordance
with the provisions of the Patiala Recovery of State Dues Act,
IV of 2002(BK), and the Rul<s framed thereunder. This Act,
had been enacted by the State of Patiala before it was merged
in the new State. Under s .. 3 of the Act debts due to the
Paliala State Bank were included in the definition clause as
•State Dues', and s. 4 authorised the Managing Director of the
PatiaJa State Bank to determine the exact amount of State
dues recoverable from the defaulter, while s. 5 enacted that
State dues may be recovered as if they were arrears of land
revenue.
Under s. 6 a certificate issued by the Managing
Director of the Bank as to the amount of State dues was conclusive proof of the matter.; stated thereiO: and s. 11 barred the
jurisdiction of the Civil Court in respect of the matters entrusted to the Managing Director under the Act and rules
framcd under the act. The appellants challcnged the validity
of the Act and the proceedings
taken thereunder on the
f.'TOunds (I) that the Act had ceased to be i

## Text

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I
2 S.C.R.
SUPREME COUR'l' REPORTS
LACHHMAN DAS ON BEHALF OF FIRM
TILAK RAM RAM BUX
v.
STATE OF PUNJAB AND OTHERl3
[And Connected Petition And Appeals].
353
(B. P. SINHA, c. J., K. SUBBA RAO, N. RAJAGOPALA
AYYANGAR, J. R. MUDHOLKAR and T. L.
'{
VENKATARAMA AIYAR, JJ.)
81,ate Ban/c-State Dues-Determination and reooveryStatute providing for special procedure-Constitutional validityMerger of States-Powers of Rule.,, of erstwhile States after
meger-Enactment,
if in force-Patiala Reoovery of State
Dues Act, JV of 2002 BK, ss. 2, 3, 4, 5, · 6, 11-0onsUtution of
India, Arts. 14, 19(1) (!), 19(1) (g), 363.
On May 5, I948, the rulers of .eight States, including the
States of
Patiala and Nabha, entered into a covenant
merging all the said States for the establishment of a new
State, called the Pepsu Union. By Art. VI of the covenant
all the rights, authority and jurisdiction of the Ruler in
relation to Government was vest in the Union.
The exe ..
cutive authority of the State was to vest in the Rajpramukh.
Article X provided that "until a constitution framed by the
Constituent Assembly comes into operation .. the Raj Pramukh,
shall have power to make and promulgate ordinance for the
peace and good Government of the, Union or any part thereof, and any ordinance so ruade shall, for the space of not more
than six mcnths from its promulgation have the like force of
law as an Act passed by the Constituent Assembly .... " The
new State came into existence on August 20, 1948, with the
Ruler of Patiala as its Raj Pralnukh. On the same date he
issued an Ordinance applying all the laws obtaining· in the
State of Patiala to the entire territories of the new State, and
as this Ordinance would have expired on February·20, 1948,
he promulgated another Ordinance on February 15, 1949, on
the same terms as the previous one.
On April 9, 1949, all the
Rulers entered into a Supplementary Covenant, whereby Art.X
was amended by omitting the words " for the space of not
more than six months from its promulgation." The object of
this was to continue in force all the laws which had been
brought into forC'e by the Ordinances until repealed by fresh
legislation. After the Constitution of India came into force
Pepsu became a Part B State, and subsequently under the States
Reorganisation Act, 1956, Prpsu became part of the State of
1961
364
SUPREME COURT REPORTS (1963]
116!
Punjab, and all the laws in force in Pepsu continued to have
force in that area.
J..aclrllmon Doi tm
behlJlj of Finn
Tilok Rom Rom Bux
v.
Sfot1 of Punj,b
The Patiala State Bank was established in 1917 by the
then Ruler of the State of Patiala. The appellant had an
account in one of the branches of the Bank in the State of
Patiala, while the petitioner, in the connected case, had a
similar account in a Branch of the Bank in the State of
Nabha.
The amounts due under the aforesaid accounl3 were
outstanding after the Constitution of India had come into
force.
The Bank proceeded to realise the same in accordance
with the provisions of the Patiala Recovery of State Dues Act,
IV of 2002(BK), and the Rul<s framed thereunder. This Act,
had been enacted by the State of Patiala before it was merged
in the new State. Under s .. 3 of the Act debts due to the
Paliala State Bank were included in the definition clause as
•State Dues', and s. 4 authorised the Managing Director of the
PatiaJa State Bank to determine the exact amount of State
dues recoverable from the defaulter, while s. 5 enacted that
State dues may be recovered as if they were arrears of land
revenue.
Under s. 6 a certificate issued by the Managing
Director of the Bank as to the amount of State dues was conclusive proof of the matter.; stated thereiO: and s. 11 barred the
jurisdiction of the Civil Court in respect of the matters entrusted to the Managing Director under the Act and rules
framcd under the act. The appellants challcnged the validity
of the Act and the proceedings
taken thereunder on the
f.'TOunds (I) that the Act had ceased to be in force ~n the
expiry c;f the six months of the Ordinance issued by the Raj
Pramukh on February 15, 1949, because the Rulers had on
power to enter into the Supplementary Convenant after they
had surrendered completely all their sovereign powers to the
new State by the Convenant dated May 5, 1 !K8, and had
therefore, no competence to confer on the Raj Pramukh any
authority to legislate; and (2) that, in any case, the Act and
the rules made there under became void on the coming into
force of the Constitution of lndfa as they were repugnant to
Arts. I 4, 19( I) (f) and (g).
Ileld,
(Subba Rao, J., d~'8enting), that the Patiala
Recovery of State Dues Act, of2002 BK did not offend Art. 14
of the Constitution of India.
A Bank established by a St•t< had distinctive features
which difforentiated it from other Banks and formed a cate-
.gory in itself; and the Act, in settinl( up •eifarate authorities
for determination of di&putcs and in prescribing a sp<cial
procedure to be follow•d by them for the r<eovrry of the
\/
I
•..
,_
)
2 S.O.R. SUPREME COURTS REPORTS
355
dues by summary process, could not be considered to be
discriminator.y and was valid.
Manna/al and Another v. Oolketor of Jhalawar and
Others. (1961) 2 S. C. R. 962, followed.
Ohiranjit Lal Choudhury v. ·Union of India and others,
(1950) S. a. R. 869 and Ram Kriahna Dalmia v. Shri Justice
S. R. Tandolkar and others, (1959) S. C.R. 279, relied on.
.
The Act was not discriminatory on the ground that
after the merger of the Pepsu State in the State ·of Punjab
the Act continued to be in force in the territories of the
erstwhile Pepsu State but had. no operation in the other
parts of the State of Punjab, because different laws prevalited
in differrnt parts of the State due to historical reasons and
this was a proper basis of classification under Art. 14.
Bhaiya Lal Shukla v. The State of Madhya Pradesh,
(1962) Supp. 2 S.C.R. 257 State ofMatihya.Pradesh v. G. 0 .
.l!fandawar, (1955) I S. C.R. 599, State of Maah11a Pradesh
v. The Gwalior Sugar Company Ltti., (1962) 2 S. C.R. 619
and Bowman v. Lewis, (1880) JOI U.S. 22: 25 L. ED. 989,
relied on.
Bela, further (per Sinha, C. J, Rajagopala Ayyangar,
Mudholkar and Venkatarama Aiyar, JJ.) that: (!)under
the Covenant dated May 5, 1948, there wa• a complete
divestiture of all the sovereign rights of the Rulers when
the new State came into existence on August 20, 1948, and,
therefore, the Supplementary Covenant entered fnto by the
Rulers on April 9, 1949; was n.ot effective for modifying the
provisions of the Original Covenant.
Prithi Singh v. State of Pepsu, A. I. R. 1952 Pepsu 161'
disapproved.
(2) the question as to whether the Patiala Recovery
of. Sta~e Dues Act, IV of 2002 (BK), was in force at the material t1D1es was one which arose out of a prov-Uioo in the
Covenant dated May 5, 1948, and, therefore, under Art. 363
of the Constitution of India, the civil court had no jurisdic·
tion to go into it.
Bholanath J. Thaker v. Siale of Saurashtra, A. I. R.
1956 S. C. 680, distinguished.
·
(3) the Patiala Recovery of State Dues Act was not
repugnant to Art. 19 (l)(f) on the ground that the procedure
prescribed by the Act and the rules for the sctilement of disputes was unfair and opposed to rule. of natural justice.
I911B
Lochhmon· Daa on
bMalf of Fif'fll
Ti/ak Ram Ram Bux
v.
Slate of Punjaj
1P62
Lo..U.,on Du on
f,,\a/f <f Finn
Tilak Jlam Rim Rtu
••
Siale •' .Punj~
356
SUPREME OOURT REPORTS [1963]
The provisions of the Act and the rules, as a whole, were
reasonablcs.
(4) thr Act ~id not contravene Art. 19(1)(g).
Per Subba Rao. J .--The Patiala Recovery of State Dues
Act violated the doctrine of equality under Art. 14 of the
Constitution of India, and could not be justified on the basis
of reasonable classification. The doctrine of classification i!
only a subsidiary rule C\1olvcd by courts to give a practical
content to the said doctrine.
0\'1:r tmphasis on the doctrine
of clas~ification or an anxious and isustaincd attempt to discover some basis for cla~sification n1ay gradually and im~r
ceptibly deprive the Article of its gloiious content. That
process would inevitably end in
~ubstituting the doctrine of
classification for the dcctrinc of equality ; the fundamental
right to equality before the law and equal protection of the
laws may be replaced by the doctrine of classilication.
In the present case, there were no real differences between the Patiala State Bank and other Bank vis a vi~ their
claim against their constituents which could reasonably sus·
tain the special treatment meted out to the former under the
Act. The provisions of the Act, in so far as they related to
the Patiala State Bank, were constitutionally void.
OmoINAL JURISDICTION : Petitions Nos. 92
and 128 of 1959.
Petitions under Art. 22 of the Constitution of
India for the enforcement of Fundamental Rights.
WITH
·Civil Appeals Noe. 210 and 211 of 1961.
Appeals from the judgment and order dated
Maroh 6, 1959, of the l'unjab High Court.in Civil
Writ Nos. 133 of 19f>7 and 389 of 1958.
Bishan Narain, and K. P. Gupta, for the petitioner (in Petn. No. 112 of 1959).
R. L. Aggarwal and tl. G. Ratnaparkhi, for the
petitioner (in Petn. No. 128 of 1959).
Bishan Narai11., R. K. Sinha, R. K. Garg, S. C .
.AggarwGl and P. C . .Aggarwala, for the appellants.
I
''•
.,..
I •
( .
2 S.C.R.
SUPREME COU.RT REPORTS 357
S. N. Sikri, Advncate-Oeneral for the State of
Punjab, N. S. Bindra and P. D. Menon, for the
respondents (in both the petitions and the appeals),
1962. April 23. The following judgments were
delivered.
The judgment of Sinha C. J., Rajagopala Ayyangar, Mudholkar and Venkatarama
Aiyar, JJ., was delivered by Venkatarama Aiyar, J.
VENKATARAMA AIYAR, J.-Thc appellants are
a joint Hindu family firm which has been carrying
on
business since 19 ll in
~rains, dal, cereals,
cotton ginning and pressing, oil manufacture and
the like, at a· place called Lehragaga in what was
once the State of Patiala. The firm had an account
·called the Cash Credit Account in the Patiala State
. Bank which had a branch at Lehragaga and used
to borrow money in this account on a pledge of its
stocks. In 1951-52 there was a heavy slump in the
prices of the commodities with the re11ult that the
amounts advanced by the Bank on the security of
the goods were very much in excess of the market
prices thereof. To cover th.is shortfall which came
to Rs. 2,32,000/- the firm entered into an arrangement with the Bank on May 23, 1953, and it is this
that forms the source of the present litigation,
The Bank sanctioned a loan of Rs. 4,50,000/- on
what is called "Demand Loan Account". The firm
deposited title deeds of the properties belonging to
them as security for the amounts that may become
payable on that account and the adult members of
the family executed a promissory note for that
amount and also a memorandum evidencing the
deposit of the title deeds.
It should be mentioned that in 1951 a firm
called Yogiraj Neelkumar was started at Lehragaga
of which the partners were Bl~irathlal one of the
senior members of the joint Hindu family of the
appellant firm and two other strangers Shri Kiehore
I96B
Lachhman Da11 on
b,nalf of Finn
Ti/tJk Rom Rom BWt.
v.
Stale of Prmjab
Al)ar J.
llHll
Uo~Do•on
6'11.Jf of Firm
TU.I. RQm Rom B1.x
••
&alt of l'unjab
368
SUPREME OOURT REPORTS [1963]
Chand and Shri Ba.nwa.rila.l.
That firm did business as Commission Agents and ha.d a. Ca.sh Credit
Account in the Pa.tia.la State Bank at Lehra.ga.ga.
under which it borrowed money for th,, purpose of
its busiueBB. That firm also sustained heavy losses
during the period of the slump and on May 2;l, 1953,
it owed to the Bank a. sum of lts. 2,17,957-12-6 on
account of shortfall.
Now what the Bank did
under the arrangement dated Ma.y 23, 1953, was to
adjust the loan of Rs. 4,50,000/- towards the shortfalls due to them both from the appellant's firm a.nd
the firm of Y ogira.j Neelkumar. Tho complaint of
the appellants is that they had nothing to do with
the firm of Yogiraj Neelkumar, that Bha.l(ira.thlal
started it a.long with strangers as his own separate
eonoorn and accordingly tho properties of the joint
Hindu family of the appellants are not liable for
the sum of Rs. 2,17,957-12-6 due to the Bank from
that firm.
The a.mount payable under the demand. loan
account not having been pa.id by tho appellants'
the Bank took stops to realise the same in accord"
a.nee with the providions of tho Pa.tis.la. Recovery
of State Dues Act, hereinafter referred to a.s 'the
Act', and tho rules framed thereunder. It will be
convenient a.t this stage t.o refer to these provisions
a.nd rules in so fa.r as they n.re material, as it is their
vire8 and constitutionality that form the principal
target of attack in these proceedings. Section 3 ( l)
of the Act defines "State Dues" a.a includinJ debts
due to the Pa.tiala. State Bank. "Department" is
defined in s. 3 (2) a.s including the Pa.tie.la State
Bank, and "Head of department" in a. 3 ( 6) as
meaning the Ml\Ila.ging Director in the oa.se. of the
Patiala State Bank. Section 4 ( 1) authorises the
Head of department to determine the exact amount
of State dues recoverable from the defaulter in the
manner prescribed under the rules. Section 5 (I)
{a) euaots that State dues may be recovered by the
..•
'
' -
_)
2 S.C.R.
SUPREME COURT REPORTS 350
department through the Nazim as if these were
arrears of land revenue. Then comes s. 6 which
is as follows :-
"6. (I) The Head of department shall
send a certificate as to the amount of State
dues recoverable from the defaulter to the
Nazim in Form I appended to this Act and
to the Accountant-General in Form II appended to this Act :
Provided that where the head of department is below the rank of a Minister or
Secretary, he shall, unless he is the Registrar,
Co-operative Societies, send the certificate to
the Nazim and the Accountant General through
the Minister or Secretary in oharge who shall
countersign the certificate after ·satisfying
himself that the amount of State dues stated
in it is correct.
(2) A certificate 'transmitted under the
preceeding sub-section shall be conclusive
proof of the matters stated therein and the
Nazim or the Accountant·General shall not
question the validity of the certificate or hear
any objections of the defaulter as to the
amount of State dues mentioned in the
certificate or as to the liability of the defaulter to pay such dues".
·
Section 11 provides that no civil court shall have
jurisdiction in respect of any matter which under
the Act or the rules is entrusted to the Head of
department or any authority or officer authorised
by him. Section 12 confers on the State authority
to make rules providing inter alia for the manner
in which the amount of State dues shall be determined. Rules framed under a. 12 of the Act were
published on August 8, 1945. Rule 3 requires that
the head of department shall cause a notice to be
196b
Lachhman Da3 on
b~half of Firm
Tilok Rtr.m Rom Bux
v.
State qf Purijab
Ai1ar J.
I96Z -
LaeMman DtU on
b,hafJ •J Fi1m
T'lalc Bam Ram Bu
••
St<Jle of P...ju
360
SUPREME COURT REPORTS r1g63]
served on the defaulter in the manner prescribed.
The notice bas to specify the amount of state dues .
a.nd require the defaulter to pa.y such dues on or
before a. da.te specified, or to appear on such date
before the hea.d of department a.nd present a. written
statement of his defence. The date to be fixed
should a.How at lea.st fiftel'n days to the defaulter
to ma.kc payment or to appear a.nu answer the claim.
If thn defaulter docs not appear on the date specified, the head of department ma.y proceed ex parte
and determine by order in writing the a.mount of
State duos recoverable from him if he is satisfied
that the notice had been duly served, and if not so
satisfied, he may direct fresh notice. Rule 6 provides that "where the defaulter appears on the
date fixed in tho notice a.nd presents his writen
statement, the head of department or the Inquiry
Officer, a.a the case ma.y
be,. shall examine the
objections of the defaulter stated in the written
statement in the light of the relevant records of the
department, and she.II then by lorder in writing
determine on the ea.me day or on a.ny subsequent
day the exact a.mount of State dues reoovera.ble
from him." Rule 7 provides that when the a.mount
determined a.a payable under rules 5 a.nd 6 remains
unpaid, the head of department might iBBue a. notice
on the defaulter requiring him to pay the State
dues within fifteen de.ye and that in default, the
amount could be recovered through the Na.zim.
Under Rule 8, an appeal a.go.inst a.n order determining the amount due under rule 5 or 6 lies to the
lleard of Directors. Against an Order rej 3Cting a.n
a.ppea.l under rule 8, a. revision is provided to the
Ministry. There is a.Isa a. provision for service of
notice on the defaulter, when proceedings for realising the a.mount are ta.ken.
We may now refer to the steps taken by the
Pa.tie.la Bank for recovering the amounts due from
the appellants. On February 17, 1955, the BIJ'lk
,
y
>
l
2 S.C.R.
SUPREME COURT REPORTS
361
issued a notice to the appellants under rule 3 (2)
stating that a sum of Rs. 5,17,863-3-4 was due from
them and calling upon them to pay the said amount
or to file a written statement within fifteen days
setting out their defence to the claim. To this the
appellants sent on March 26, 1955, a reply in which
they pointed out that they had been unable to pay,
because of "continuous slump in the market", and
requested that the Bank should accept payments
in reasonable instalments. It was also stated that
the Government intended to acquire some lands belonging to the appellants and that compensation
would become payable and it was prayed thatuntil
then the recovery proceedings might be poatponed.
On this, the Bank would appear to have stayed
their hands for some time.
On November 21, 1955,
a fresh notice was issued under rule, 3 siating that
a sum of Rs. 5,24,593-10-10 was due from the appellants and asking them to pay the amount or to
file their defence to the claim within fifteen days.
To this aga;n the appellants replied on December 7,
1955, asking that the representation previously
made by them might be considered by the Board
of Directors. On January 6, 1956, the appellants
sent another reply stating that they expected to
pay a substantial amount of the loan within a short
time and prayed that further proceedings might be
suspended. The Managing Director did not accede
to this request and on January 27, 1956, he issued
a certificate under s. 7 of the Act certifying that a
sum of Rs. 4,98,589-1-6 was due from the appellants
and asking the Deputy Commissioner, Patiala, to
recover the same as arrears of land revenue. After
some more attempts at getting the recovery proceedings postponed, the appellants filed in the High
Court of Punjab on February 16, 1957, a petition
under Art. 226 of the Constitution, Writ Petition
No. 133 of 1957, wherein they challenged the validity of the Act and of the proceedings taken there·
under on various grounds. Meantime, on July 7,
196B
L 1chhman Das on
behalf of Firm
Titak llam Rom Bu•
v.
Stal• of Punjab
<ltyar J,
-
L00Mma11 Du Oft
M1aiJ of F frm
T ila Rom Rt11t1 Bux
••
81,,,. of Pwrjob
A(1<UJ.
362
SUPREME OOURT REPORTS [1963]
1956, the Bank issued a notice under rule 3 (2) de·
mantling from the appellanta a. sum of Rs. 25,548-4-6
aa duo on the caBh credit account at Lehi-a.gaga.. To
this, the a.ppellanta sent a reply denying their liability. On October, 4, 1956, the B1tnk determined
the liability ex parte at Rs. :!5,478·15-9. A notice
under rule 7(1) was issued on December 6, 1956,
and that not having bPen complied with, a certifi·
cate under s 7 of the Act was issued by the Managing Director. On May 17, 11158, the appellant filed
Writ Petition No. 389 of 1958 in the High Court of
Punjab challenging the validity of the determina·
tion made on October 4, 1956, and of the subsequent
proceedings taken for the recovery of the said amount
on the same grounds as in Writ Petition No. 133 of
1957. Both these Writ
Petitions were heard together, and by·their Judgment dated March 6,1959,
the learned Judges held that the impugned Act and
the proceedings were valid and dismissed the petitions. They, however, granted a certificate under
Art. 133, and hence these appeals.
The appellanta also filed a petition under Art.
32 of the Constitution,
attacking the vires of
the Act, and of the proceedings taken thereunder,
on the same grounds as are raised in the appeals.
We have accordingly heard them together, and this
Judgment will govern all of them.
Three contentions have been urged in support
of the appeals:-
( i) The prooeedings taken under the Act for
determining the amount payable by the appellants
and for recovering the same are illegal as the Act
had ceased to be in force on the material dates.
(ii) The Act and the rules made thereunder
became void on the coming into force of the Con·
stitution as they are repugnant to Arts. 14 and 19
( 1) (f) and (g), anJ the proceedings taken under
those provisions are therefore illegal.
t..·•
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2 S.C.R.
SUPREME COURT REPORTS
363
(iii) The oer1;ificate issued under s. 7 is not in
accordance with the rules framed under the Act and
in consequence the proceedings taken thereunder
are illeg"ll.
(i) Taking up t.he contention that the Act had
ceased to be in force on the material dates, it is
necessary first to state the facts on which it is based.
On May 5, 1948, the "Rulers of the independent State
of Faridkot, Jind, Kapurthala, Malerkotla, Nabha,
Patiala, Kalsia and Nalagarh entered into an agree·
ment referred to as "the Covenant" for the establishment of a new State called the Patiala and East
Punjab States Union or more briefly. "the l'epsu
Union" comprehending the territories of their respective States with a common executive, legislature and judiciary. Article III provides for the con·
stitution of a Council of Rulers. Article VI of the
Covenant provides that on the constitution of the
new State "all rights, authority and jurisdiction belonging to the Ruler which appertain, or are incidental to the Government of the Covenanting State
shall vest in the l' nion and shall hereafter be exercisable only as provided by this Covenant or by
the Constitution to be framed thereunder" and that
the Union shall take over "all duties · and obligations of the Ruler pertaining or incidental to the
Government of the Covenanting State" and "all
the assets and liabilities of the Covenanting State".
The executive authority of the State is to vest under Art. IX of the Covenant in the Raj Pramukh.
Article X provides for the formation of a Constituent Assembly and the framing of a Constitution
by it and thne is the following proviso to it which
is very material for the present discussion:
"Provided that until a Constitution framed by the Constituent ARsembly comes into
operation after rPceiving the assent of the
Raj Pramukh, the Raj Pramukh shall have
power to make and promulgate Otdinance for
19611
Laehhman D•s on
b.halj •f Firm
Tilol: Ram Ram Bux
..
State of Punjab
A.l,yar J.
1961
Laelihman Das on
bthalJ of Firm
T;J,I,; Rt.m Rom BUJt
••
St•lt 1/ Panjab
Ai11•r J.
364 SUPREME COURT REPORTS [1963]
the peace and good Government of the Union
or any part thereof, and apy Ordinance so
made shall, for the space of not more than six
months from its promulgation have the like
force of J,.w as an Act passed by the Constit·
uent Assembly, but any such Ordinance ma:r,
be controlled or superseded by any such Act. '
Article XI provides for the payment of the
amount fixed in the Schedule as the privy purse of
each Ruler. Art.icle XII guarantees to the Ruler
"all the personal privileges, dignities and titles en
joyed by them ......•••.................. immediately before the 15th day of AuguHt, I 947'' and Art. XIV,
euooession to the Gaddi according to hw
and
custom.
Tho new State camo into existence on August
20, 1!)48, 8.s provided under the Covenant. The Ruler
of Patiala became its Raj Pramukh and on the same
date he promulgated an Ordinance. No. I of 2005
(BK) which provided inter alia that all Laws in
force in the State of Patiala on that date shall
apply mutaHs mutandi.~ to the territories of the
said State and with effect from that dato all Jaws
in force in such Covenanting State immediately
before that date shall be repealed".
By force of
this Ordinance, the impugned Act became the law
of the Pepsu Union. Under Art. X of thfl Covenant this Ordinance would have expired on February
20, 1949, and so on February 15, 1949, the Raj
Pramukh promulgated another Ordinance No. 16
of 2005 (BK) in terms similar to the Ordinance
No. l of 2005. The appellants concede that this
law is intra vires and by force of this Ordinance the
impugned Act continued to be in force after February 20, 1949.
When Art. X of the Covenant provided that
the Ordinances to be pwmulgated by the Raj Pram ukb were to be in force for a. period of only six
c
v
]
•
_)
2 S.C.R.
SUPREME COURT REPORTS
365
months it was expected that the Constituent Assembly would in the mean time be convened and a
regular Constitution drawn up.
But that did not
materialise and so on April 9, 1049, all the Rulers
met again and entered into another agreement
called "the supplementary Covenant", where by
Art. X was amended_ by omitting the words "for
the space of not a more than six months from its
promulgation". The result of this was that the
laws which had \:>een brought into force by Ordinance No. 16 of 2005 (BK) including the impugned
Act, would not lapse on August 20, 1949, but
continue to be in force until repealed by fresh
legislation.
But it is argued for the appellants that the
Supplementary Covenant is void and inoperative
because by the Covenant dated May 5, 1948, the
Rulers had surrendered complet.ely all their sovereign powers to the new State and that in consequence on April 9, 1949, when they entered into
the Supplementary Covenant they had no shred of
sovereignty left in them and had therefore no
competence to confer on the Raj Pramukh any
authority to legis1ate.
To this the respondents
reply that the original Covenant on its true construction did not completely extinguish all the
powers of ·the Rulers and that the Supplementary
Covenant is therefore within their competence.
They further contend that it is a political question
whether the Supplementary Covenant is valid or
not, and that Art. 363 bars the jurisdiction of the
Civil Courts to entertain such a question. We now
proceed to consider these contentions.
To appreciate the true effect of the Covenant
it is necessary to state what the position is according to rules of International Law, when one independent State becomes merged in another. "A
State" s~;ys Oppenheim, "ceases to be an International
feraon, when it cease!! to exist. Practical oases
•
1962
Lacbhman Dos on
behalf of Firm
Tilak Ram Ram Bu.
••
61ale of Punjab
19~2
Lachlun-"• DflA on
brh'Jlj of 1-'irm
filok Ram Rr;m Bux
••
Sltalf of P1111jab
tfiyar J,
366
SUPREME COURT REPOR'l'S [1963]
of examination of States are: mer!!er of State into
another, annexation aft€r conquest in war, break·
ing up of State into several States, and breaking
up of a
State into partR which a.re annexed by
surrounding States. Ry voluntarily merging into
another Stat(', a State Josee all its independence and
becomes a mero pa.rt. of another". (International
Law, Vol. l, 150). Thorofore when the new State
of Pepsu wn.q formed, the oight States which had
merged into it would cease to exist as independent
personae and thero could he no question of sover·
eignty of suoh States or of its ex-Rulers. But it is
aruged that the loss of sovereignty need not ocour
at a single point of timn, and that in the present
case it was grarlual, and spread over nc~rly a. year,
and that both the Covenants were made during this
period. It is no doubt true that loss of sovereignty
might bn a c:nntinuing process extending over a
considerable period of time, and that has also
been held quite recently by this Court in Promod
Cluindra Deb
v. 'l'he Stal£ of Orissa (').
But
is that what has happened here ?
The Covenant is quite clear and unequivocal on the point.
Article VI id the crucial provision, and it says
that all the rights, authority and jurisdiction of the
Ruler in relation to Government a.re to vest in the
Union. Then follow provisions for the exercise
of those powers by the Cnion. Thus there is on
the one hand an extinction of the powers of the
Rulers, and on the othn hand vesting of the same in
the new State. In strong contrast to this are the
provisions which guarantee to the Rulers their
privy purse, and their right to their personal properties, and privileges. On the wording of the
Covenant therefore there was a. complete divestiture of all the sovereign rights of the Rulers, when
the new State came int-0 existence on August 20,
1948.
(I) [1962] Supp. IS. C. R, ~.
I-
.. ,,.
2 s.c.R.
SUPREME COURT REPORTS
367
But it is contended . that the Covena.nt does
not . dispose of the entirety of the legislative power
possessed by the Rulers, because under Art. X the
Raj Pramukh·could enact laws only for a period
of six: moriths. The legislative power not having
been completely transferred to him, it is argued,
the residuum must vest somewhere and that could
only b11 in the Rulers themselves. · Therefore, it
is said, there is some sovereignty•left in them, and
that is disposed of by the
1Sqpplementary Covenant .
This argument sounds· plausible but cannot be
sustained on the terms of the origina!Covenant.
His not, in our view, correct to say, that under
Art. X the legislative powers of the Itulers were
not transferred in full to ·the new State of Pepsu.
The Raj Pramukh has the power under that Article
"to make and promulgate Ordinances for the peace
and good Government of the Union or any part
thereof". Stopping here, there is no reservation
whatsoever in. the grant of the power to the new
Ruler. Then follows the provision that the Ordinance is to be in. force for a period not exceeding
six months. The eft'ect of this is not to keep back
from the Raj Pramukh any portion or field of legislative power, and this will be plain from the fact
that the Raj Pramukh can go on renewing the laws
every six months ad infinitum. What the effect of
this provision would be if the Raj Pramukh chose
to ignore it we need not pause to consider. What
is relevant for the purpose of the present discussion
is, not whether the Raj Pramukh could have enacted
a law in disregard of the above provision but whether in view of it any residue of legislative power
could be helll to have continued in the Rule1·s. On
that question Art. VI is clear beyond all doubt.
The entirety of the rights, authority and jurisdiction
of the Hulers is to vest in the Union, and is to be
exercisable only as provided in the Covenant. It
cannot in our opinion be argued that the Rnle'fll of
1962
LacU~man Dar""'
behalf of Fi,m
Tilak Rain Ram Bux
v.
Sia'• of Punjab
Aiyar J.
•
1961
Lachhman Das on
bt.holf of Firm
Tilak Ram R?m Bux
..
State oj Punjab
A€,1or J,
•
368
SUPREME COURT REPORTS [1963]
the Covenanting States could, subsequent to August
20, 1948, have passed any laws within their own
territories on the ground f.hat the power of the Raj
Pramukh did not exwnd, under Art. X, to enacting
legisla.tinn beyond six months. It is further to be
notod that under Art. VI, a II the powers of the
Rulers are to vest in the Union, and even if the
whole of the legislative power ie not exercisable by
the Raj Pra.mukh by reason of Art. X. it is in the
Union that the residue of the powtr must be hold
to he lodged and not with the Rulers .
It is noxt argued for the respondents that
though the R.ulers might have surrendered their
power to the Union under the original Covenant,
that did not., according to rules of Intern ationa.I
Law, deprive them of their right to enter into a
fresh C<ivonant.
Relianre was placf'd on the
following passage in
Oppenheim 's International
Law:
"A trPnty, although concluded for ever,
or for n period of time which ha.a not yet
f'Xpircd, may ncvcrth<>less always he diBBolved
by mutual consent of the c:ont.racling parties''.
(Vol. I, p. 842, para 537).
It is contended that on tho principal stated
above it was within the competence of the Rulers
to modify Art. X as thoy di<l under the Supplementary Covenant.
But tho passage quoted above
presupposes that on the date of the later t.z:eaty by
which the earlier treaty is rescinded or modified the
contracting parties are sovereigns and if, as we
have already held, the effect of the original Cov~
na.nt is to completely divest the Rulers of therr
sovereign power there can be no question of their
entering into any treaty thereafter as that could
be only between sovereigns and the Supplementary
Covenant cannot therefore be sust.a.ined on the
principle of Intemational Law enunciated above.
)
•
2 S.C.R.
SUPREME COURT REPORTS
369
Our attention was also invited to the statement of the law in Hyde's International Law, Vol.
I, p. 396, that when there is a change of sovereignty
arising by reason of cession, the ·grantor is permitted, pending the actual transfer, to exercise authority with respect to certain matters and it was
argued that on this principle the Rulers must be
held to have the competence to conclude the
Supplementary
Covenant
with
a
view
to
implement the original Covenant.
But this
power which is an exception to the rule previously
stated by the learned author that on a change of
sovereignty all legislative and political powers vest
in the new sovereign is limited to the exercise of
"authority necessary to maintain order and safeguard the economic conditions" and even this interim authority ceases when the possession of the
territory is actually delivered to the new sovereign.
As that happened in the instant case on August 20,
1948, the Rulers cannot in any view be said to
have had any authority to enter into any Covenant on April 9, 1949.
We must now refer to the decisions which
have been cited on behalf of the respondents as
bearing on the true construction to be put on the
Covenant.
In Virendra Singh v. State of Uttar
Pradesh (1),
Rulers of 35 States entered into
a Covenant in March, 1948, constituting the United State of Vindhya Pradesh and as the intergra-
-
ti on did not work well they entered into another
agreement in December, 19!9, dissolving that State
and on 1st January, 1950, acceded to the Govern·
ment of India under a merger agreement. There
after the State Government repudiated certain
grants of land made by the previous Rulers, and its
action was challenged on the ground that .the alienations were within the protection of Articles of the
--'
·merger agreement.
And this Court held that
( l)[ 1955] 1 s. C.R. 415, ~29.
1962
Lachhman Das on
heho~f of Firm
Tilak Ram Ram Bux
••
Slate of Punj"b
AiyarJ.
Ladlvna11 Das on
IHAalf of Firm
7 il.t R4m Ram Dux
v.
Stale of Punjab
"''"', J.
370
SUPREME COURT REPORTS (1963)
though no rights could be founded on the merger
agreement as they were acts of State, the subsP..
quent conduct of the State in affirming the transfers
created justiciable rights. The question actually
decided has thus no bearing on the point now in
controversy.
But in narrating the events leading
to such a merger agreement it was observed.
"The Rulers of Charkbari and Sa.rile. retained,
at the moment of final cession, whatever
mi>a~ure of so~reignty they had when paramountcy lapsed, leBB the portion given to the
Indian Dominion by their Instruments of
Acces~ion in 1947; thPy lost none of it during
tho interlude when they toyed with the experiment of intergration.''
Thl'se observations cannot in the context be held to
be a decision on the point under consideration. It
m:iy also be added that tho disintegration of the
United 8tate of Vinrlhya Pradesh and the reconstitution of the old States would itself be an act of
State.
l'i·ithi Singli v. Slate of Pcps11. ('i relied on for
the respondents is a tlircct dedsion on this point.
Thero it was held on a consideration of Arts. Ill,
XI, XII and XIV of tho Covennnt that tl1<: Rulers
had not surrendered all their sovereign powers to
the new State. We aro unable to agree with this
decision. Article I II provides for the formation of
a Council of Hulers which is to exercise such functions· as aro assigned to it by the Covenant and such
other functions, if any, as may be assigned to it by
the Constitution of the Union.
This Article clearly
does not vest any sovereign powers in the Rulers.
As for Arte. XI, XII and XIV they relate to the
personal rights of the Rulers and as already stated
they emphasize by contrast that the l<ulers had no
110vereignty vested in them. The learned Judge11
(IJ A.J.R. (1953) hpsQ, 161,
•···
2 S.C.R.
SUPREME COURT REPORTS
371
sought support for their conclusion in the passages
from Oppenheim on International Law, Vol. I, p.
842, quoted above but for the reasons already given
they are not in point. In the result we agree with
the appellants that the Supplementary Covenant
cannot be held to be effective for modifying the
provisions in the original Covenant.
.
It is next contended for the respondents that
even on the footing that the validity of the impugned Act, should be determined in accordance
with the provisions of the original Covenant, without reference to the Supplementary Covenant, the
appellants must fail because the question in dispute
is one which arises out of a provision in a Covenant
and under Art. 363 the Civil Court has no jurisdiction to go into it. The appellants do not dispute
that the H.ulers of the States who entered into the
Covenant are all Rulers within Art.363(2}(b), or
that the Government of the Dominion of India was
a party to it. What they urge is that they merely
seek to establish that they are not liable under the
impugned Act, because it is inoperative by reason
of Art. X in the Covenant, and that such a dispute
is not within the bar of Art. 363. And the decision
in Bholanatk J. Thaker v. State of Saurasktra(') is
relied on as supporting this · contention. There a
Judicial Officer of the erstwhile Wadhwan State,
had filed a suit questioning the validity <'fan Order
of the State of Kathiawar, whioh had been formed
as the result of the merger of a number of States
including Wadhwan, whereby his services were
prematurely terminated. The question was whether
the action was barred by Art. 363. This Court held
that the Officer had a right to continue in service
under a law of Wadlnvan enacted before the date of
merger, that the Covenant was relied on only for
showing that that right was at all times subsisting
and that Art. 363 was not a bar to the maintenance
(I) A.I.R. (1954) S. C. 680.
1962
La11hhman Dai oa
behalf of Fir•
Tilak Ram Ram Bu:t
v.
Stat• of Punj1b
AiJ<'r J,
1961
LO(h/1man Das on
Beltolj of Firtn
7 lok Ram Ram Bux
v.
S ~au of Plfl~o b
AVM' J.
372
SUPREME COURT REPORTS [19631
of such a suit. The ratio of the decision is.to be
found in the following observation:
"There was no dispute arising out of the
Covenant and what the Appellant was doing
was merely to eaforce his rights under tho
existing laws which continued in force until
they were repealed by approprii.te legislation."
In other words the dispute relate.d to a right which
arose independent of, and was
affirmed in the
Covenant, and therefore Art. 363 had no application. That is not the pOHition here. The liability
of the appellants to pay to the Bank the amounts
determined in accordance with the impugned Act is
one which arises dehors the Covenant, and it is
sought to be got rid of only by recourse to Art. X.
The dispute is therefore one arising directly on a
provision in the Covenant, and Art.