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PETITIONER: LACHHMAN DAS ON BEHALF OF FIRMTILAK RAM RAM BUX

       Vs.

RESPONDENT: STATE OF PUNJAB AND OTHERS[And Connected Petition And Appeal

DATE OF JUDGMENT: 23/04/1962

BENCH: AIYYAR, T.L. VENKATARAMA BENCH: AIYYAR, T.L. VENKATARAMA SINHA, BHUVNESHWAR P.(CJ) SUBBARAO, K. AYYANGAR, N. RAJAGOPALA MUDHOLKAR, J.R.

CITATION:  1963 AIR  222            1963 SCR  (2) 353  CITATOR INFO :  R          1964 SC1223  (16)  F          1966 SC1607  (33)  R          1967 SC1581  (20)  RF         1973 SC1461  (1195)  RF         1974 SC2009  (3,23)  R          1980 SC 452  (57,58)  R          1980 SC 801  (8)  R          1984 SC 200  (7)  RF         1992 SC1277  (22,34,87)

ACT: State,  Bank-State Dues-Determination and  recovery  Statute providing  for  special  procedure-Constitutional  validity- Merger of States-Powers  of Rulers of erstwhile States after meger-Enactment, if in force-Patiala Recovery of State  Dues Act,  IV of 2002 BK, ss. 2, 3, 4, 5, 6,  11-Constitution  of India, Arts. 14, 19(1) (f), 19(1) (g), 363.

HEADNOTE: On  May 5, 1948, 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 executive 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 made shall, for the space of not  more than six months 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 Pramukh.  On the same date be  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

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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  bad  been brought into force 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, Pepsu became  part  of the State of 354 Punjab, and All the laws in force in Pepsu continued to have force in that area. 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 accounts  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 Rules 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 Patiala State Bank were included in the definition clause as ’State  Dues’, and s. 4 authorised the Managing Director  of the  Patiala  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 matters stated therein  and s. 11  barred the jurisdiction of the Civil Court in respect of  the matters en. trusted to the Managing  Director  under the  Act  and rules framed under the  act.   The  appellants challenged the validity of the Act and the proceedings taken thereunder on the grounds (1) that the Act bad ceased to  be in  force on the expiry of the six months of  the  Ordinance issued by the Raj Pramukh on February 15, 1949, because  the Rulers  bad  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,  1948, 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 India as  they were repugnant to Arts. 14, 19(1) (f) and (g). Held,  (Subba Rao,dissenting), that the Patiala Recovery  of State  Dues  Act, of 2002 BK did not offend Art. 14  of  the Constitution of India. A Bank established by a State had distinctive features which differentiated it from other Banks and formed a category  in itself ; and the Act, in setting up separate authorities for determination  of  disputes  and in  prescribing  a  special procedure to be followed by them for the recovery of the                             355 dues  by  summary  process, could not be  considered  to  be discriminatory and was valid. Mannalal and and other v. Collector of Jhalawar and  Others. (1961) 2 S. C. R. 962, followed. Chiranjit Lal Choudhury v. Union of India and others, (1950) S.  C. R. 869 and Ram Krishna Dalmia v. Shri Justice  S.  B. Tandolkar and others, (1959) S. C. R. 279, relied on. The Act was not discriminatory on the ground that after  the

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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 different  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 of  Madhya  Pradesh  v.  G.  C. Mandawar, (1955) 1 S. C. R. 599, State of Madhya Pradesh  v. The  Gwalior Sugar Company Ltd., (1962) 2 S. C. R.  619  and Bowman v. Lewis, (1880) 101 U. S. 22: 25 L. ED. 989,  relied on. Held,   further  per  Sinha,  C.  J,  Rajagopala   Ayyangar, Mudholkar and Venkatarama Aiyar , JJ.) that : (1) under  the Covenant dated May 5, 1948, there was 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 into by the Rulers on  April 9,  1949, was not 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 State  Dues Act, IV of 2002 (BK), was in force at  the  mat- erial  times was one which arose out of a provision  in  the Covenant  dated May 5, 1948, and, therefore, under Art.  363 of  the  Constitution  of  India, the  civil  court  had  no jurisdiction to go into it. Bholanath J. Phaker v. State of Saurashtra, A. I. R. 1956 S. C. 680, distinguished. (3)the  Patiala  Recovery  of  State  Dues  Act  was   not repugnant to Art. 19 (1)(f) on the ground that the procedure prescribed  by the Act and the rules for the  settlement  of disputes was unfair and opposed to rules of natural justice. The  provisions of the Act and the rules, as a  whole,  were reasonables. (4) the Act did 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  is only a subsidiary rule evolved by  courts to  give  a practical content to the  said  doctrine.   Over emphasis on the doctrine of classification or an anxious and sustained attempt to discover some basis for  classification may  gradually and imperceptibly deprive the Article of  its glorious  content.  That process I would inevitably  end  in substituting the doctrine of classification for the doctrine of  equality ; the fundamental right to equality before  the law and equal protection of the laws may be replaced by  the doctrine of classification. In the present case, there were no real differences  between the Patiala State Bank and other Bank vis a via their  claim against  their constituents which could  reasonably  sustain 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.

JUDGMENT: ORIGINAL JURISDICTION : Petitions Nos. 92 and 128 of 1959. Petitions under Art. 22 of the Constitution of India for the enforcement of Fundamental Rights.                             WITH

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Civil Appeals Nos. 210 and 211 of 1961. Appeals  from the judgment and order dated March 6 1959,  of the Punjab High Court in-Civil Writ Nos. 133 of 1957 and 389 of 1958. Bishan Narain, and K. P. Gupta, for the petitioner (in Petn. No. 92 of 1959). R.L.  Aggarwal and A. G. Batnaparkhi, for the  petitioner (in Petn.  No. 128 of 1959). Bishan  Narain, B. K. Sinha, B. K. Garg, S. C. Aggarwal  and P. C. Aggarwala, for the appellants. 357 S.N. Sikri, Advocate-General 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.-The  appellants are  a  joint  Hindu family firm which has been carrying on business since  1911, in  grains, 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 result 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 this 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  Bhagirathlal  one of the senior members of  the  joint Hindu  family of the appellant firm and two other  strangers Shri Kishore 358 Chand  and  Shri  Banwarilal.  That  firm  did  business  as Commission  Agents  and  had a Cash Credit  Account  in  the Patiala  State  Bank at Lehragaga under  which  it  borrowed money  for  the  purpose of its business.   That  firm  also sustained heavy losses during the period of the slump and on May 23, 1953, it owed to the Bank a sum of Rs. 2,17,957-12-6 on  account of shortfall.  Now what the Bank did  under  the arrangement  dated May 23, 1953, was to adjust the  loan  of Rs. 4,50,000/- towards the shortfalls due to them both  from the appellant’s firm and the firm of Yogiraj Neelkumar.  The complaint  of the appellants is that they had nothing to  do with  the  firm  of  Yogiraj  Neelkumar,  that  Bhagirathlal started it along with strangers as his own separate  concern and accordingly the 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 amount payable under the demand loan account not  having been paid by the appellants’ the Bank took steps to  realise the  same in accordance with the provisions of  the  Patiala Recovery of State Dues Act, hereinafter referred to as  ’the

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Act’ and the rules framed thereunder.  It will be convenient at  this stage to refer to these provisions and rules in  so far  as  they  are  material,  as  it  is  their  vires  and constitutionality  that form the principal target of  attack in  these  proceedings.  Section 3 (1) of  the  Act  defines "State  Dues"  as including debts due to the  Patiala  State Bank.  "Department" is defined in s. 3 (2) as including  the Patiala State Bank, and "Head of department" in a. 3 (6)  as meaning  the  Managing Director in the case 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 tile manner prescribed under  the  rules. Section  5 (1) .(a) enacts that State dues may be  recovered by the 359 department  through  the Nazim as if these were  arrears  of land revenue.  Then comes s. 6 which is as follows :-               "6.  (1) 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 It 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 charge 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 s. 12  of  the  Act  were published on August 8, 1945.  Rule 3 requires that the  head of department shall cause a notice to be 360 served  on  the  defaulter in the  manner  prescribed.   The notice  has to specify the amount of state dues and  require the  defaulter,  to  pay  such dues  on  or  before  a  date specified,  or  to appear on such date before  the  head  of department  and present a written statement of his  defence. The  date to be fixed should allow at least fifteen days  to the  defaulter to make payment or to appear and  answer  the claim.  If the defaulter does not appear on the date  speci- fied,  the  head  of department may  proceed  ex  parte  and determine  by  order  in writing the amount  of  State  dues 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 the notice and  presents  his

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writen  statement,  the head of department  or  the  Inquiry Officer, as the case may be, shall examine the objections of the  defaulter stated in the written statement in the  light of the relevant records of the department, and shall then by order  in  writing  determine  on the same  day  or  on  any subsequent  day the exact amount of State  dues  recoverable from  him." Rule 7 provides that when the amount  determined as  payable under rules 5 and 6 remains unpaid, the head  of department  might issue a notice on the defaulter  requiring him  to pay the State dues within fifteen days and  that  in default,  the amount could be recovered through  the  Nazim. Under  Rule  8, an appeal against an order  determining  the amount due under rule 5 or 6 lies to the Board of Directors. Against  an  Order  rejecting  an appeal  under  rule  8,  a revision  is  provided  to the Ministry.  There  is  also  a provision  for  service  of notice on  the  defaulter,  when proceedings for realising the amount are taken. We may now refer to the steps taken by the Patiala Bank  for recovering the amounts due from the appellants.  On February 17, 1955, the Bank 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 that until then the recovery proceedings might be postponed.   On this, the Bank would appear to  have  staved their  hands for some time.  On November 21, 1955,  a  fresh notice  was  issued under rule 3 stating 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 again 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,  be issued a certificate under P. 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  thereunder  on  various grounds.  Meantime, on July 7, 362 1956,  the Bank issued a notice under ’rule 3 (2)  demanding from  the appellants a sum of Rs. 25,548-4-6 as due  on  the cash  credit account at Lehragaga.  To this, the  appellants sent a reply denying their liability.  On October, 4,  1956, the Bank determined the liability ex parte at Rs. 25,478-15- 9.  A notice under rule 7(1) was issued on December 6, 1956, and that not having been complied with, a certificate  under a,  7 of the Act was issued. by the Manauing  Director.   On

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May  17, 1958, the appellant filed Writ Petition No. 389  of 1958 in the High Court of Punjab challenging the validity of the  determination  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  appellants  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   proceedings 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  Constitution  as  they  are repugnant  to  Arts.  14 and 19 (1) (f)  and  (g),  and  the proceedings  taken  under  those  provisions  are  therefore illegal. 363 (iii)The  certificate  issued  under s.  7  is  not  in accordance  with  the  rules framed under  the  Act  and  in consequence the proceedings taken thereunder are illegal. (i)Taking up the 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 agreement referred to as "the Covenant"  for the establishment of a new State called the Patiala and East Punjab  States  Union  or more briefly  ",the  Pepsu  Union" comprehending  the  territories of their  respective  States with a common executive, legislature and judiciary.  Article III  provides for the constitution 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 Union  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.   TX  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 there is to following proviso to  it which is very material for the present discussion:               "Provided that until a Constitution framed  by               the Constituent Assembly comes into  operation               after receiving the assent of the Raj Pramukh,               the  Raj Pramukh shall have power to make  and               promulgate Ordinance for               364               the peace and good Government of the Union  or               any  part thereof, and any Ordinance  so  made               shall..  for  the space of not more  than  six

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             ’months,  from its promulgation have the  like               force of law as an Act passed by the  Constit-               uent  Assembly, but any such Ordinance may  be               controlled or superseded by any such Act." Article  XI provides for the payment of the amount fixed  in the Schedule as the privy purge of each Ruler.  Article  XII guarantees  to  the  Ruler  all  the  personal   privileges, dignities        and        titles        enjoyed         by them........................... immediately before the  15th day of August, 1947" and Art.  XIV, succession to the  Gaddi according to law and custom. The  new  State came into existence on August 20,  1948,  as provided  under the Covenant.  The Ruler of  Patiala  became its  Raj  Pramukh  and on the same date  he  promulgated  an Ordinance No. 1 of 2005 (BK) which provided inter alia  that all Laws in force in the State of Patiala on that date shall apply mutatis mutandis to the territories of the said  State and  with  effect from that date all laws 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  the 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. 1 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 promulgated by the Raj Pramukha were to be in force for a peroid of only six 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, 1949,  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 been 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 completely all their  sovereign powers to the new State and that in  conse- quence  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 legislate.  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 apolitical  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" says Oppenheim, ’ ceases to be an International Person when it ceases to exist.   Practical cases

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366 of  examination of States are werger of State into  another, annexation after conquest in war, breaking up of State  into several States, and breaking up of a State into parts  which are  annexed by surrounding States.  By voluntarily  merging into  another State, a State loses all its independence  and becomes a mere part of another". (International Law, Vol. 1, 150).  Therefore when the new State of Pepsu was formed, the eight  States which had merged into it would cease to  exist as  independent personae and there could be no  question  of sovereignty  of such States or of its ex-Rulers.  But it  is aruged  that  the loss of sovereignty need not  occur  at  a single  point of time, and that in the present case  it  was gradual,  and spread over nearly a year, and that  both  the Covenants were made during this period.  It is no doubt true that  loss  of  sovereignty might be  a  continuing  process extending  over a considerable period of time, and that  has also  been  held  quite recently by  this  Court  in  Promod Chandra  Deb v. The State of Orissa (1).  But is  that  what has  happened  here  ?   The Covenant  is  quite  clear  and unequivocal  on  the  point.   Article  VI  is  the  crucial provision,  and it says that all the rights,  authority  and jurisdiction  of the Ruler in relation to Government are  to vest in the Union.  Then ’follow provisions for the exercise of those powers by the Union.  Thus there is on the one hand an extinction of the powers of the Rulers, and on the  other 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 into existence on August 20, 1948. (1) [1962] Supp. 1 S.C.R. 405. 367 But  it is contended that the, Covenant 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 months.  The legislative power not  having  been  completely. transferred  to  him,  it  is argued, the residuum must vest somewhere and that could only be  in the Rulers themselves.  Therefore, it is said,  there is some sovereignty left in them, and that is disposed of by the Supplementary Covenant.  This argument sounds  plausible but  cannot  be  sustained  on the  terms  of  the  original Covenant.   It  is not, in our view, correct  to  say,  that under Art.  X the legislative powers of the Rulers 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 effect 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 held to have continued  in  the Rulers.   On  that  question Art.  VI is  clear  beyond  all

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doubt.    The   entirety  of  the  rights,   authority   and jurisdiction  of the Rulers 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 Rulers of 368 the Covenanting States could, subsequent to August 20, 1948, have  passed  any laws within their own territories  on  the ground  that  the power of the Raj Pramukh did  not  extend, under  Art.  X, to enacting legislation beyond  six  months. It  is  further  to be noted that under Art.   VI,  all  the powers of the Rulers are to. vest in the Union, and even  if the whole of the legislative power is not exercisable by the Raj  Pramukh by reason of Art.  X. it is in the  Union  that the  residue of the power must be held to be lodged and  not with the Rulers. It is next argued for the respondents that though the Rulers might  have surrendered their power to the Union  under  the original  Covenant,  that  did not, according  to  rules  of International Law, deprive them of their right to enter into a  fresh  Covenant.  Reliance was placed  on  the  following passage in Oppenheim’s International Law: .lm15 "A  treaty, although concluded for ever, or for a period  of time  which has not yet expired, may nevertheless always  be dissolved  by  mutual consent of the  contracting  parties". (Vol.  I, p. 842, para 537). It  is contended that on the principal stated above  it  was within  the  competence of the Rulers to modify Art.   X  as they did under the Supplementary Covenant. But the passage quoted above presupposes thaton  the  date  of  the   later treaty by which the earliertreaty    is   rescinded    or modified  the contracting parties are sovereigns and if,  as we have already held, the effect of the original Covenant is to  completely  divest the Rulers of their  sovereign  power there  can be Do question of their entering into any  treaty thereafter as that could be only between sovereigns and  the Supplementary Covenant cannot therefore be sustained one the principle of International law enunciated above 369 Our attention was also’ invited to the statement of the  law in Hyde’s International Law, Vol. 1, 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. inVirendra  Singh v. State of  Uttar Pradesh (1),Rulers   of   35   States entered into a Covenant inMarch, 1948, constituting  the United State of Vindhya Pradesh and as the intergration  did not  work  well  they  entered  into  another  agreement  in December,  1949, dissolving that State and on  1st  January,

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1950,  acceded  to the Government of India  under  a  merger agreement.   There  after the  State  Government  repudiated certain grants of land made by the action was challenged  on the  ground  nations were within the  protection  of  merger agreement.         And this Court held that (1)  [ 1955] 1 S.C. R. 415,429 370 though no rights could be founded on the merger agreement as they were acts of State, the subsequent 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 Charkhari and Sarila  retained,               at  the  moment  of  final  cession,  whatever               measure  of  sovereignty they bad  when  para-               mountcy lapsed, less the portion given to  the               Indian   Dominion  by  their  Instruments   of               Accession in 1947; they lost none of it during               the  interlude  when they toyed with  the  ex-               periment of intergration." These  observations  cannot in the context be held to  be  a decision  on the point under consideration.  It may also  be added that the disintegration of the United State of Vindhya Pradesh  and  the  reconstitution of the  old  States  would itself be an act of State. Prithi  Singh  v.  State  of  Pepsu(1)  relied  on  for  the respondents is a direct decision on this point’ There it was held on a consideration of Arts.  III.XI, XII and XIV of the Covenant  that  the  Rulers had not  surrendered  all  their sovereign  powers to the new State.  We are unable to  agree with this decision.  Article III provides for the  formation of  a Council of Rulers which is to exercise such  functions as  are  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 Arts.   XI, XII and XIV they relate to the personal rights of the Rulers and  as already stated they emphasize by contrast  that  the Rulers  had  no  sovereignty vested in  them.   The  learned Judges (1)  A.I.R. (1953)Pepsu. 161. 371 sought  support  for their conclusion in the  passages  from Oppenheim on International Law, Vol. 1, 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 Rulers 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 Bholanath J. Thaker v. State  of  Saurashtra(1)  is relied on  as  supporting  this

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contention.   There  a  Judicial Officer  of  the  erstwhile Wadhwan State, had filed a suit questioning the validity  of an Order of the State of Kathiawar, which 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 Wadhwan 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 372 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  enforce  his  rights  under   the,               existing  laws which continued in force  until               they    were    repealed    by     appropriate               legislation." In  other words the dispute related to a right  which  arose independent  of,  and  was affirmed  in  the  Covenant,  and therefore  Art.  363 had no application.  That  is  not  the position  here.  The liability of the appellants to  pay  to the  Bank  the  amounts determined in  accordance  with  the impugned Act is one which arises dehore 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. 363 will apply. But  even  if the appellants are right in  their  contention that  Ordinances  1  and 16 of 2005 (Bk)  ceased  to  be  in operation  after the expiry of six months from the  date  of their  promulgation, they can derive no advantage  from  it, because  what  those  Ordinances  did  was  to  extend   the operation  of all Patiala laws to the territories which  had formed part of the other Covenanting States.  So far as  the territories of the erstwhile State of Patiala are concerned, its laws continued to be in force proprio vigore and not  by force  of Ordinances 1 and 16 of 2005 (Bk).  Therefore  even if  the Ordinances lapsed on August 20, 1949,  as  contended for  the  appellant, that would not affect  their  liability under  the impugned Act, as they come from the territory  of the  erstwhile State of Patiala, and would in any  event  be governed  by it.  The question therefore is purely  academic so far as appellants are concerned but it does not arise for decision  in  Writ  Petition No. 128 of  1959,  wherein  the validity  of the impugned Act and of the  proceedings  taken thereunder is                             373 challenged by a resident of the erstwhile State of Nabha, on the same grounds as are raised in the appeals.  That is  why we  have,  gone into it fully, and given  our  pronouncement thereon.   In  the  result this  contention  must  be  found against the appellants. (ii)We shall next consider the contention of the appellants that  the Act and the rules framed thereunder are  repugnant to  Art.  14 and Art. 19 (1)(f) and (g) and that  they  have therefore  become  void under Art. 13 of  the  Constitution. Dealing first with the contention that they contravene  Art. 14, two grounds have been urged in support of (i) that there is discrimination between the Patiala State Bank on the  one hand  and the other Banks on the other and (ii)  that  after the  merger of the Pepsu Union in the State of Punjab  under the States Reorganisation Act, 1926, there is discrimination between  the law as administered in the territories  of  the

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erstwhile Pepsu Union on the one hand and in the other parts of the State of Punjab on the other. As  regards the first ground the argument of the  appellants might  thus be stated.  In the case of Banks other than  the Patiala  State  Bank  a  dispute  between  a  Bank  and  its customers has to be settled under the ordinary law by resort to  courts  or to arbitration and a decree passed  in  those proceedings  has  to  be realised  in  accordance  with  the procedure  prescribed in the Code of Civil  Procedure.   But under  the impugned Act and the rules a dispute between  the Patiala  State Bank and its customers has to be  decided  by the authorities constituted thereunder and the  jurisdiction of the Civil courts is barred with respect to it.  The  pro- cedure prescribed for the determination of the dispute under the Act and the rules is a special one widely different from that which is followed by the Civil 374 courts.  Then again when the Bank obtains a decree it can be realised by a summary process as arrears of revenue and  not according to the mode prescribed for realisation of  degrees under the Civil Procedure Code.  There is thus a substantial difference  between the rights of a customer who deals  with the  Patiala  State Bank and one who deals  with  the  other Banks.   This  differentiation  is  arbitrary  and  has   no rational  relation to the objects of the legislation and  so it is violative of Art. 14. It  cannot be disputed that the impugned Act and  the  rules framed  thereunder put the Patiala State Bank in a  position different  from that of the other Banks under  the  ordinary law.   The  question is whether this difference  amounts  to discrimination  within  Art.  14.  The,  contention  of  the respondents is that the Patiala State Bank forms a  category in  itself and the law which prescribes a special  procedure in relation to the settlement of disputes between that  Bank and  its  customers  is  valid because  it  is  based  on  a classification having a just relation to the objects of  the legislation.  It is the correctness of this contention  that now  falls  to be considered.  When a  State  establishes  a Bank,  it is the funds of the State to which the tax  payers contribute  that  are  utilised for  running  it.   In  this respect  a  State  Bank differs from  Banks  established  by private agencies in which the working capital is  subscribed by  individuals.  It should be noted that it is not part  of the  governmental  functions of a State to run a  Bank,  and when a State does establish a Bank, is with a view to confer benefits  on  the  general public,  such  as,  for  example, developing commerce and industry within its territories.  On the other hand when private agencies establish a Bank it  is as  an  investment for those who subscribe  capital  to  it. Thus  a  Bank  established by a State  has  got  distinctive features         375 which differentiate it from the other Banks and for  purpose of Art. 14 it forms a category in itself The law is now well settled   that  while  Art.  14   prohibits   discriminatory legislation  directed  against one individual  or  class  of individuals,  it does not forbid reasonable  classification, and  that  for  this .purpose even one person  or  group  of persons  can  be,&-  class.  Professor Willis  says  in  his Constitutional  Law p. 580 "a law applying to one person  or one   class  of  persons  is  constitutional  if  there   is sufficient  basis or reason for it." This statement  of  law was  approved  by this Court in  Chiranjit  Lal  Chowdhry’v. Union  of India (1).  There the question was whether a,  law providing  for the management and control by the  Government

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of a named Company, the Sholapur Spinning & Weaving  Company Ltd.  was bad as offending Art. 14. It was held that even  a single  Company might, having :regard to its features, be  a category  in itself and that unless it was shown that  there were   other   Companies   similarly   circumstanced,    the legislation  must be presumed to be constitutional  and  the attack  under Art. 14 must fail.  In Ram Krishna  Dalmia  v. Shri Justice S. R. Tendolkar (2), this Court again  examined in great detail the scope of Art. 14, and in enunciating the principles  applicable  in  deciding whether  a  law  is  in contravention of that Article observed               "that a, law maybe constitutional even  though               It  relates  to  a  single  individual  if  on               account  of  some  special  circumstances   or               reasons  applicable to him and not  applicable               to thers that single individual may be treated               as a class by himself. On  the principles stated above we are of the  opinion  that the  Patiala State Bank is a class by itself and it will  be with  in the power of the State to enact a law with  respect to it, We are also of (1) [1950] S.C.R. 869. (2) (1959) S.C.R. 279,297. 376 of  the  opinion that the differentia  between  the  Patiala State  Bank and the’ other Banks has a rational  bearing  on the object of the legislation.  If the funds of the  Patiala State  Bank  ’are State funds, a law which  assimilates  the procedure for the determination and recovery of amounts  due to  the Bank from its customers to that prescribed  for  the determination  and  recovery of arrears of revenue  must  be held  to have a just and reasonable relation to the  purpose of  the legislation.  A law which provides for  State  funds being  advanced  to customers through State  Bank  can  also provide  for  its  being recovered in  the  same  manner  as revenue.   A direct decision on this ;Point is  Mannalal  v. Collector of Jhalawar (1).  There the State of Jhalawar  had established  a Bank and the appellants as customers  of  the Bank owed large amounts to it.  The State of Jhalawar became merged  in the State of Rajasthan and acting under s.  6  of the  Rajasthan  Public  Demands  Recovery  Act,  1952,   the Collector  Jhalawar  issued  a  notice  to  the   appellants proposing  to  recover  the dues as a  public  demand.   The validity  of this demand was challenged on’ the ground  that the provisions of the Act were obnoxious to Art. 14 in  that they  enabled the State to recover the amounts due to it  on Banking account in a mode different from that applicable  to other  Banks.   In  rejecting  this  contention  this  Court observed               "It  is  said that the Act  makes  distinction               between  the other Bankers and the  Government               as  a  banker in respect of  the  recovery  of               money due. it seems to us that Government even               as  a  banker, can be legitimately  put  in  a               separate class.  The dues of the Government of               a  State are the dues of the entire people  of               the  State.   This being the position,  a  law               giving special facility for the               (1)   [1961] 2 S.C.R. 962.                                    377               recovery of such dues cannot, in any event, be               said to offend Art. 14 of the Constitution." We  are in agreement with these observations.  In  our  view the  same  principles  apply to the  impugned  Act,  and  in setting  up  separate authorities for determination  of  the

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disputes  and  in  prescribing a  special  procedure  to  be followed  by  them for the recovery of the dues  by  summary process, the impungned Act does not infringe Art. 14 of  the Constitution. Then  the second ground on which the impunged Act and  Rules are  attacked as offending Art. 14 is that after the  merger of  the Pepsu Union in the State of Punjab under  the  State Reorganisation  Act, 1956, they continue to be in  force  in the  territories of the erstwhile Pepsu Union, but  have  no operation  in  the other parts of the State of  Punjab,  and this, it is said, is a fresh ground of discrimination.   We, see  no  substance in this objection.  Prior to  the  States Reorganisation Act, 1956, the Pepsu Union, and the State  of Punjab   were   two  different  States.    The   legislative authorities  functioning in the two States  were  different. Prior  to  the  integration there could be  no  question  of discrimination  under  Art. 14 because that can  arise  only with  reference to a law passed by the same authority,  vide The  State of Madhya Pradesh v. G. C. Mandawar (1).  And  if after reorganisation of States and integration of the  Pepsu Union  in  the  State of Punjab,  different  laws  apply  to different  parts  of the State, that is  due  to  historical reasons,  and  that has always been recognised as  a  proper basis of classification under Art. 14. In Bowman v. Lewis relied on the judgment of the Court below in  support  of the above position, a law of  the  State  of Missouri was assailed as (1) [1955] 1 S.C.R. 599. (2) [1880] 10 U.S. 22; 25 L-ED. 989, 378 violative of the guarantee of equal protection of laws under the  Fourteenth  Amendment in that it provided  for  appeals against  ’judgments by Courts in some parts of the State  to one  Court and in others to another Court.  In holding  that this  was not unconstitutional, Bradley, J., observed :  The 14th Amendment does not profess to secure to all persons  in the United States the benefit of the same laws and the  same remedies.  Great diversities in these respects may exist  in two States separated only by an imagainary line.........  If diversities of law and judicial proceedings may exist in the several States without violating the equality clause in  the 14th  Amendment, there is no solid reason why there may  not be   such  diversities  in  different  parts  of  the   same State.........  If  a Mexican State should  be  acquired  by treaty  and added to an adjoining State or part of a  State, in  the United States, and the two should be erected into  a new  State , it cannot be doubted that such new State  might allow the Mexican laws and judicature to continue  unchanged in   the   one  portion,  and  the  common  law-   and   its corresponding  judicature  in the other  portion.   Such  an arrangement would not be prohibited by any fair construction of the 14th Amendment.  It would not be based on any respect of  persons  or  classes, but  on  municipal  considerations alone, and a regard to the welfare of all classes within the particular territory or jurisdiction." In the State of Madhya Pradesh v. The Gwalior Sugar  Company Ltd.  (1),  the validity of a law of the  State  of  Gwalior imposing  cess on sugarcane was challenged after the  merger of  that  State in Madhya Bharat on the ground that  in  the State  of  Madhya Bharat there was no such tax and  in  con- sequence the law of the Gwalior State became  discriminatory under Art. 14.  This Court sustained the legislation as  not hit by Art. 14. (1)  (1962) S.C.R. 619.                             379

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This question again came up for decision in Bhaiyalal Shukla v.  The State of Madhya Pradesh (1).  There the  facts  were that after the reorganisation of the State of Madhya Pradesh there were within that State as many as four Sales Tax Acts different  in their incidence in force in  different  areas. Thus  while a resident of the former Vindhya  Pradesh  State was  liable to pay sales tax on building materials  used  in works  contracts  a resident of the former State  of  Madhya Pradesh  was  not  under a similar liability  and  this  was assailed as offending the equal protection clause under Art. 14.  In, overruling this contention this Court observed:               "We  have already held that the sales tax  law               in Vindbya Pradesh was validly enacted, and it               brought its validity with it under s. 119’  of               the State Reorganisation Act, when it became a               part   of   the  State  of   Madhya   Pradesh.               Thereafter,  the different laws  in  different               parts  of Madhya Pradesh can be  sustained  on               the  ground  that the  differentiation  arises               from  historical reasons, and  a  geographical               classification  based on  historical  reasons,               has been upheld by this Court." This decision furnishes a complete answer to this contention of the appellants.  In the result we are of the opinion that the  impugned Act. and the Rules are not open to  attack  as repugnant to Art.14. Then  the  question is, whether the Act-and  the  Rules  are repugnant  to  Art.  19(1)(f)  and (g).   There  can  be  no question of contravention of Art. 19(1)(g), because  the  impugned  enactments  do  not  trench   either directly  or  indirectly on the right of the  appellants  to carry  on  trade  or business.  A law with  respect  to  the recovery of debts is not one with (1)  (1962) SUPP. 2 S. C. R. 257. 380 respect to the carrying on of trade or business, though  the debtor might be a trader. Coming  next  to  Art.  19 (1)  (f),  the  argument  of  the appellant with reference thereto may thus be stated: The Act ousts  the  jurisdiction  of  Civil  Courts  over-  disputes between  the  Bank and its customers, and  sets  up  special authorities to settle them.  It is the Managing Director who in  the first instance decides the dispute.  He is the  very person  who is in charge of the affairs of the Bank, and  to constitute him arbiter of the dispute which arise out of its dealings, is to confer on him the roles of both the claimant and the Judge and that is opposed to all canons of  judicial fairness.   Further, the Act and the rules do not  prescribe any  procedure  to be followed by the Managing  Director  in ’the hearing of the dispute.  He has simply to decide it  in accordance with the documents of the Bank.  Thus no real and effective opportunity is afforded to the customer to present his case.  An appeal is provided against the decision of the Managing  Director, but he is also a member the Board  which hears  it,  and  so  the provision for  appeal  is  an  idle formality.  The further revision to the Minister is likewise a  formal  affair.  Then the amounts determined as  due  are liable  to be recovered through the Nazim, as if  they  were arrears of land revenue, and under s. 6 (2) the  certificate of the Head of the Department on which the recovery is to be made  is  conclusive proof of the  matters  stated  therein. Thus  the procedure laid down in the Act, and the rules  for settlement  of disputes in unfair, and opposed to all  rules of natural justice and proceedings taken against  properties for  obtaining  satisfaction of orders passed under  such  a

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procedure  must be held to infringe Art. 19 (1) f) and  must be quashed. The   learned   Advocate-General  who   appeared   for   the respondents, contends at the very outset, 381 that  Art.  19 (1) (f) could have no application to  a  case like  the  present,  that the liability  of  the  appellants arises under a contract, that the provisions of the Act  and the  Rules  are binding on them as terms of  that  contract, that,  the provision that disputes shall be settled  in  the first  instance  by the Managing Director is similar  to  an arbitration   clause   in  an  agreement,   and   that   the restrictions  enacted  in the Act and the Rules are  in  the nature of self imposed restraints, for which no redress  can be  sought  under  Art. 19 (1) (f).   In  our  opinion  this contention deserves consideration.  It is arguable that when Art. 19 speaks of laws imposing reasonable restrictions,  it has  in mind laws which are imposed on subjects, which  they have no option but to obey.  But when the operation of a law is attracted by reason of a contract, which a person is free to  enter  into at his own will and choice, it may  be  said that  the inhibition under Art. 19 has no  application,  the parties  being left to their rights and remedies  under  the "contract.  But in the view we have taken of the contentions of  the  appellants  on their merits, we  do  not  think  it necessary to pronounce on this question. We  have  already  held that the State Bank is  a  class  by itself, that it is competent for the Legislature to enact  a law exclusively with respect to it and that such a law  does not  contravene  Art.  14.  On the question  whether  it  is repugnant to Art. 19 (1) (f), the point for consideration is whether  it is unreasonable as being unfair and  opposed  to rules  of  natural  justice,  and  is  in  consequence   not protected by Art. 19 (5). Have  the  appellants  established  that  ?  It  should   be remembered in this connection that rules of natural, justice are  not  a rigid code to which   proceedings,must  strictly conform,  if they are to be sustained.  They must  by  their very nature vary 382 with  the  facts  and circumstances of each  case,  and  are incapable   of  a  definition  which  will  apply   to   all situations.   "The requirements of natural justice  observed Tuoker,L.   J.,  in Russell v. Duke of  Norfolk  (1),  ,must depend  on the circumstances ’of the case the nature of  the inquiry,  the rules under which the tribunal is acting,  the subject-matter that is being dealt with, and so forth." Now  what  are the facts ? An important factor to  be  taken into  account  is that the impugned Act and  Rules  are  not legislation  confined  to the recovery of money due  to  the Patiala  State Bank.  It is a general law applicable to  the realisation  of  all revenue due to the State, dues  to  the Bank  being expressly included in the definition  of  "State dues"  in  s.  3 (1) of the Act, and it is  of  the  pattern usually  adopted in Revenue Laws.  If State Revenues can  be diverted  for  Banking purposes, it  seems  reasonable  that their recovery should be governed by the Revenue Laws. We must next refer to the hierarchy of officers, constituted under the Act.  At the top are the Ministers; then there  is a Board of Directors; next comes the Managing Director,  and subordinate  to him are a host of officers in charge of  the several departments and branches.  The Board of Directors is to  consist  of the Prime Minister, Finance  Minister  three members  nominated  by  the  Ruler, two  of  whom  are  non- officials  representing important clients of the Bank,’  and

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the  Managing Director.  The Managing Director has power  to sanction loans on personal security up to Rs. 3,000/- and on pledge of goods up to Rs. 25,000/-.  Beyond that limit it is the Board that can sanction loans. We may now examine how far the contention of the  appellants that  the procedure prescribed by the Act and the  Rules  is opposed to rules of natural (1) (1949) 1 All. E.R. 109, 118.                             383 justice,  is. well founded.  The first complaint is that  it is the Managing Director, who is in charge of the day to day administration of the Bank, and that therefore he is not the proper person to decide the dispute, because his own  action must   be  under  challenge.   We  see  no  force  in   this contention.   The  Managing  Director  is  a  high   ranking official  on a salary scale of Rs. 1,600-100-2,500,  with  a free  furnished residence.  He has no personal  interest  in the  transaction  and there is no question of bias,  or  any conflict   between  his  interest  and  duty.    Loans   are sanctioned  by the appropriate authorities under the  Rules, and the customer operates on the account through cheques and deposit  receipts,  and there could be no  question  of  any attack  on  the  actions  of  the  Managing  Director.   How unsubstantial  this objection is will be seen from the  fact that  the  loan  dated  May 23,  1953,  with  which  we  are concerned could have been sanctioned under the Rules, not by the Managing Director, but only by the Board. It  is  then  said that the hearing  before  the  .Managing- Director  is perfunctory, that under Rule 6, he is  only  to examine  the objections stated in the written statement  ,in the  light of the relevant ,records of the  department"  and decide  the  dispute,  and  that  there  is  thus  no   real opportunity  afforded to the parties to present their  ease. This argument proceeds on a misconception of the true  scope of  Rule  6.  It does not bar  the  parties  from  examining witnesses  or.  producing other documentary  evidence.   The Managing  Director,  has, under this Rule,  to  examine  the statement  and  the records of the Bank, in so far  as  they bear  on the points in dispute and that normally,  would  be all  that is relevant.  But he is not precluded by the  Rule from  examining  witnesses  or  taking  into  account  other documentary evidence, if he consider that that is  necessary for  a proper determination of the dispute.  And whether  he should do so or not is a matter 384 left  to  his  discretion.  Discussing  a  somewhat  similar question arising on the language of s. 68.D(2) of the  Motor Vehicles  Act,  1939, this Court observed in  Malik  Ram  v. State of Rajasthan (1) :               "It  will therefore be for the  State  Govern-               ment,   or  as  in  this  case   the   officer               concerned, to decide in case any party desires               to lead evidence whether firstly the  evidence               is  necessary  and  relevant  to  the  inquiry               before  it.  If it considers that evidence  is               necessary,.’   it  will  give   a   reasonable               opportunity  to the party desiring to  produce               evidence  to  give evidence  relevant  to  the               enquiry  and within reason and it  would  have               all  the powers of controlling and giving  and               the recording of evidence that any court  has.               Subject therefore to this over-riding power of               the State Government or the officer giving the               hearing, the parties entitled to give evidence               either  documentary or oral during  a  hearing

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             under s. 68-D(2). Then  it is said that the provision for appeal to the  Board of  Directors  is  an idle formality  because  the  Managing Director whose decision is appealed against is also a member of the Board.  It has already been mentioned that among  the members  of the Board are Ministers, whose  subordinate  the Managing  Director is, and two non-official  representatives of  the  customers.   That  is  sufficient  to  dispel   any suspicion  that  the  hearing before the Board  would  be  a farce.  We may mention that the practice in England is for a Judge  who tries a criminal case to sit as a member  of  the Court  of  appeal, which hear,% the appeal against  his  own order,  and this has been held not to be open to  objection, vide  R. v. Lovegrove (2).  A similar practice  prevails  in appeals  preferred  against the decision of a  single  Judge under the Presidency Small Cause (1) [1962] 1.S.C.R. 978, 984, 985. (2) [1951] 1 All.  E.R 804. 385 Courts Act, 1882, when an appeal is taken to the full court. It  is  then  contended  that s. 11  of  the  Act  bars  the jurisdiction  of  the  Civil Courts with  reference  to  the disputes  triable under the Act, and that  is  unreasonable. It  is  too late’ in the day to contend that  provisions  in statutes creating a special jurisdiction and taking away the jurisdiction  of Civil courts in respect of matters  falling within  that  jurisdiction are unreasonable, or  opposed  to rules of natural justice.  It has only to be remembered that provisions  excluding  the jurisdiction of Civil  courts  in such cases do not affect the jurisdiction of either the High Court under Art. 226 or of this Court under Art. 32 or Art., 136 to interfere when grounds therefor are established. Lastly it is said that the  provision s.  6 (2) of the  Act, that  the  certificate of the Head of  Department  shall  be conclusive ’roof of its contents is unreasonable.  But  this is  to ignore that at that stage the question is one of  the recovery of what had been determined to be due, and that  is analogous to the provision in the Civil Procedure Code  that a Court executing a decree cannot go behind it. Examining the provisions of the Act and the Rules as a whole we  are  of  opinion that they are  reasonable  and  do  not violate  any Rules of natural justice.  If  the  proceedings under  challenge  before  us  had  in  fact  been  taken  in disregard  of  Rules of natural justice, and  prejudice  had resulted therefrom, the appellants would have been  entitled to obtain redress in the present proceedings under Art. 226. But  that however is not their complaint.  When  notice  was served.  on  them under rule 3 on November  21,  1955.  they remained ex parte.  In their notices to the Bank in reply to the  demand,  they never disputed their liability  but  only asked for time to pay the amounts.  Having failed in 386 their attempt to gain time, they are obliged now to take the high  stand  that  the Act and the rules  have  become  void because  they  are unreasonable and contravene Art.  19  (1) (g).   In  this  they  have  failed.   In  our  opinion  the contention  that there has been any infringement of Art.  14 or 19 (1) (f) or (g) must be rejected as untenable. (iii)It  is finally contended for the  appellants  that the certificates issued by the Managing Director under s,  6 (1)  of  the  Act  are  defective  in  that  they  are   not countersigned  by the Minister or Secretary, as required  by the proviso to that subsection, and that in consequence  the proceedings  taken  thereunder  are  without   jurisdiction. Reliance  was placed in ’Support of this contention  on  the

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decision  of  the  Full Bench of the Punjab  High  Court  in General S. Shivdev Singh v. The State of Panjab (1), that it was  not competent to the Punjab Government to delegate  the functions  assigned  to it under a. 42 of  the  East  Punjab Holdings  (Consolidation  and prevention  of  fragmentation) Act, 1948. to the Additional Director, the contention  being that  the  Minister  or the Secretary  cannot  abdicate  his functions  under the Act to the Managing Director.  But  the appellants  have  overlooked  that  in Form  No.  1  and  11 prescribed  under the Act, the provision for  ’countersigna- ture  is directed to be struck out, when it is sent  by  the Managing Director.  The result of the combined operation  of s.   6  (1)  and  the  Forms  referred  to  there  is   that countersignature  is required only when the  certificate  is issued  by  an officer subordinate to, the  Minister,  other than the Managing Director.  This contention must  therefore be rejected . All the contentions urged in support of the appeals and Writ Petition   No.  92/1961  fail,  and  they  are   accordingly dismissed, with soots, one hearing fee. 387 In Petition No. 128 of 1959. This  is a petition under Art. 32 of the Constitution.   The petitioner  is a merchant running a Steel Rolling  Mills  at Jaitu  in  what was at one time the State of  Nabha.   By  a Covenant  entered  into on May 5, 1948, the State  of  Nabha became  merged  in a new State called the Patiala  and  East Punjab States Union or more briefly the Pepsu.  Union’ which came  into  existence on August 20, 1948.   Then  under  the States  Reorganisation  Act, 1956, the  Pepsu  Union  became merged  on  November 1, 1956, in the State of  Punjab.   The petitioner had an account in the Nabha Branch of the Patiala State   Bank  under  which  he  borrowed  ’monies  for   his ’business.   On  February 20, 1951, he executed  a  mortgage deed  in favour of the Bank for Rs. 52,000/being the  amount due  by  him to the Bank.  In November, 1953,the  Bank  took proceeding  ’under the Patiala Recovery of State  Dues  Act, hereinafter  referred  to as the Act.’  for  recovering  the amounts due on the said mortgage and thereupon the  petitio- ner filed Writ Petition No. 252 of 1955 in this Court  under Art. 32 of the Constitution for quashing the proceeding  on, the ground that the Act and the rules were unconstitutional. On February 3, 1956, a settlement was arrived at between the petitioner  and  the  Patiala  State  Bank  whereunder   the petitioner  paid some amounts and agreed to pay the  balance by  instalments.   In  view of  this  settlement  the,  writ petition  was  withdrawn on May 11,  1956.   The  petitioner having made default in payment of the instalments, the  Bank again started proceeding for recovering the amounts due  and the  petitioner  now seeks by this petition  to  have  those proceedings quashed on the ground that the impugned Act  was not in force at the material dates and that it is void being in  contravention of Arts. 14 and 19(1)(f) and (g) and  that further the certificate issued by the 388 Managing  Director  ’under  s. 6(.1) of the Act  is  not  in accordance with the proviso to that section and is therefore bad.   The  respondents  contest  the    application.   This petition ’Was heard along with Civil Appeals Nos.’ 210 & 211 of  1961 and Writ Petition No. 92 of 1961 wherein  the  same question  have  been raised for our determination.   By  our Judgment delivered in those cases to-day we have  disallowed those contentions.  Following that Judgement, this  petition is dismissed with costs, one hearing fee. SUBBA RAO, J.-I regret my inability to agree with the’  view

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expressed by my learned brother Venkatarama Aiyar, J. In  MY view the Patiala Recovery of State Dues Act (No.  IV of 2002 BK.)  is  a typical instance of a glaring violation  of  the doctrine   of   equality  enshrined  in  Art.  14   of   the Constitution.   As I propose to strike down the act  on  the ground that it infringes Art. 14 of the Constitution, I will not  express my views on the other questions  raised  before us.   The  facts  are fully stated in the  judgments  of  my learned  brother,  and it is, therefore,  not  necessary  to restate  them here, except those which are relevant  to  the said question. The  Bank  of Patiala was established in 1917  by  the  then Maharaja  of Patiala.  On May 5, 1948, the Rulers  of  eight States,  including  the  State of Patiala,  entered  into  a covenant  merging all the said States into one United  State called  the  Patiala and East Punjab States  Union,  briefly called  PEPSU.  On August 20, 1948, the said State of  Pepsu was  established  with  the  Maharaja  of  Patiala  as   its Rajpramukh.  In exercise of the power conferred on him under he  said covenant the said Rajpramukh issued,  an  Ordinance applying  all  the laws obtaining in the State  of  Patiala, including the Patiala Recovery of State Dues Act, 2002 389 BK.,  hereinafter  called the Act, to the  entire  State  of Pepsu.   After  the enquiry of six months,  the  Rajapramukh issued  a second Ordinance extending for another six  months the  laws  made applicable to the State of Pepsu  under  the earlier  Ordinance.   Later  on  in  exercise  of  a   power conferred upon the said Rajpramukh by a Supplementary Coven- ant,  the said Act was indefinitely extended so as  to  have operation   throughout  the  State  of  Pepsu.   After   the promulgation  of  the Constitution of India on  January  26, 1950,  Pepsu  became part of the Indian Union as  a  Part  B state,  and  under the provisions of the  Constitution,  the said Act continued to have force throughout the said  State. Subsequently,  under  the States Reorganization  Act,  Pepsu became  part  of  the  State of  Punjab  and  the  said  Act continued  to  have force in that part of Punjab  which  was Popsu  before  merger.   After the  Constitution  came  into force,  the petitioners and the appellants in the  aforesaid Writ Petitions and Civil Appeals respectively borrowed money from the said Bank on the security of their properties.  The Bank  authorities  ascertained the amounts due to  the  Bank from  the said parties and were seeking to realise the  same from  the  properties  of the said  debtors  in  the  manner provided by the provisions of the Act. After the formation of the State of Pepsu, the Patiala  Bank was  operating  in  the entire Pepsu area,  and,  after  its merger  with  the  State of Pun. jab, the  Bank  was  having branches not only in Pepsu but in the other parts of Punjab. There are also a number of other banks, including the  State Bank of India, doing the same business in the said territory were the Bank of Patiala is operating.  The case of the appellants and the petitioners before us is that  though  the said banks and their debtors were  in  the matter of ascertainment of debts 390 and  realisation of the amounts due from them to  the  banks were   similarly  situated,  the  provisions  of   the   Act discriminated the debtors of the Patiala Bank from those  of other  banks  in  that  regard  and  thereby  infringed  the equality clause enshrined in Art. 14 of the Constitution. To appreciate this contention it is necessary to consider in some  detail  the  provisions  of the Act  with  a  view  to ascertain whether there was any such discrimination and,  if

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there was, whether the same could be justified on the  basis of reasonable classification.  The long title of the Act  is Patiala  Recovery  of State Dues Act.  In  the  Act,  ,State dues"  is defined to mean any amounts due to the  Rajpramukh of  the  State or the State or any department of  the  State from  any person and shall include, among others, debts  due to  the  Patiala  State Bank;  "department"  is  defined  to include  the Patiala State Bank; "defaulter" means a  person from  whom State dues are due and includes a person  who  is responsible  as surety for the payment of any such due,  and "head  of  department " means the Managing Director  in  the case of the Patiala State Bank.  Section 4 provides for  the determination  of  the State dues; under that  section,  the head of department shall determine in the prescribed  manner the exact amount of State dues recoverable by his department from  the defaulter, and it also authorizes, pending  deter- mination  of the dues, to move the Nazim to issue  a  notice prohibiting alienation of any property by the defaulter; and payment  of  any debt due to him from any person or  of  any money payable to him the State to the extent of the probable amount of State dues recoverable from the defaulter, and  to move  also  the  Accountant-General to  withhold  any  money payable  to the defaulter by the State to the  said  extent. The mode of recovery of the debt is provided by s. 5 : under that section, the 391 State dues shall be recovered by the department through  the Nazim  as if they were arrears of land revenue  and  through the   Accountant-General  by  withholding  payment  to   the defaulter of any amount payable to him by the State.   Under s. 6, the bead of department shall send a certificate as  to the  amount of State dues recoverable from the defaulter  to the  Nazim  and  the certificate  so  transmitted  shall  be conclusive  proof of the matters stated therein.  The  Nazim and  the Accountant General are precluded  from  questioning the  validity of the said certificate or heat any  objection of  the defaulter as to the amount of States dues  mentioned in  the certificate or as to the liability of the  defaulter to  pay such dues.  Section 10 says that neither  the  Nazim nor the Accountant General shall act upon such a certificate unless it is sent within the period of limitation prescribed under  the Limitation Act within which the said  Bank  could institute  a suit in a civil court for the recovery  of  the dues; and sub-s. (2) thereof directs the head of  department to mention in the certificate the date on which the debt has fallen  due and make a statement therein to the effect  that the  debt, is within the period of limitation.   Section  11 bars  the  jurisdiction of a civil court in respect  of  any matter  which  the head of department or  any  authority  or officer authorised by the head of department is empowered by the Act or the rules framed thereunder to dispose of or take cognizance  of  the  manner  in  which  any  such  head   of department  or  authority or officer  exercises  any  powers vested  in  him  or by or under the Act or  the  rules  made thereunder.   In  exercise  of the power  conferred  on  the Government to make rules, the Patiala Recovery of State Dues Rules, 2002 BK. were made.  They provide a machinery for the determination  of the amount due to the Bank.  Under  r.  3, the head of department to which 392 state dues are payable shall cause a notice to be served  on the defaulter in the manner prescribed specifying the amount of the state dues and the date on which the same has  fallen due  and  requiring  the defaulter to pay  the  said  amount before  a  specified date, or to appear before the  head  of

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department or such officer as specified therein.  Where  the defaulter  does  not  appear on the date  specified  in  the notice,  the head of department or the Inquiry  Officer,  as the  case  may  be, is authorized to proceed  ex  parte  and determine  by  order  in writing the amount  of  state  dues recoverable from him.  Where the order is made by an Inquiry Officer,  it  is  subject to confirmation  by  the  head  of department.  Where the defaulter appears on the date  fixed, the  head of department or the Inquiry Officer, as the  case may be, shall examine the objections of the defaulter stated in  the  written-statement  in the  light  of  the  relevant records  of  the  department  and shall  then  by  an  order determine  the exact amount of State dues  recoverable  from him.   If  the inquiry is made by the  Inquiry  Officer,  he shall submit his report to the head of department, who shall by  an  order in writing finally determine  the  state  dues recoverable  from the said defaulter.  Rule 8 gives a  right of  appeal  to the defaulter from the order of the  head  of department  in  the case of the’ Patiala State Bank  to  the Board  of Directors of the Bank.  Where the appeal filed  by the defaulter is rejected, the defaulter may file a revision to Ijlas-i-Khas. Briefly stated, under the Act and the rules made thereunder, the Managing Director of the Bank decides on the question of the-existence  and  the  extent  of  the  liability  of  the customer  of the bank after making an inquiry in the  manner prescribed,  subject to an appeal to the Board of  Directors of the Bank and a revision to the ljlas-iKhas.  The  amounts found due would be realized. 393 through  the Nazim as if they were arrears of  land  revenue and  through  the Accountant-General by authorizing  him  to withhold amounts due to the defaulter from any department of the  State.  No, civil court has jurisdiction in any  matter which  the  head of department or any authority  or  officer under  the Act is authorized to dispose of or the manner  of its disposal.  In short, the creditor decides his own  claim and  realizes the amounts by a coercive process  prescribed. It  may  also be mentioned at this stage that  the  Managing Director  of the Bank is also the Secretary of the Board  of Directors.   In any view, the appeal provided is  only  from one authority of the bank to another authority of the  bank. The  revision  to the Ijlas-iKhas, apart  from  its  limited scope, is in effect only from a department of the Government to another.  In short, the creditor is made the judge of his cause  and  is empowered to determine the dues  and  realize them  from  the debtor.  The debtor is at the mercy  of  his creditor.   He  may plead and protest, but he has  no  other remedy  to get an unbiased determination of his claim  or  a decision on his objections.  Such a machinery may have  some relevance  in feudal times, but the question is whether  our Constitution sanctions such an outmoded procedure. At  this stage, it will be convenient to notice briefly  the scope  of  Art.’  14 of the  Constitution  relevant  to  the present inquiry.  Art. 14 reads :               "The  State  Shall  not  deny  to  any  person               equality  before the law or the equal  protec-               tion  of  the  laws within  the  territory  of               India." This subject has been so frequently and recently before this Court  as  not to require an  extensive  consideration.’  In State  of  U. P. v. Deoman Upadhyaya (1), I  have  described briefly the doctrine of equality thus : (1) [1961] 1 S.C.R. 14, 34. 394

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              "All  persons  are equal before  the  law  is               fundamental  of every civilised  constitution.               Equality  before law is a negative  concept  ;               equal  protection  of law is a  positive  one.               The  former declares that every one  is  equal               before  law,  that no one  can  claim  special               privileges  and that all classes  are  equally               subjected to the ordinary law of the land; the               latter postulates, an equal protection of  all               alike  in the .same situation and  under  like               circumstances.  No discrimination ’can be made               either  in the privileges conferred or in  the               liabilities  imposed.  But these  propositions               conceived  in the interests of the public,  if               logically  stretched too far, may not  achieve               the high purpose behind them.  In a society of               unequal  basic  structure,  it  is  well  nigh               impossible  to  make laws  suitable  in  their               application  to all the persons alike.  So,  a               reasonable   classification   is   not    only               permitted  but is necessary if society  should               progress.  But such a classification cannot be               arbitrary  but must be based upon  differences               pertinent to the subject in respect of and the               purposes for which it is made." I  would  add to the said statement  the  following  caution administered  by Brower, J., in Gulf, Colorada and Santa  Fe Rly.  Co. v. Ellis (1):               "While good faith and a knowledge of  existing               conditions on the part of a Legislature is  to               be persumed, yet to carry that presumption  to               the  extent  of always holding there  must  be               some   undisclosed  and  unknown  reason   for               subjecting certain individuals or Corporations               to  hostile and discriminating Legislation  is               to  make  the protecting clauses of  the  14th               Amendment  a mere rope of sand, in  no  manner               restraining state action," (1)  (1897) 165 U.S. 150; 41 1. Ed. 666. 395 It shall also be remembered that a citizen is entitled to  a fundamental  right of equality before the law and  that  the doctrine of classification is only a subsidiary rule evolved by courts to give a practical content ’to the said doctrine. Over  emphasis  on  the doctrine  of  classification  or  an anxious  and  sustained attempt to discover some  basis  for classification  may gradually and imperceptibly deprive  the article  of  its  glorious  content.   That  process   would inevitably    end   in   substituting   the   doctrine    of classification for the doctrine of equality: the fundamental right  to equality before the law, and equal  protection  of the laws may be replaced by the doctrine of classification. It  is  also  well-settled  that  the  guarantee  of   equal protection applies against substantive as well as procedural laws.  Jennings in his "Law of the Constitution", 3rd  Edn., p. 49, describes the idea of equality of treatment thus:               "Equality  before  the law  means  that  among               equals  the  law should be  equal  and  should               equally  administered,  that  like  should  be               treated alike."               The  learned  author  further  elaborates  the               theme thus:               "The  right to sue and be sued,  to  prosecute               and  be  prosecuted.,  for the  same  kind  of               action should be the same for all citizens  of

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             full  age and understanding and  without  dis-               tinction  of  race, religion,  wealth,  social               status, or political influence."               Dicey  in his "Law of the Constitution",  1959               at p.193 states:               "Equality  before  the law does  not  mean  an               absolute equality of men, which is a  physical               impossibility, but the denial and any  special               privilege by reason of birth, creed or               396               the like in favour or any individual and  also               the  equal subjection of all  individuals  and               classes  to  the  ordinary  law  of  the  laud               administered by the ordinary law Courts."               In  Ram  Prasad Narayan Sahi v. The  State  of               Bihar(1) Mukherjea, J., observed:               "The meanest of citizens has a right of access               to a court of law for the redress of his  just               grievances...... " This  Court,  in  The  State of West  Bengal  v.  Anwar  Ali Sarkar(2),  struck  down  a. 5 of the  West  Bengal  Special Courts  Act  (X of 1950), which provided that.   "a  special Court  shall  try such offences or classes  of  offences  or cases  or  classes of oases as the State Government  may  by General   or   special  order  in   writing,   direct",   as contravening  Art. 14 of the Constitution.  Mahajan, J.,  as he then was, observed:               "Equality   of   right  is  a   principle   of               republicanism  and article 14 enunciates  this               equality  principle in the  administration  of               justice.    In  its  application   of,   legal               proceedings  the article assures  to  everyone               the  same  rules  of  evidence  and  modes  of               procedure.  In other words, the same rule must               exist for all in similar circumstances."               Mukherjea,  J., says to the same effect at  p.               322-               "A rule of procedure laid down by law comes as               much  within the purview of article 14 as  any               rule  of substantive law and it  is  necessary               that   all   litigants,  who   are   similarly               situated, are able to avail themselves of  the               procedural rights for relief and defence  with               like protection and without discrimination." In  Ram  Prasad Narain Sahi v. State of Bihar(1),  the  same principle has been restated by this Court. (1)   [1953]   S.C.R.  1129,  1143.    (2)   [1952]   S.C.R. 284,313,322. 397 There, the Court of wards granted to the appellants  therein a large area of land belonging to the Bettiah Raj which  was then under the’ management of-the Court of Wards; the  Bihar Legislature  passed  an Act declaring that  the  settlements granted  to  the  appellants  shall be  null  and  void  and empowering  the  Collector to eject the appellants  if  they refused to restore the lands.  In striking down the impugned enactment Patanjali Sastri, C.J., observed:               "This  is  purely a  dispute  between  private               parties and a matter for determination by duly               constituted  courts to which is entrusted,  in               every   free   and  civilised   society,   the               important function of adjudicating on disputed               legal   rights,  after  observing   the   well               established   procedural   safeguards    which               include  the  right  to be  heard,  the  right

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             produce  witnesses and so forth.  This is  the               protection which the law guarantees equally to               all persons, and our Constitution prohibits by               article  14  every  State  from  denying  such               protection to anyone." In Ameerunnissa Begum v. Mahboob Begum (1) this Court had to consider  the  validity  of an Act  made  by  the  Hyderabad Legislature which provided that "the claims of Mahboob Begum and  Kadiran  Begum  and of  their  respective  children  to participate in the distribution of the matrooka of the  late Nawab  are  hereby dismissed" and that  the  above  decision "cannot be called in question in any court of law".  This is no  doubt  an  extreme  case;  but  in  declaring  that  law unconstitutional, Mukherjea, J., as he then was, observed :               "Nay, the legislation goes further than   this               and  deniers to these specified  individual  a               right  to  enforce their claim in a  court  of               law, in accordance with the personal law  that               governs the community to which they belong,               (1)   [1953] S.C.R. 404,415.               198               They, in fact, have been discriminated against               from the rest of the community in respect of a               valuable  right which the law secures to  them               all  and the question is, on. what basis  this               apparently hostile and discriminatory legisla-               tion can be supported." A  creditor  deciding  his own case cannot be  in  a  better position  then  the Legislature, by an  Act,  rejecting  the claim  of a particular person.  This Court again,  in  Shree Meenakshi Mills Ltd., Madurai v.Sri A. V. Viswanatha  Sastri (1), struck down s. 5(1)     of    Taxation    on     Income (Investigation  Commission) Act, 1947 (Act XXX of 1947),  on the  ground  that  the procedure  prescribed  thereunder  is discriminatory in character, having regard to the fact  that under the amended s. 34 of the Indian Income-tax Act,  1922, the  persons  coming under both the sections from  the  same class.   This Court restated the principle that Art.  14  of the  Constitution not only, guarantees equal  protection  as regards  substantive laws but procedural laws as  well.   It has  also  been pointed out that, though the Act  was  valid during  the pre-Constitution period, after the  Constitution came  into  force  the discriminatory  procedure  cannot  be continued.   In  Suraj Mall Mahta & Co. v. A.  V.  Viswanath Sastri (2), in the context of the same Act, viz., Act XXX of 1947,  this  Court pointed out that though between  the  two procedures  there  was some similarity to  be  followed  for catching  evaded income, the overall picture was that  there was  substantial discrimination between the two  procedures. In  Muthiah v. The Commissioner of Income-tax,  Madras  (3), this  Court  held that s. 5(1) of Act XXX of  1947  offended Art. 14 of the Constitution in view of the amended of s.  34 of  the Indian Income-tax Act by amending.  Act,% XLVIII  of 1948  and  XXXIII  of  1954.  This Court,  in  view  of  the discriminatory treatment (1) [1955] 1 S.C.R. 787.  (2) [1955] 1 S.C.R. 448. (3) [1955]2S.C.R. 1247. 399 in  the procedure, declared that after the  inauguration  of the  Constitution the persons whose cases were referred  for investigation  by the Central Government after September  1, 1948,   were  being  discriminated  against  under   drastic procedure  of Act XXX of 1947 when those similarly  situated were  being dealt with by the Income-tax Officer  under  the amended provision of s. 34 of the Income-tax Act, 1922.

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This  Court,  therefore,  has  not,  rightly,   countenanced discriminatory procedures which are not formal in nature but substantially  prejudicial to parties in establishing  their rights  or  in  defending against  unjust  claims.   It  is, therefore, clear that under our Constitution every person is entitled  to equal treatment under similar circumstances  in the matter of his access to courts. It  is  true  that if there is a reasonable  basis  for  the classification,  special  tribunals may be created  for  the trial  of cases of a special nature; but even so, it is  not permissible to make differentiation between cases  belonging to  the same class or nature.  The question in  the  present case  is  whether the impugned Act can be justified  on  the basis of reasonable classification. To  ascertain whether there is a reasonable  classification, three  questions have to be posed, namely: (1) What  is  the object  of  the impugned Act? (2) What are  the  differences between the classes of persons bit by impugned Act and those left  out  ?  and (3) have  the  difference  any  reasonable relation  to the object sought to be achieved ? It  is  said that  the object is to realise the amounts advanced  by  the Government  to finance businesses in full and as speedly  as possible,  so that the money might be available for  further advances  to others in the interest of trade  and  industry. It is further said that there are differences between the 400 State  as a creditor and a borrower from the State  and  any other  bank as a creditor and the debtor of that bank.   The next  step  in the argument is that these  differences  have nexus  to  the  aforesaid, object for it is  said  that  the recoupment of public funds is more important than  refilling of private purses. Let me scrutinize this argument from different aspects.  The question  may  be  looked at from the  stand  point  of  (i) creditor,  (ii) debtor, (iii) debt, and (iv) realisation  of debt.   The  Patiala Act, after the Constitution  came  into force,  extended  to  the entire  Pepsu  area.   Take  three classes of creditors in that area-(i) The Patiala Bank, (ii) The  State  Bank  of  India, and  (iii)  any  private  Bank. Suppose  eah  of  these three banks advances a  sum  of  Rs. 10,000/-  to  one debtor or to three  different  debtors  on adequate  security.  The Patiala Bank, though its  officers, can decide what amount is due to it and realize the same  by sale  through  the Nazim or recover the amount  through  the Accountant  General;  and  the  debtor  is  precluded   from questioning   the  determination  of  the  amount   or   the realization  thereof in a civil Court.  The other two  banks have to file suits and, if necessAry, appeals obtain decrees and   execute  the  same  in  the  usual  course.   In   the asCertainment  of the debt and the realization thereof,  all the  three banks are similarly situated.  It cannot be  said with  any  justification  that  the  summary  procedure   in derogation  of  all principles of natural justice  would  be either  reasonable or necessary in the case of debt  alleged to be due to the Patiala Bank, while it is not necessary  in the  case of the other banks.  If the Managing  Director  of the  Patiala Bank could be relied upon for  determining  the bank dues, why is it the Managing Director of-State Bank  or even  of a private bank should be prevented from doing so  ? It  could  not  be said a,% a proposition of  law  that  the Managing Director of the Patiala Bank would necessarily be  401 more honest and more competent then his counterpart in other banks so as to be made a judge of his own cause.  The entire procedure  is travesty of the principle of natural  justice.

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From  the standpoint of the debtor, discrimination  is  more pronounced.  The incongruity of the situation would be  more emphasized  if the same debtor. borrowed  different  amounts from the three banks: two banks would proceed against him in a court of law and the Patiala Bank would decide for  itself the  amount  due from the debtor and recover the  same  from him.   The debtors of the three categories  borrowed  money, gave  securities  and  ordinarily  were  entitled  to  equal judicial   process  in  the  matter  of  determination   and realisation of their dues.  They may have valid defences  to the  claim.   Ordinarily  they  shall  be  entitled  ‘to  an impartial  tribunal  for ascertaining the amounts  due  from them,  to a right of appeal to other impartial tribunals  to get any errors corrected.  What are the differences  between the three categories of debtors in the matter of the  object sought to be achieved.  The three categories of debtors  may well have changed their places and borrowed the same  amount on  the same security from other banks, all the debtors  are liable  to  pay their creditors, all of  them  borrowed  for their businesses; all of them gave security, and  therefore, all  of them would be entitled to raise their  defences,  if any.   The fact that one borrowed from one bank  instead  of the other cannot be a difference which has any nexus to  the object sought to be achieved. Let  us look at the matter from the standpoint of the  debt. it  is  not  suggested that the Patiala  Bank  is  advancing moneys  on  specially  favourable  conditions  without   any security, while the other banks impose, onerous  conditions. All  the debts are secured, all of them bear  interest,  and all  of them are payable just like any other debt.   In  the premises, the only thing that 402 can  be  said  is that the Patiala Bank emerged  out  of  an authoritarian  set  up,  while  the  other  two  banks   are functioning in a democratic one.  But the historical  origin of the bank, in the circumstances, has no relevance, for  we are judging the constitutional validity of the provisions of the Act in respect of debts advanced after the advent of the Constitution.  Article 13 (1) of the Constitution  expressly declares.   "All  laws in force in the  territory  of  India immediately before the commencement of this Constitution, in so far as they are inconsistent with the provisions of  this Part, shall, to the extent of such inconsistency, be  void." Article  13, therefore, does not permit perpetuation  of  an unconstitutional  law  on  the  ground  of  its   historical parentage. It  is  then  said that the Act, in  effect  and  substance, provided special tribunals for determining the amount due to the Patiala Bank and, therefore, the procedure prescribed is reasonable  and  the appellants and the  petitioners  cannot have  any  grievance that they cannot go to a  civil  court. This  argument  is untenable.  What the appellants  and  the petitioners  complain  is  that  this  Act,  in  effect  and substance,  empowers their creditor to determine the  extent of their liability and to decide on their objections to  the creditor’s  claim, and that the said, procedure  is  against all principles of natural justice.  It is no answer to  that argument  that  the  creditor, being a  department,  of  the Government,  can be relied upon to decide the  case  fairly, after  following the principles of judicial procedure.   The same  thing can be said of the other banks, though they  are not departments of the Government.  The analogies sought  to be drawn from Co-operative Societies Act or the  Arbitration Act are not only unreal but misleading, for under those Acts the creditor dose not decide the validity of the  objections

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of the debtor but a third party appointed by the Govern- 403 ment  in  one  case or by the parties  in  the  other  ease, following the principles of judicial procedure, decides  the dispute  between  the- contesting parties.  That  apart,  we cannot  decide  on the constitutionality of an  Act  on  the assumption   of   the   validity  of   another   Act.    The constitutional  validity  of  other Acts  will  have  to  be considered  on a scrutiny of the provisions of  those  Acts. It may be asked why a Managing Director of the Patiala  Bank or, as a matter for that, the Board of Directors of the said Bank.,  must  be  presumed  to  have  greater  rectitude  or efficiency  than the Managing Director of the State Bank  or indeed  any  other reputed bank.  It may be  contended  with equal  justification  the every bank in Patiala  and  indeed every bank in India can be entrusted with judicial powers to decide   its  claims  and  realise  the  dues  through   the governmental  coercive machinery.  If that was conceded,  it would be the end of the rule of law in our country. Lastly  it  is  contended  that  the  sections  of  the  Act providing  for  recovery  through  the  Nazim  through   the coercive  process or through the Accountant-General  by  the withholding payment of amounts, if any, due to the  debtors, can be sustained on the basis of the doctrine of  reasonable classification.   The provisions for realizing  the  amounts cannot   be  considered  separately  from   the   provisions providing  for the determination of the debt.  Both  set  of provisions  are  integral  parts of a  single  scheme.   The effect  of  the  said  provisions  is,  a;  I  have  already considered  in  detail at the earlier stage, that  the  debt would  be  determined  and the amounts  realized  through  a coercive  process  and  the debtor would  be  debarred  from questioning  either  the  determination of  the  debtor  the realization thereof in any court of law. Reliance is  placed upon the judgement of the Court in Manna Lal v. Collector of Jhalawar (1).  The question raised in that case war, whether any loan due to the Jhalawar (3)  [1961] 2 S.C.R. 962. 404 State  Bank  could be ’recovered as a public  demand.   This Court hold that it could be so recovered.  It also  repelled the  argument that the Act, in so far as it  enabled  moneys due  to the Government in respect of its trading  activities to be recovered by way of public demand, offended Art. 14 of the Constitution on the ground that the Government, even  as a banker could be legitimately Put in a separate class.  But the  question now raised before us, namely, whether a  State Bank  could be a judge in its own cause, was neither  raised nor decided there.  The decision, therefore, does not  cover the  present  controversy.  In my view, there  are  no  real differences  between Patiala Bank and other  banks  vis-avis their   claims  against  their  constituents,  which   could reasonably  sustain the special treatment mated ,out to  the former  under the Act.  Discrimination is writ large on  the face of the Act.  In this view, no other question arises for consideration. In the result, I hold that the provisions of the Act, in  so far as they relate to the Patiala Bank, are constitutionally void  and I issue a writ of mandamus directing the Bank  not to  proceed to recover the debt alleged to be due  from  the appellants under the provisions of the Act.. The appeals and the writ petitions are allowed with costs. By  COURT  :  In view of the opinion of  the  majority,  the appeals and the writ petitions are dismissed with costs, one hearing fee.

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Appeals and petitions dismissed.                             405