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PETITIONER: JAGANNATH AGARWALA

       Vs.

RESPONDENT: STATE OF ORISSA

DATE OF JUDGMENT: 08/03/1961

BENCH: HIDAYATULLAH, M. BENCH: HIDAYATULLAH, M. KAPUR, J.L. SHAH, J.C.

CITATION:  1961 AIR 1361            1962 SCR  (1) 205  CITATOR INFO :  APL        1962 SC 445  (21,35)  R          1962 SC1288  (7)  R          1964 SC1043  (19,69,93,95,117,137)  R          1971 SC 846  (7)  RF         1981 SC1946  (18)

ACT: Act  of  State--Duration  of--State allowing  claims  to  be preferred  and  enquired  into--Act  of  State,  if  at   an end--Administration of Mayurbhanj State Order, 1949, cl. 9.

HEADNOTE: The  appellant had two money claims against the Maharaja  of Mayurbhanj  State.  From January 1, 1949, the  State  merged with the Province of Orissa.  Clause 9 of the Administration of   Mayurbhanj  State  Order,  1949,  promulgated  by   the Government  of  Orissa,  provided  for  the  issuing  of   a notification  for calling upon all persons having  pecuniary claims against the Maharaja to notify the same to an officer authorised in that behalf.  After issue of the  notification the  appellant  preferred his two claims  before  the-Claims Officer.   The  Claims Officer made a  report  substantially accepting  the  claims.  This report was  submitted  to  the Member (third), Board of Revenue.  Without giving the appel- lant any hearing the claims were rejected on the ground that they were barred by limitation.  The appellant applied for a review  and submitted the documents on which he  relied  but again  without giving the appellant a hearing the  Board  of Revenue  declined  to  review  the  matter.   The  appellant contended 206 that there was a breach of the principles of natural justice in  the Board of Revenue deciding the matter without  giving the  appellant a proper hearing.  The  respondent  contended that  the rejection of the claims was an act of State,  that the new Sovereign State could not be compelled by the courts to  accept the liability of the old Ruler, that  though  the new  Sovereign State might make such enquiry as it chose  it was  not compelled to give a hearing to the appellant.   The appellant  replied that the act of State was over  when  the claims were invited and accepted by the Claims Officer.

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Held,  that the rejection of the claims was an act of  State and  could  not be challenged.  Unless  the  new  Sovereign, either  expressly  or impliedly, admitted  the  claims,  the municipal courts had no jurisdiction in the matter.  The act of State did not come to an end when Government allowed  the claims  to  be  preferred or the  Claims  Officer  made  his report.   The enquiry was for the benefit of the  State  and not for conferring rights on the claimants.  Till there  was an  acceptance  of  the claims by  the  Government  or  some officer who could be said to bind the Government, the act of State was still open. Dalmia,Dadri Cement Co. Ltd. v. Commissioner of  Income-tax, [1959] S.C.R- 729 State of Saurashtra  v. Mmemon Haji Ismail Haji, [1960] 1 S.C.R. 537 and Vaje Singh ji joravar Singh v. Secretary  of  State  for India, (1924) L.R.  51  I.A.  357, relied on.

JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeals Nos. 666 and 667 of 1957. N.   C. Chatterjee and G. C. Mathur, for the appellant. A.   V. Viswanatha-Sastri, K. N. Rajagopala Sastri and T. M. Sen, for the respondents. 1961.  March 8. The judgment of the Court was delivered by HIDAYATULLAH,  J.-These two appeals raise a common  question of  law,  and it is convenient to deal with  them  together. They  have been filed (with certificate) against a  judgment of  the  High Court of Orissa, by  Jagannath  Agarwala,  who sought to enforce a claim he had against the former State of Mayurbhanj  and the ex-Ruler of Mayurbhanj.  They arise  out of  two  petitions under Art. 226 of the  Constitution,  for writs  of  mandamus, etc., which the High  Court  of  Orissa dismissed by its order under appeal. It appears that in the year 1943 the Maharaja, of 207 Mayurbhanj  entered  into an agreement or  arrangement  with Jagannath  Agarwala  for  establishing a  business  for  the manufacture of industrial alcohol and essential oils and for purchases  of wheat and barley in the Punjab.  Civil  Appeal No.  666  of  1957  relates  to  the  establishment  of  the manufacturing business, and Civil Appeal No. 667 of 1957, to the  purchases of wheat and barley.  With reference  to  the establishment  of the business, the appellant urges that  it was agreed that the capital required would be contributed by the  parties in equal shares, and that the profit  and  loss would also be shared equally.  As regards the purchases, the appellant  was to advance such money as might  be  required, and the State of Mayurbhanj was to provide necessary permits and facilities for transport. In  furtherance of this agreement, the appellant urges  that he  established a factory and started the business, but  the Maharaja, instead of contributing his share of the  capital, asked the appellant to do so on his behalf, promising to pay him  the  amount.   The factory  was  constructed,  and,  it appears,  it  went into production, but later  closed  down, suffering  a total loss of Rs. 2,80,875-9-3.  In  the  first case,  therefore,  the claim of the  appellant  against  the Maharaja and the State was Rs. 1,40,400 odd.  In the  second case,  the appellant advanced a sum of Rs. 50,000  and  also incurred a further expenditure of Rs. 3,741-7-9.  The  State of  Mayurbhanj  failed  in  its  promise  of  procuring  the necessary  permits  and facilities for  transport,  and  the appellant was, therefore, required to sell the foodgrains in

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the Punjab, and thus incurred a loss of Rs. 14,844-0-3.  The appellant  alleges  that the Maharaja promised  to  pay  the ’amount. From  January 1, 1949, the Mayurbhanj State merged with  the Province  of Orissa, and on the same day, the Government  of Orissa  promulgated the Administration of  Mayurbhanj  State Order, 1949 under s. 4 of the Extra Provincial  Jurisdiction Act,  1947 (47 of 1947).  That Order allowed claims  against the  State of Mayurbhanj to be preferred to  Government  for its 208 consideration.   Clause 9 of the Order, in so far as  it  is material, is as follows:               "9. Claims against Ruler of the State. (a) The               Administrator   shall  as  soon  as   possible               publish  a  notification  in  the  Gazette  in               English  and  in vernacular calling  upon  all               persons   having  pecuniary  claims,   whether               immediately  enforceable or not,  against  the               State  or  the  Ruler  of  the  State  in  his               capacity as Ruler of that State, to notify the               same in writing to the officer authorised,  by               the Administrator in this behalf  (hereinafter               called  the said officer) within three  months               from the date of the notification.               (b)   The  notice shall also be  published  at               such  places and in such other manner  as  the               Administrator may by special or general  order               direct.               (c)   Every  such claimant shall,  within  the               period  specified in sub-paragraph (a)  notify               to the said officer in writing his claim. with               full   particulars  thereof  and   any   claim               presented after the expiration of such  period               shall be summarily rejected.               (d)   Every  document  including  entries.  in               book.%  of  account in the  possession  of  or               under the control of the claimant on which  he               bases  his claim shall be produced before  the               said  officer along with the statement of  the               claim:               (f)   Nothing in the preceding  sub-paragraphs               shall   apply  to  any  pecuniary   claim   of               Government or any  local  authority.               (g)   The said officer shall after making such               enquiry  as  he  may deem  fit,  decide  which               claims notified under sub-paragraph (c) are to               be  allowed in whole or in part and which  are               to  be disallowed, and on his  decision  being               confirmed  by  the  Administrator,  the   said               officer shall give written notice of the  same               to   the  claimants.   The  decision  of   the               Administrator shall be final and shall not  be               liable.  to  be called into  question  in  any               Court whatsoever..’               (h)   No  court  shall  have  jurisdiction  to               investigate               209               any  pecuniary  claim  against  the  State  or               against the Ruler of the State in his capacity               as Ruler of that State and such claim shall be               determined   only  in  accordance   with   the               provisions of this paragraph.               (i)   The   Administrator  may  delegate   his               powers  under  this paragraph to  any  officer

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             subordinate  to him not below the rank  of  an               Additional District Magistrate.               (j)   The  provisions of this paragraph  shall               not  apply  to any  claim  against  the  State               based on a     cause of action which arose  on               or  after the 1st January 1949 and such  claim               shall  be disposed of in accordance  with  the               laws  applied  or  continued  in  force  under               paragraph 5." The appellant preferred his two claims for the consideration of  the Claims Officer, who was dealing with such claims  on behalf  of  the Administrator.  The Claims  Officer  made  a report  to the Administrator on June 20, 1951 in respect  of the  first claim, and after examining the merits,  gave  his conclusions as follows:               "Considering the evidence laid by the Claimant               before me in support of his claim, I find that               he is entitled to a sum of Rs.  1,37,785-13-7-               1/2.   It has been urged by the Claimant  that               interest @ Rs. 4 per cent. per annum should be               allowed  to him till the date of repayment  of               his  dues.  He has been allowed interest  from               1-4-43 to 28-2-49 and,, I think, he should get               interest  thereafter  @ Rs. 4  per  cent.  per               annum till the date of repayment of his  dues.               As  regards  the Claimant’s  demand  for  half               share of further advances made by the Claimant               after filing of this claim case, it cannot  be               entertained in this case.               Submitted to the Revenue Commissioner, Orissa,               Cuttack   through  the  District   Magistrate,               Mayurbhanj  as required under Clause  9(g)  of               the Administration of Mayurbhanj State  Order,               1949." In the other case, he made a report on November 5, 1951 that the appellant had substantiated his claim for Rs.  14,844-0- 3, and was also liable to be paid interest amounting to  Rs. 5,303-14-0.  This report was 27 210 submitted  to the Member (Third), Board of Revenue,  Orissa, Cuttack, through the District Magistrate, Mayurbhanj. On  June  28, 1952, the appellant received a  Memo    randum from  the  Deputy  Secretary,  Board  of  Revenue,   Orissa, Cuttack, which read as’ follows: "Dear Sri Agarwalla, With  reference to your petitions dated 1-10-51 and  7-9-50. I  am directed to say that the claims have been rejected  as Government  have  been  advised  that  they  are  barred  by limitation.                                   Yours sincerely,                                 Sd. Govind Tripathy". It appears that the appellant applied for review, and he was asked  on November 8, 1952 to produce before the  Board  any document  or documents in his possession to show that  these were  continuing  businesses and also to point out  the  law that  no claim of a continuing business could be  barred  by limitation.  The documents on which the appellant presumably relied before the Board of Revenue have not been printed  in the  record  of  this  Court, but  on  April  2,  1953,  the solicitors of the appellant were informed that the Board  of Revenue had declined to review the matter.  It appears  also that, in the first case, even before the merger the  Revenue Minister,  Mayurbhanj  State,  had rejected  the  claim  put forward  by  the appellant by his order  dated  October  26,

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1948, to the following effect:               "The  State need not recognise the claims  put               forward  by  Mr. J. Agarwalla,  as  there  was               really no formation of any Joint Stock Company               nor  any  written agreement entered  into  and               finally settled.                                   Sd. B. Mohapatra                            (Revenue Minister, Mayurbhanj)". It was in these circumstances, that the two petitions  under Art.  226  of the Constitution were filed.  The  High  Court dismissed  them.   From  the order of  the  High  Court,  it appears  that  two points alone were urged before  it.   The first was that the decision of the 211 Claims Officer should have gone to the Board of Revenue as a whole and not to a single Member and the second was that the appellant should have been served with a notice by the Board before  the  recommendations  of  the  Claims  Officer  were rejected,  and,  as has now been argued before  this  Court, allowed a hearing. The first point was not argued before us, and it seems  that the  appellant has accepted the decision of the  High  Court that  the Third Member was competent to hear and dispose  of these  cases.  The second point alone has been argued,  and. needs  to be considered.  The case was argued by Mr.  N.  C. Chatterjee  on  behalf of the appellant  as  illustrating  a patent  breach  of the principles of  natural  justice.   He contended  that his client was entitled to a proper  hearing before  the  report in his favour was rejected,  and  relied upon  the following cases: Shivji Nathubai v. The  Union  of India  (1),  New Prakash Transport Co. Ltd. v.  New  Suwarna Transport   Co.  Ltd.  (2),  Nagendra  Nath  Bora   v.   The Commissioner  of Hills Division and Appeals, Assam  (3)  and Gullapalli  Nageswara  Rao  v. Andhra  Pradesh  State,  Road Transport  Corporation (4).  In reply, Mr. A. V.  Viswanatha Sastri contended that the rejection of the claim was an  act of  State,  and that the new Sovereign State  could  not  be compelled  by a process of the municipal courts to accept  a liability  of  the old Ruler, and though the  new  Sovereign State  might  make  such enquiry as it  chose,  it  was  not compelled  to  give  a  hearing to  the  claimant.   In  his rejoinder, Mr.Chatterjee contended that the act of State was over,  when the new Sovereign State invited claims  under  a law  passed for the purpose, and proceeded to  consider  the evidence tendered in support of the claim He also  contended that by the admission of the claim by the Claims Officer the act of State was over, and that any further consideration of the report had to comply with the rules of natural  justice, laid down by this Court in the cases cited by him. What is an act of State and when it ceases to apply  between a new Sovereign and the subjects of a State (1)  [1960] 2 S.C.R. 775. (3)  [1958] S.C.R. 1240. (2)  [1957] S.C.R. 98. (4)  [1959] SUPP. 1 S.C.R. 319. 212 conquered, acquired or ceded to the new Sovereign, has  been the  subject  of several decisions of this Court.   In  M/s. Dalmia Dadri Cement Co. Ltd. v. The Commissioner of  Income- tax  (1) and The State of Saurashtra v. Memon   Haji  Ismail Haji  (2), it has been held that unless the  new  Sovereign, either  expressly  or  impliedly   admits  the  claim.,  the municipal  courts have no jurisdiction in the  matter.   The question  to  consider  is whether such  a  stage  had  been reached in the enquiry which had been commenced.  No  doubt,

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the  plea  that this was a part of an act of State  was  not specifically  raised before the High Court; but, as  pointed out  by  the Judicial Committee’ in Vale  Singh  Ji  Joravar Singh v. Secretary of State for India (3), no plea is really needed.   It is clear from the Order, which was  made  under the  Extra  Provincial Jurisdiction Act,  that  claims  were being asked to be entertained only for investigation and not for  acceptance.   It is the acceptance of the  claim  which would  have  bound the new Sovereign State and  the  act  of State  would  then  have come to an end.  But  short  of  an acceptance,  either  express or implied, the  time  for  the exercise of the sovereign right to reject a claim was  still open.   In Vaje Singh Ji’s case (3), enquiries were made  by Captain  Buckle  and again in 1868, and  the  two  enquiries lasted 16 years before the rejection of the claims, and  the rejection  was still upheld as an act of State.  Vaje  Singh Ji’s case (3) has been relied upon by this Court in the  two cases  referred to, in the argument of Mr. A. V.  Viswanatha Sastri.   It would, therefore, appear that the act of  State could  not  be  said  to  have come  to  an  end,  when  the Government allowed claims to be preferred, or when their own Officer made his report.  The Claims Officer was not a  part of  the municipal courts, and Government cannot be  said  to have  submitted itself to the jurisdiction of the  municipal courts,  when it entrusted the enquiry to him.  Nor can  the investigation  of claims be said to have conferred  a  civil right upon the claimants to enforce their claims against the State.   In our opinion, enquiry was for the benefit of  the State and not (1) [1959] S.C.R. 729.         (2) [1960] 1 S.C.R. 537. (3) (1924) L.R. 51 I.A. 357. 213 for conferring rights upon likely claimants.  It was  always open  to  the  Government to admit any  claim,  even  though reported  adversely  by the Claims Officer,  though  such  a contingency   might   have  been  very   remote.    Equally, therefore, the Government had the paramount right to  reject a  claim,  which its Claims Officer considered good  but  on which  the Government held a different opinion.   In  short, till  there  was  an acceptance by the  Government  or  some officer  of  the Government, who could be said to  bind  the Government,  the  act of State was still open, and,  in  our opinion, it was so exercised in this case. Mr.  Chatterjee  contended  that at least  within  the  four corners of the Order, the appellant had a right to be heard, and  that he did not have a proper bearing.  If the  Member, Board  of  Revenue, entertained some doubt about  the  claim being within time, he might have heard the party.  That this was an enquiry mainly to ascertain whether a claim should or should  not be recognised is obvious enough.  It was  in  no sense  a  trial of any issue between the appellant  and  the Government.   To judge such an action with the  same  rigour with  which  a  judicial enquiry or trial is  judged  is  to convert  the enquiry into a civil suit.  The  appellant  was fully heard by the Claims Officer, and the only question was whether the claim was within time.  Even there, the  Member, Board  of  Revenue,  asked  the  appellant  to  submit   all documents  and arguments in support of his  contention  that the  claim  was within limitation, and to that  extent,  the appellant had his say.  Whether the Member, Board of Revenue should have gone further and given a viva voce hearing was a matter  entirely for that Officer to choose, and  there  was nothing  under the law to compel him.  Though we think  that such  an  opportunity  might  have  been  afforded  to   the appellant,  we  cannot  say that this  was  a  matter  which

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entitled him to a writ. In  this  view  of the matter, the  appeals  fail,  and  are dismissed.   But,  in the circumstances of the  case,  there shall be no order as to costs.                                      Appeals dismissed. 214