CHAPTER - V.

TORTIOUS LIABILITY OF THE STATE

UNDER THE INDIAN CONSTITUTION
The Law of the Constitution of a Country, generally, seeks to establish its
fundamental o.r,;basic or a.pex organs of-Government, ^nd fidmipistration, and
endeavours to define and describe “ their structure, composition, powers and
principal functions, their inter relationship and attempts to regulate their relationship
with the public.1 As suck, the Constitution of India contains certain provisions
relating to tortious liability of the State.

This chapter entitled “Tortious Liability of the State under the Indian Constitution
“is dealt with in three sections. Section-I deals with the constitutional provisions
relating to tortious liability and its limited Judicial interpretation. Section-11 deals
with the recent trends in Judicial approach on tortious liability of the State in the
light of the human rights Jurisprudence. Section-Ill deals with the defence of 'Act
of State’, Judicial immunity and other protection clauses for an action against the
State in tort.

SECTION - I LIMITED LIABILITY UNDER THE CONSTITUTION

5.1.1. Constitutional Provisions

The Constitution for free and democratic India was framed by the Constituent
Assembly, elected by the Provincial Legislative Assemblies, by indirect election.
Sri B.N. Rau, the Constitutional advisor, based on the reports submitted by various
committees and sub-committees of the Constituent Assembly, prepared the draft
of the Constitution. Clause 2142 of his draft which contained a provision with
1. Wade and Phillips, Constitutions! Law and Administrative Law, (9th Ed., ed. Bradly) p. 1; O. Hood
philips and Paul Jackson, Constitutional Law and Administrative Law, (7th Ed., 1987), p. 5; M.P.
' Jain, Indian Constitutional lavs, (4th ed., Wadhwa and Co., Nagpur, 1993) p.1.
2. This clause was drafted basing on Section 176 of the Government of India Act, 1935,
 158

regard to suits and proceedings for and against the State reads thus:
(1) The Federation may sue, or be sued by the name of the Federation of India and
the Government of a province may sue or be sued by the name of the province
and, may be subjected to any provisions, which may be made by Act of the Federal
Parliament or a Provincial Legislature enacted by virtue of the powers conferred
by this Constitution, sue or be sued in relation to their respective affairs in the like
cases as the Dominion of India-and the Corresponding province, might have sued
or been sued if the Constitution had not been enacted.

(2) If at the date of the commencement of this Constitution any legal proceedings
are pending to which the Dominion of India is a party, the Federation shall be
deemed to be substituted for the Dominion in those proceedings.

The Drafting Committee3 under the chairmanship of Dr. B.R. Ambedkar considered
the above clause and revised it, which reads thus;
(1) The Government of India may sue or be sued by the name of the Government of
India and the Government of a Sate may sue or be sued by the name of the State
and may, subject to any provisions which may be made by the Act of Parliament or
by the legislature of a State for the time being specified in Part-I of the First
Schedule, enacted by virtue of the powers conferred by this Constitution sue or be
(

sued in relation to their respective affairs in the like cases as the Dominion of
India and the corresponding provinces might have sued or been sued, if this
Constitution had not been enacted.

(2) If at the date of commencement of this Constitution;

(a) any legal proceedings are pending to which the Dominion of India is a party,
3. The Drafting Committee was appointed by a resolution of the Constituent Assembly on August
29, 1947.
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the Government of India shall be deemed to be substituted for the Dominion in

those proceedings;

(b) any proceedings are pending to which a province is a party, the corresponding
State shall be deemed to be substituted for the province in those proceedings.

A comparison of the original clause with revised clause would reveal that both the
clauses are similar with regard to the content of liability,4 but there is a minor
difference, namely, the words ‘Government’ and ‘State’ were substituted for the
words, ‘Federation’ and ‘Province’ respectively. The revised clause 214 later
became Article 274 of the Draft Constitution which was put to discussion in the
Constituent Assembly, on June 15, 1949. The Chairman of the Drafting Committee
moved an amendment suggesting that the expression ‘Government of India’ must
be. substituted by the expression ‘Union of India’. H.V. Kamath, a member of the
Constituent Assembly opposed this amendment and opined that the ‘Union of India’
was not a corporate body capable of suing and being sued.5 But the Chairman
explained the difference between the ‘Government of India’ and the ‘Union of
India’ on the following lines. “ The Government of India is not a legal entity; the
Union of India is a legal entity, a sovereign body which possess rights and
obligations, and therefore, it is only right that any suit brought by or against the
Central Government should be in the name of the Union or against the Union”6.
The Chairman further explained that the expression ‘Government of India’ meant
‘the executive Government’ which is fleeting body being there at one time and
then disappearing and some other people coming in and taking charge of the
executive7 The Constituent Assembly accepted the amendment mooted by the
4. The extent of tortious liability of the State, which had been carried successively by the chain of
Constitutional enactments beginning from the Government of India Act, 1858 remained unchanged.
5. 8. Constituent Assembly Debates (1949) p. 902
6. Ibid
7. Ibid. H.V. Kamath opined that' the Government is not fleeting but the personal of the Government
may be fleeting.
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Chairman, and ultimately the draft Article 274 emerged as Article 300 of the
Constitution of India.

The Supreme Court of India also confirmed the Chairman’s view in State of Punjab
v. O.G.B. Syndicate Ltd,,8 A five member Bench speaking through N. Rajagopala
Ayyangar J. observed “ it would not be correct to say that the State is not a
Constitutional or even a juristic entity for the reason that it does not partake the
characteristics of or satisfy in whole, the definition of Corporation. The State is
an organised political institution which has several of the attributes of the
Corporation, the Government of the Union and the Government of a State are
enabled to sue and be sued in the name of Union of India and of the Government of
a State, as the case may be. It would not, therefore, be improper to speak of the
Union and the State as Constitutional entities, which have attributes defined by
the Constitution”9.
The head note of Article 300 of the Constitution reads “suits and proceedings” and
it declares;
(1) The Government of India may sue and be sued by the name of the Union of
India and the Government of a State may sue or be sued by the name of the State
and may, subject to any provisions which may be made by Act of Parliament or of
the Legislature of'such State enacted by virtue of powers conferred by this
Constitution, sue or be sued in relation to their respective affairs in the like cases
as the Dominion of India and the Corresponding Provinces or the Corresponding
Indian States might have sued or been sued, if this Constitution had not be enacted.
(2) If, at the date of commencement of this Constitution;
(a) any legal proceedings are pending to which the Dominion of India is a party,
the Government of India shall be deemed to be substituted for the Dominion in
8. A.I.R. 1964S.C. 66S
9. Ibid at 679
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those proceedings; and

(b) any legal proceedings are pending to which a province or an Indian State is
party, the corresponding State shall be deemed to be substituted for the province
or Indian State in those proceedings.

5.1.2. Three Parts of Article 300

Article 300(1) of the Constitution consists of three parts.10 The first part deals
with the question about the form and cause-title for a suit intended to be filed by
or against the Government of India or the Government of a State. The second part
provides, inter alia, that a State may sue or be sued in relation to its affairs in cases
like those in which a corresponding province might have sued or been sued if the
Constitution had not been enacted. The third prescribes that it would be competent
to Parliament or the legislature of a State to make appropriate provisions in regard
to the topic covered by it.

(i) Cause-Title:-
The expression ‘Government of India’ used in clause(l) of Article 300 is not
defined. The same expression also finds place in Article 12, where it refers to the
executive organ of the Union and of the States. Under clause (b) of Article 294,
the rights, liabilities, and obligations of the Government of the Dominion of India
shall be those of the Government of India under the Constitution. So the right to
sue and the obligation to be sued belongs to the ‘Government of India’, but the
cause-title of a suit against it will be in the name of ‘Union of India’ as provided in
clause(l).of Article 300. The reasons are that the Union of India is a legal entity
created by Article 1 of the Constitution of India and under clause(a) of Article
294, the property and assets vested in the Crown for the purpose of the Government
10. B.P. Sinha, CJ in State of Rajasthan v. Mst. Vidyawati, A.I.R. 1962, S.C. at 935; also P.B.
Gajendragadkar, CJ in Kasturila! v. State of U.P., A.I.R. 1965 S.C. at 1044.
 162

of the Dominion of India or a Governor’s province at the commencement of the

Constitution shall be transferred, by.succession, to the Union or the corresponding
State under the Constitution. Similarly the Government of a State may sue or be
sued by the name of the State concerned.

The expression by the name of the State in clause(l) of Article 300 refers to a
State as specified in the First Schedule of the Constitution and it does not include
Union territories. By virtue of Article 239 of the Constitution, the administration
of a Union territory is vested in the President of India, but in the administration of
a Union territory the President does not function as the head of the Union of India;
he only functions as the head of the Union territory. The Supreme Court in Satya
Dev v. Padam Devu held that a Union territory is a separate entity and the.
Government of a Union territory and the Union Government are not identical.
Therefore, a suit by or against a Union territory must be brought by or against.the
name of the administration of the Union territory.

(ii) Extent and Foundation of Liability

The second part of Article 300(1) provides that a State may sue or be sued in
relation to its affairs ‘in cases like those in which a corresponding province might
have sued or been sued “ if the Constitution had not been enacted”. The question
whether the expressions “ in cases like those “ and ‘if the Constitution had not
been enacted’ have any reference to the foundation and extent of liability of the
State was examined by the Supreme Court in State ofRajasthan v. Smt. Vidyawati11.
The Court held that those two expressions define the extent and foundation of
liability of the State by referring back for the determination of such cases to the
legal position before the enactment of the Constitution. The pre-constitution
11. A.I.R. 1954 S.C. 587;
12. A.I.R. 1962 S.C. at 935
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position of suability of the State was dealt in various enactments, such as, Section
176 of the Government of India Act, 1935, Section 32 of the Government of India
Acts 1919 and 1915, Section 65 ofthe Government of India Act 1858 and originally
Section 10 of the Charter Act 1833. The Constitution of India, thus, retained the
refer back approach for determining tortious liability of the State.

The term ‘sue’ in Article 300 is not merely confined to launching of suits for
initiating proceedings by a plaint either by or against the Union of India or State
Government. It extends to all proceedings before a Court of law for the enforcement
of civil right or a claim and includes writs like ‘ Certiorari' for the enforcement of
public law under Articles 32 and 226 of the Constitution in the Supreme Court and
High Courts respectively13. The Court in Vidyawati case also observed that Articles
294 and 295 merely provide for the devolution of the property, assets, rights and
liabilities of the erstwhile Governor’s provinces and the Indian States, on the
I

commencement of the Constitution. They do not define the extent of those rights
or liabilities but merely provide for the substitution of one Government in place of
another. Article 300 of the Constitution, thus embodies the principle that in India,
the State consents to being sued in its own Courts, subject to certain principles
relating to liability.

The question whether the Union and States can sue another for damages under
Article 300 or whether it should be filed in the Supreme Court Under Article 131 14
of the Constitution was decided in Union of India v. State of Rajasthan.1S, in which
Venkataramaiah J. held that the legal right of the State of Rajasthan to sue for
damages for the loss suffered by it on account of the damage caused to the goods
13. Province of Bombay v. Khushaldas Advani A.I.R. 1993 S.C. 746
14. Article 131 ofthe Constitution deals with original jurisdiction ofthe Supreme Court in disputes
between the Government of India and States.
15. A.I.R. 1984 S.C. 1675 at 1679
 164

transported through the Railway administration as such is not a dispute between

the Union Government and the State of Rajasthan. The State has made a claim

like any other consignee of goods despatched through the railway for compensation

and its success or failure in the suit depends on proof of facts which have to be

established in the same way in which a private person would have established.

Therefore, a suit is maintainable in a Civil Court at Rajasthan and the suit is not

covered by Article 131 of the Constitution.

(iii) Provision for Legislation

The third part of Article 300(1) provides that it would be. competent to the

Parliament or the Legislature of a State to make appropriate provisions in regard

to the tortious liability of the State. The inclusion of such a provision by the

framers of the Constitution makes it clear that their intention was to allow the pre-
t

constitution legal position regarding tortious liability of the State only for a

temporary period. D.D. Basu16 rightly pointed out that it was never contemplated

by the framers of the Constitution, that, instead of being a temporary or transitional

Stage, the antiquated Common Law founded on the archaic Status of the good old

East India Company should continue to be the law under the Republican

Constitution, for an indefinite time.

After the judgement of the Supreme Court in KasturilaP1 and basing on the

recommendations of the First Law Commission Report,18 the Government (Liability

in Tort) Bill was introduced in Parliament twice in 1965 and 1967, but was allowed

to lapse on both the occasions. In the absence of a legislation passed by the

appropriate authority, liability of the State would have to be determined by referring

16. D.D. Basu, Commentary on the Constitution of India, Vol. J. 6th Edn. (1986), p. 137
17. Kasturilal v. State of U.P. A.I.R. 1965 S.C. 1039
18. Law Commission of India submitted its First Report on May, 11, 1956.
 165

to the pre-constitution position as indicated by the second part of Article 300(1) of

the Constitution. It is submitted that this is a very unsatisfactory position of law.
It is also surprising to note that none of the Constituent Assembly members felt it
necessary to have a separate law fixing tortious liability of the State on the lines of
the Federal Tort Claims Act, 1946, and the Crown Proceedings Act, 1947 passed
in America and England respectively, just when the Constituent Assembly was
debating on drafting the Indian Constitution.

5.1.3. Suability of the Former Indian States:-

Under Article 300 the position of States which formed part of British India before
India became independent and now that of the Union of India, remained the same
as it was under Section 176 of the Government of India Act, 1935, but the same
* I

did not extend to the Indian (Princely) States which were outside British India. As
Rulers of these States were independent of the Government of India and
autonomous, subject only to the paramountcy of the Crown, the Government of
India and the succeeding States were not liable for their acts. This view was
explained by the Andhra Pradesh High Court in Farid v. Government of the Union
of India.19 M.A. AnsarifJ. held that the liability of the succeeding State cannot be
higher than that of its predecessor State. It was followed by the Rajasthan High
Court in State of Rajasthan v. Rikhabchand10, the plaintiff, a practising advocate
at Kotah, an Indian State prior to independence was subjected to detention twice
under Rajasthan Public Safety Ordinance and subsequently released by the High
Court of Rajasthan on both the occasions. He filed a suit for damages for false
imprisonment. Ranawat J. held that Section 176 of the Government of India Act,
1935, which applied to the Dominion of India and its provinces was not applicable
19. A.I.R. 1958 A.P. 394; Abdul Kadirv. Saurashtra State, A.I.R. 1956 Saur. 62. Nawanagar State
was not liable initially for the plaintiffs claim and consequently the Saurashtra State which succeeded
it could not be held liable.
2G. A.I.R 1961 Raj. 64
 166

to the Indian States, when acceded25 to the Dominion of India and thus, the position

of the United States of Rajasthan to sue and be sued stood on a different footing

from the Dominion of India or its provinces. The learned Judge allowed the appeal

and held the Government, not liable for the act of the commissioner in ordering

wrongful detention of the respondent.

Again in State of Rajasthan v. Gangadhar,12 the Court held that the liability of the

Government of India or State as a successor of the former Indian States is on a

different footing. In the instant case the police sealed all the property of one

Zorawarmal after his death as escheat to the State. But, through the judgement of

a civil court, the plaintiff took delivery of all the property from the Collector except

some gold and silver ornaments, for the recovery of which the suit was launched.

Singhal, J. held that as the case relates to the former State of Bikaner, an Indian

State, and where the Bikaner State code of Civil Procedure, 1920 provided that the

suits by and against the Government shall be instituted by or against the State

Council without any reservation; The United States of Rajasthan was as such equally

liable and by virtue of Article 300 the same liability was carried over to the State

of Rajasthan. He also observed that it was not open to the State of Rajasthan to

claim immunity from an action in tort on the authority of Navigation and Kasturilal

decisions.

Thus, the position of the State Governments, who have succeeded to the territories

of the erstwhile Indian States is that though the Article 300 is not attracted, the

State Government would be liable for a tort committed by an ex-ruler or his officers,

unless there was any law of that Indian State excluding such liability.
21. The State of Kotah, a Princely State acceded to the Dominion of India under Section 6 of the
Government of India Act, 1935 and subsequently with some other States formed into United States
of Rajasthan.
22. A.I.R. 1967 Raj. 199
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5.1.4. Judicial Construction of State Liability:-

At the commencement of the Indian Constitution, as discussed in the preceding
chapter, divergent interpretations precipitated in the field of tortious liability of
the State in India. Firstly, the State is liable for the wrongs of its employees done
in the course of their employment in the same way as any other private employer
in a similar case, where the act complained of is of a private nature and not. done in
exercise of powers usually called sovereign powers. Secondly, all functions of the
Government are divided into sovereign and non-sovereign functions and the State
is held liable for the latter type of actions only. Thirdly, the distinction between
sovereign and non-sovereign functions is rejected and the State is held liable in all
cases in which a suit could be brought against a private individual except where
the act in question was an act of State. Fourthly, other rules such as Statutory
authority, the theory of benefit and the theory of ratification etc., are adopted by
the judiciary in fixing or exempting the State from liability in tort, which trend
continued even after the Constitution came into force. The judiciary invariably
referred to the ratio in Navigation case in large number of cases as a dogma leading
to unavoidable confusion. It has also not been able to evolve a clear test to determine
the character of a function as a sovereign and non-sovereign.. On the other hand the
tendency to declare, more and more governmental functions as sovereign functions
immune from liability were on the increase till recently. A survey of some of the
important decisions on divergent aspects, pronounced by the Supreme Court of
India as well as different High Courts would reveal the uncertain and unsatisfactory
legal position.

(i) Liability Under Statutory Duty

Whether the State should be vicariously liable for wrongs committed by its
employees in the course of discharge of statutory duty has been subjected to
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divergent opinions. Pre-constitution judicial interpretation supported that the State

was not liable for any injury caused while performing a Statutory duty. That trend

continued even after the commencement of the Constitution. In District Board,

Bhagalpur v. Province of Bihar,23 the Patna High Court held that when the duty to

be performed is imposed by law and not by the will of the employer, the employer

is not liable for the wrong done by the agent. The facts in brief were that the

treasury had issued a cheque book on the basis of a forged requisition form and

had made payments on the basis of certain cheques, bearing forged signatures of

the Chairman of District Board. The payments were made because of negligence

and want of proper care on the part of treasury officers as they failed to compare

the signature of the Chairman in the requisition form and the Cheque with the

specimen Signature kept In the treasury. The Court observed that as the Treasury

officers were performing duties imposed upon them by law and not by the will of

their employer, they are governmental in nature and not commercial. Therefore,

acts done in the exercise of such powers are not within the rule of vicarious liability.

It is submitted that this is not a very satisfactory position of law. As the State is

engaged in an undertaking which can be characterised as Private business, i.e.,

Banking business, the State should be held vicariously liable for the negligence of

its employees.

In Mohmed Murad v. U.P. Government,24 certain Jewellery, belonging to a minor

was entrusted with a Nazir for the safe custody of an order of the District Judge.

Due to negligence on the part of Nazir in the performance of his duty imposed by

a statute, the Jewellery was stolen. The Court held that as both, the District Judge

and Nazir were functioning under certain provisions of law, the State of Uttar

Pradesh was not, vicariously liable for damages caused by their negligent act.

23. A.I.R. 1954 Pat. 529; Ram Gulam v. Uttar Pradesh, A.I.R. 1950 All. 206
24. A.I.R. 1956 All. 75
 169

Brijmohanlal, J. while disposing of the case observed “where the servant acts in

performance of the duties imposed upon him by law, the master has no right to

control him nor to give him any instructions. He. is obeying the law and not the

master and naturally the master should not be held liable for anything which the

servant does while carrying out the aforesaid duties.”25 In State of Bihar v. Narain

Prasad,26 the seizure of goods by the officer of the State was not made under the

orders of the Government, but under the sanction of Essential Supplies Act, 1946.

Therefore, the State was held not liable for the damages caused on account of the

negligence of its officers in performing the duties entrusted to them by the

Legislation.

Similarly in State v. Devilal Shivlal,27 Shivdayal, J. observed “where a tortious

Act is committed by a public servant in discharge of his statutory functions, which

were referable to and ultimately based on the delegation of the sovereign powers

of the State of such public servant, an action for damages for loss caused by such

tortious act will not lie”. However, “ if a tortious act has been committed by a

public servant in discharge of duties assigned to him not by virtue of delegation of

any sovereign power, an action for damages will lie”. In the present case seizure

of wood by the revenue authorities was described as an act discharged in the exercise

of statutory powers.

It is submitted that the principle laid down in these line of cases does not appear to

be reasonable, for an official of the State always remains to be its agent whether

he functions under an executive order of the Government or under powers conferred

25. Ibid at 77
26. A.I.R 1963 Pat. 290; Hiralal v. India A.I.R 1968 Tri. 63; it was held that collection of customs
duty, being a Staturoy power union of India was not liable for the plaintiffs loss; Sekharchand v.
Radhey Shaim, A.I.R 1973 All. 28; State was held not liable for wrongful arrest for sales tax arrears.
27. A.I.R 1970 M.P. 179 at 184.
 170

-on him directly by an Act of the legislature. The dichotomy between the executive
and the legislative branches is irrational as both constitute parts of the State. M.P.
Jain28 opined that this rule is also unjust in the modern concept of welfare State
where more and more statutory powers are being conferred directly on Government
servants through legislation. It is, therefore, necessary that the State should be
made liable for the wrongful acts of its servants done during the course of their
employment, whether acting under executive orders or exercising legislative power.

The Law Commission also recommended to that effect, which says “The State,
should be liable if in the discharge of statutory duties imposed upon it or its
employees, the employees act negligently or maliciously, whether or not discretion
is involved in the exercise of such duty”. In England Section 2 clause(3) of the
Crown Proceedings Act, 1947 also makes the crown liable for the tortious acts of
Government servants even though the function has been directly, conferred by a
statute.

(ii) Theory of Ratification

Generally, the State cannot in law ratify, the illegal activity, as it had no power to
do illegal things under law. But ratification in relation to State’s liability for illegal
and unlawful acts of its officers is to be understood in its popular sense of approval
or confirmation of the act and adoption of all its benefit and obligations. The
question whether ratification by the Government of an act of its servants performed
under statutory authority would make the State liable or not is not certain. In
Babulal Agarwala v. Province of Orissa,29 the plaintiffs goods were seized by the
police, which act was neither authorised by the State nor had the sanction of any
law nor was it for the purpose of the State. Narasimha, J. held that the State was
28. M.P. Jain Principles of Administrative law, 4th ed.,Wadhaw and Co., Nagpur, 1986); p. 793.
29. A.I.R. 1954 Ori. 225,
 171

not liable for the tortious act of its servants which neither got ratified nor derived
any benefit from such act.

Similarly in State of Rajasthan v. Rikhabchand, 30 Ranwat J. held that the

commissioner not being an agent of the Government, his action of ordering the
detention of plaintiff cannot be said to have been performed on behalf of the
Government. It cannot also be said that the Government ratified it, hence the
Government was not liable. Again in Narain Prasad,31 the S.tate was held not
I

liable as the act of seizing of the plaintiffs goods and selling them by the officers
of the State was neither authorised nor ratified by the State.

However, in another line of cases the Judiciary held the State liable when the
wrongful act of its servant which resulted in damage to the plaintiff was ratified
by it. In M/s. Chetandas Gulabchand v. State of Bihar,31 it was held that the State
would be liable when it ratified the act of Additional District Magistrate by refusing
to pay compensation and at the same time by profiting out of the act by retaining
the amount realised by the sale. Similarly, in State of Bihar v. Pritichand,33 the
plaintiffs estate was taken over by the State officials. Due to wilful default and
gross negligence of the estate manager, a servant of the State, the plaintiff suffered
loss. As the State ratified every action of the manager, it was held liable for the
loss suffered by the plaintiff.

(Hi) Theory of Benefit:-

During the pre-constitution era, the Judiciary recognised the State’s liability in
30. A.I.R. 1961 Raj. 64
31. Supra note 26
32. A.I.R. 1958 Pat. 512
33. A.I.R. 1964 Pat. 13
 172

cases where there was some benefit or profit to the State out of the tortious acts of
its servants. The same trend continued even during post-constitution Judicial
interpretation in some cases. In Abdul Kadir v. Saurashtra State,24 the servants of
the State of Nawanagar35 seized and detained the animals belonging to the plaintiff
in the exercise of powers conferred upon them by the Municipal Law. But, due to
negligence on the part of the servants of the State, the animals perished before
they were sold. Baxi J. observed that the State cannot be held liable for the loss of
animals as it has not profited by such loss.

But in Union of India v. Ayed Ram 26 the collector of central excise, Calcutta,
seized certain quantity of non-duty paid tobacco from the plaintiffs ship.
Subsequently tobacco was sold by the department long after the duty imposed was
deposited. The plaintiff claimed for the return of the tobacco or the sale proceeds
of it, the court held that the plaintiff cannot sue the defendant Union of India for
damages for the tort of conversion of the confiscated tobacco, but, since there was
a proof that the sale proceeds of the seized tobacco was deposited in the Government
treasury and the Union of India benefited to that extent, there is a duty cast upon
the Union Government to return the proceeds of the sale of the confiscated tobacco.

Thus, the judicial thinking on the subject of vicarious liability of the State for the
wrongs of its servants continued to depend partly on the ratio of statutory immunity,
doctrine of ratification and the rule of benefit or profit applied prior to the
Commencement of the Constitution.

(iv) Sovereign and Non-sovereign Functions

The concept of “the great and clear distinction’ referred to by Peacock CJ. gave
34. A.I.R. 1956 Saur. 62
35. The State of Nawanagar was succeeded by the State of Saurashtra
36. A.I.R. 1958 Pat. 439
 173

much room for subjectivity and produced conflicting results. A.R. Blackshield37
maintained that the mysterious contrary results were possible, because the
Navigation case which was relied upon by the Judiciary in interpreting Article 300
of the Constitution, contains a rich profusion of multiple possibilities and it is
possible for the judges to reach almost any result. The Judiciary also showed its
awareness of the changed(social political and economic situation and started giving
liberal interpretation of Article 300. The first direct case, which came up before
the Supreme Court of India on the question of extent of vicarious liability of the
State for the tortious act of its employees under Article 300(1) of the Constitution
was State of Rajasthan v. Smt. Vidhyawati.3S In the instant case one Lokumal was
employed as a temporary jeep car driver on probation by the appellant State and he
was alloted to the District Collector of Udaipur. The driver, while bringing the
jeep car back from the workshop after repairs, knocked down one Jagdishlal, who
was walking on the footpath by the side of the public road in Udaipur city, causing
him multiple injuries, resulting in his death, three days later in the hospital. The
plaintiffs, who are Jagadish Lai’s widow and a minor daughter sued the driver
and the State of Rajasthan as first and second defendants for compensation of a
*v

sum of Rs. 25,000/- for the tort of negligence which resulted in accident and
consequently in the death of the bread-winner of their family. The first defendant
remained exparte and the suit was contested by the second defendant State.

The trial Court after elaborate discussion of the evidence, came to the conclusion
that the driver was rash and negligent in driving the Jeep car while bringing it back
from the workshop and decreed the suit against him exparte. The suit was dismissed
against the State by accepting its contention that it was not liable for the tortious

37. A.R. Blackshield, Tortious liability of the Government: A Jurisprudential Case note; 8. J.I.L.I.
(1966). pp. 643 and 653
38. A.I.R. 1962, S.C. 933
 174

acts of its employee, as the act was not done in the exercise of sovereign powers.

The trial Court took the view that as the Car was being maintained for the use of

the Collector, in discharge of his official duties, that circumstance alone was

sufficient to take the case out of the category of cases where vicarious liability of

the employer could arise, even though the Car was not being used at the time of

the occurrence of the accident for any purpose of the State. The trial Court observed

that the constitution and control of the Collector’s office is an instance of exercise

of sovereign powers.

On appeal by the plaintiff’s, the High Court of Rajasthan speaking through

Wanchoo, CJ. and D.S. Dave, J. decreed the suit against the State of Rajasthan

also. The Bench observed “ In our opinion the State is in no better position in so

far as it supplies cars and keeps drivers for its civil service. It may be clarified

that we are not here considering the case of drivers employed by the State for

driving vehicles which are utilised for military or public service.”39 The defendant

State appealed to the Supreme Court after obtaining the necessary certificate from

the High Court ‘that the case fulfills the requirements of Article 133(1 )(c) of the

Constitution. It is submitted that the High Court had rightly observed that an

important question of law of general public importance, namely, the extent of

liability of State in tort was involved in this case. On behalf of the State two

questions were raised before the Supreme Court. They are (1) that under Article

300 of the Constitution, the State of Rajasthan was not liable, as the corresponding

Indian State would not have been liable if the case had arisen before the Constitution

came into force; and (2) that the Jeep car the rash and negligent driving of which

led to the claim in the suit, was being maintained 4 in exercise of sovereign powers’

and not as part of any commercial activity of the State.

39. Ibid at 935

 175

A Constitution Bench40 of the Supreme Court unanimously dismissed the appeal.

B.P. Sinha C. J. while answering the second argument first, raised a question thus
"can it be said that when the jeep car was being driven back from the repair shop to
the Collector’s place, when the accident took place, it was doing anything in
connection with the exercise of sovereign powers of the State?”41 The learned
r
Chief Justice answered the question in the negative and stated that "it has to be
remembered that the injuries resulting in the death of Jagdish Lai were not caused
while the jeep car was being used in connection with the sovereign powers of the
State

Regarding the first question on the true Construction and effect of Article 300(1)
of the Constitution, Sinha CJ made some of the important observations, which can
be summarised as given below:42

(1) The present set up of the Government is analogous to the position of East India
Company which functioned not only as a Government with sovereign powers as a
delegate of the British Government, but also carried on trade and commerce as
also public transport like railways, post and Telegraph and road transport business.

(2) In India, ever since the time of East India Company the sovereign has been
held liable to be sued in tort or in contract, and the Common Law immunity never
operated.

(3) When the rule of immunity in favour of the Crown based on Common law in
the United Kingdom, has disappeared from the land of its birth, there is no legal
40. The bench consisted’of B.P. Sinha, CJ and J.C. Kapur, M. Hidayatullah, J.C. Shah J.R.
Mudholkar, J.J.
41. Ibid Supra note 39
42. Ibid at 935-940
 176

warrant for holding that it has any validity in this country, particularly after the
Constitution.
(4) The words ‘Liabilities incurred’ in Section 65 of the Government of India Act,
1858 were not confined to the liabilities under a contract, but include also a liability
arising out of a tortious act.

(5) Articles 294 and 295 of the Constitution are primarily concerned with the
devolution of those rights, assets and liabilities and generally speaking provide
for the succession of a State in respect of the rights and liabilities of an Indian
State, that is to say, they do not define, those rights and liabilities, but only, provide
for substitution of one Government in place of the other.

(6) The second part of Article 300 defines the extent of liability of the State to be
sued by the use of the words ‘in the like cases’ although the first part of it deals
only with the nomenclature of the parties to a suit or proceedings, and refers back
for the determination of such cases to the legal position before the commencement
of the Constitution. The legal position before the Commencement of the
Constitution is indicated in Section 176(1) of the Government of India Act, 1935,
the provisions of which are substantially the same as those of Article 300(1) of the
Constitution. '

(7) Under the Constitution we have established a welfare State, whose functions
are not confined only to maintain law and order, but extend to engaging in all
activities including industry, public transport, State trading, to name only a few of
them..... as the State activities have such a wide ramifications involving not only
the use of sovereign powers but-also its powers as employees in so many public
sectors, it is too much to claim that the State should be immune from the
 177

consequences of tortious acts of its employees committed in the course of their

employment.

(8) The mere fact that the car was being maintained for the use of the Collector, in
discharge of his official duties is not sufficient to take the case out of the category
of cases where vicarious liability of the employer could arise even though the car
was not being used at the time of the occurrence for any purpose of the State.

(9) Now that we have by our Constitution established a republican form of

Government and one of the objectives is t.o establish a socialistic State with its
varied industrial and other activities, employing a large army of servants, there is
no justification in principle or in public interest, that the State should not be held
vicariously liable for the tortious act of its servant.

(10) The State of Rajastha'n cannot escape liability so long there is nothing to show
that its predecessor, the Union of Rajasthan, as it was brought into existence in the
last stage of integration, just before the coming into effect of the Constitution was
not liable by any rule of positive enactment or by Common Law.

(11) Viewing the case from the point of view of first principles, there should be no
difficulty in holding that the State should be as much liable for tort in respect of a
tortious act committed by its servant within the scope of his employment and
functioning as such as any other employer.

The above observations of the Court were acclaimed by many jurists. Professor
M.P. Jain and Dr. S.N. Jain43 have reached to the conclusion thus “though not very

43. Supra note 28 at 769-70

 178

articulate, the Court seemed to be suggesting that it would not hold the Government
immune from the tortious acts of its servants whether committed in the exercise of
sovereign or non-sovereign functions”. They have also observed that Vidhyawati
decision “gave the impression that the Court was in favour of a broader view of
the State’s liability for the tortious acts of its servants than what the Navigation
Case had laid down. But it is also true that the Court did not overrule the test of
j

sovereign function to determine Government’s liability. What it did was to give a

restrictive significance to the concept of sovereign functions”. They concluded by
saying that “Vidhyawati might well have been the precursor of a new trend in the
area of vicarious liability of the State”.

H.M. Seervai44 opined that it is very unfortunate that though Sinha, CJ cited the
distinction made in Navigation case, between the trading activities and sovereign
activities of the company, he did not expressly disapprove of that distinction. But
his reference to the feudalistic concept on which the immunity of the Crown was
based in England, suggests that he disapproved of that distinction. In the opinion
of Alice Jacob,45 what the Court did in Vidhyawati case was not more than
qualifying the “significance of the distinction between sovereign and non-sovereign
functions”. She also observed that the law on State liability for the tortious acts of
its servants “had received a fresh stimulus in the Vidhyawati decision. It is
submitted that the Court in Vidhyawati gave a new hope to the victims of tortious
acts in the hands of the Government servants, by giving a liberal interpretation of
Article 300 of the Constitution.

a. Kasturilal Case: A retrograde Decision;-

It was considered that the Supreme Court by Vidhyawati decision has abolished
the ‘great and clear distinction’ between sovereign and non-sovereign functions of
44. H.M. seervai, Constitutional Law of India, 4th ed., Vol.2 (1993). P- 2131
45. Alice Jacob, “Vicarious liability of Government in Torts"-7.J.I.L.i. 247-48 (1965)
 179

the State for determining tortious'liability of the State in India46. But, unfortunately,
with in a short time, a clear departure was made in the form of Kasturilal Raliaram
Jain v. State of Uttar Pradesh 47 and the efficacy of law laid down in Vidhyawati
was considerably watered down by the Supreme Court.

The facts of the case in brief were that the appellants were a duly registered firm
t

dealing with business in bullion and other goods at Amritsar. Ralia Ram, one of
its partners arrived at Meerut by the train at midnight with the object of selling
gold and silver in Meerut Market. He was taken into custody by three police
constables and his belongings were searched on suspicion of stolen property, while
he was walking through the Chaupala Bazar. A huge quantity of gold and silver
was seized from his possession and he was kept in police lock up. Next day Ralia
Ram was released on bail and some time thereafter the silver seized from him was
returned but inspite of repeated demands gold was never returned to him as one
Mohammad Amir, head constable and incharge of police Malkhana, in whose
custody the gold was kept misappropriated it and fled away to Pakistan. The
appellants then filed a suit claiming return of the gold or in the alternative, damages.

The respondent State resisted the claim inter alia on the grounds that it was not a
case of negligence of the police officers and that even if negligence was proved
against the said police officers, the respondent State could not be said to be liable
for the loss resulting from such negligence. Two substantial questions arose
between the parties, namely (1) whether the police officers in question were guilty
of negligence in the matter of taking care of the gold which had been seized from
Ralia Ram and (2) whether the respondent State was liable to compensate the
appellant for the loss caused to it by the negligence of the Public Servants employed
by the respondent. The trial Court found in favour of the appellant on both the.
46. G.P. Verma, State Liability in India, Retrospect and Prospects-(1993), p. 216
47. A.I.R. 1965 S.C. 1039
 180

. issues and decreed the suit in its favour.

On appeal by the State, the Allahabad High Court held that the trial court was in

error in regard to both findings and reversed the decision of the trial Court. The

High Court found that no negligence had been established against the police officers

in question and even it was assumed that the police officers were negligent and

their negligence led to the loss of gold, that would not justify the appellants claim

for a money decree against the respondent State. The appellants, then, moved the

Supreme Court after obtaining a Certificate from the High Court.

A Constitution Bench48 of the Supreme Court unanimously agreed with the findings

of the trial Court on the first question and held that the police officers were negligent

in dealing with the property of the appellants as they have failed to observe the

procedure prescribed for such seizure.49 P.B. Gajendragadkar, CJ50 observed thus

“there can be no escape from.the conclusion that the police officers were negligent

in dealing with Ralia Ram’s property after it was seized from him”. Not only was

the property not kept in safe custody in the treasury, but the manner in which it

was dealt with at the Malkhana shows gross negligence on the part of the police

officers.

48. The bench consisted P.B. Gajendragadkar, CJ K.N. Wanchoo, M. Hidayathullah, Raghubir
Dayal and J.R. Mudholkar, J.J.
49. Where a person is arrested Under Section 54(1) and .(ii) of the Criminal Procedure Code
(Cr.P.C.) on suspicion that he was carrying stolen property and on search of such person under
Section 51 of the Cr. P.C. gold and Silver seized under Section 550 of the Cr. P.C.; Section 523 of
the Cr. P.C. provides for the procedure in that behalf and lays down, inter alia, the that seizure by
any police officer of property taken under Section 51 of the code shall be forthwith reported to a
Magistrate, who shall make such order as he thinks fit respecting the disposal of such property or
the delivery of such property to the person entitled to the possession thereof. Further Regulations
165(1) and 166 of the Uttar Pradesh Police Regulations provide that property worth Rs. 100/- or
less has to be kept in police Malkhana and the property exceeding Rs. 100/- has to be kept by the
prosecuting inspector in a seperate box under lock and key in the treasury.
50. Supra note 47 at 1043-44
 181

The Supreme Court in dealing with the second question did not approve of the

liability of the State on the ground of negligence of its servants. When the Counsel

for appellants drew the attention of the Court to its earlier decision-in Vidhyawati

and urged the Court to merely extend the principle enunciated therein’, the Supreme

Court conceded that there were certain observations made in Vidhyawati which

were Primafacie attractive, but hastened to add that the facts in these two cases

fell under distinct and separate categories. The Court went back and affirmed the

ratio laid down in the Navigation case in the following terms “This case recognises

a material distinction between acts committed by the servants employed by the

State where such acts are referable to the exercise of sovereign powers delegated

to the public servants, and acts committed by public servants which are not referable

to the delegation of any sovereign powers”.

The Court while holding the State not liable, as the police were exercising ‘

Sovereign Powers’ enunciated the rule thus : “ If a tortious act gives rise to a claim

for damages, the question to ask is: was the tortious act committed by the public

servant in discharge of statutory functions which are referable to; and ultimately

based on, the delegation of the sovereign powers of the State to such public servant

? If the answer is in the affirmative, the action for damages for loss caused by

such tortious act will not lie. On the other hand, if the tortious act has been

committed by a public servant in discharge of duties assigned to him not by virtue

of the delegation of any sovereign power, an action for damages would lie”.5’

The Court while distinguishing with Vidhyawati decision held that ‘when the

Government employee was driving the car from the workshop to the Collector’s

residence, he was employed on a task or an undertaking which cannot be said to be

51. Ibid at 1046

 182

referable to, or ultimately based on the delegation of Sovereign or Governmental

power of the State’........ 'In fact’ said the Court, “ the employment of a driver to

drive the jeep car for the use of a civil servant is itself an activity which is not

connected in any manner with the sovereign power of the State at all on the other

hand, the power to arrest ta person, to search him and to seize property found with

him “ are powers which can be properly characterised as sovereign powers”.

However, Gajendragadkar, CJ. warned that the concept of sovereign functions

should not be extended unduly by the courts and he observed that 'when the State

pleads immunity against claims for damages resulting from injury caused by

negligent acts of its servants, the area of employment referable to sovereign

functions must be strictly determined”. The Court also emphasized upon the

significance and importance of making such distinction at the present time when

in the pursuit of their welfare ideal, the various Governments, “naturally and

legitimately enter into many commercial and other undertakings and activities which

have no relation with the traditional concept of governmental activities in which

the exercise of sovereign is involved”. It was necessary to limit the area of sovereign

powers, so that the tortious acts committed in relation to ‘non-governmental and

non-sovereign’ activities did not go uncompensated. This is exactly what has been

done by the court in its decision in Vidhyawati,52

The Court itself was not happy over their judgement seems clear, when we observe

the Statement of Gajendragadkar, CJ. which reads thus: "In dealing with the present

appeal, we have ourselves been disturbed by the thought that a citizen whose

property was seized by process of law, has to be told when he seeks a remedy in a

court of law on the ground that his property has not been returned to him, that he

can make no claim against the State. That we think is not a very satisfactory position

52. Id at 1048
 183

in law. The remedy to cure this position, however, lies in the hands of the

legislature".53 The learned Chief justice observed thus “Before we part with this

appeal, however, we ought to add that it is time that the legislature in India seriously

consider whether they should not pass legislative enactments to regulate and control

their claim from immunity in cases like this on the same lines as has been done in

England by the Crown Proceedings Act,. 1947”.54

This judgement of the Supreme Court was widely criticised H.M. Seervai55 opined

that the judgement in Kasturilal case was ‘clearly wrong and productive of grave

public mischief and should be overruled”. He also said that the decision failed to

distinguish between an act of State and an act done or purporting to be done under

the authority of Municipal Law. A.R Blackshield,56 opined that it was 1 one of the

rash of decisions’, ‘ a retrograde decision’ 57 after which the courts are struggling

hard to reassess and redefine the scope of the Slate’s immunities.

b. Vidhyawati and Kasturilal: An Analysis

An analysis of Vidhyawati and Kasturilal decisions delivered by the Supreme Court

would lead to draw certain important observations. Both the cases deal with an

identical legal principle of the ‘great and clear distinction’ laid down in the

Navigation case but reached different conclusions. So, Vidhyawati was permitted

to claim damages against the State for the death of her husband due to negligent

act of its employee. Whereas Kasturilal whose property had been seized and lost

due to the proved negligence of the employees of the State was denied damages.

In both the cases the Judges harp on contemporary constitutional philosophy and

53. Id at 1048-49
54. Id at 1049
55. Supra note 44 at 2132
56. Supra note 37 at 645
57. Supra note 46
 184

role of modern State but equally emphasize the importance of the distinction

between the sovereign and non-sovereign functions of the State. In Vidhyawati,

the judges intend to limit the area of State immunity whereas in Kasturilal, they
t
stress the need for strictly determining the areas of employment referable to

sovereign powers.

Further, the decision in both the cases is unanimous, which shows that there is no

deviation in the legal principle of the court in determining the tortious liability of

the State. In Vidhyawati, Sinha CJ did not express his dissatisfaction with the

position of law as he was able to do justice to the aggrieved, but in Kasturilal,

Ga^jendragadkar CJ. showed his helplessness and anguish with the then existing

state of law. It is submitted that it was not enough for the apex Court merely to

express its feeling of being disturbed by the thought that wrong has been done to

Kasturilal and he should have been compensated. In this connection A.R.

Blackshield58 observed thus “it goes only to show that the judges judicial technique

has been defective” and he further observed that for “almost always as a matter of

law judges can reach what they see as a just result”. It is submitted that, the Simplest

course for the Court in Kasturilal would have been to follow Vidhyawati decision.

5.1.5. Liability for Damage to Propeirty:-

In a welfare State it is the primary duty of the State to protect individuals and their

property. The deletion of Articles 19(l)(f) and 3 li9 from the chapter on fundamental

rights does not, however, mean that the right to property finds no place in the

Indian Constitution. Insertion of Article 300-A60 in the Constitution declares that

58. Supra note 37 at 648
59. Article 19(1)[f] guaranteed to all the citizens a fundamental right to acquire hold and dispose of
any property, and Article 31 provided that no person shall be deprived of his right to property save
by the authority of law were omitted from Fundamental Rights Chapter by the Constitution (44th
Amendment) Act, 1978
60. Added by the Constitution (44th amendment) Act, 1978, Article 31 was relettered as Article
300-A
 185

‘ no person shall be deprived of his right to property save by authority of law.’ An

officer of the State while dealing with the property of an individual may, either in
the exercise of powers conferred on him by a statute or otherwise cause damage to
it due to inept or negligent handling. In such a situation, the question that arises is
whether the individual, whose property is subjected to loss or damage is entitled
to compensation from the State for the damage suffered by him. A survey of the
judicial pronouncements would reveal the correct legal position

In Babulal Agarwala v. Province of Orissa,61 the plaintiff was granted a licence to

carry on the business of purchase, sale and storage of paddy, rice and other food
grains. The police, acting in a high handed manner, seized six times the goods
from the plaintiffs godown with a view to prevent them from being exported from
Orissa. The Orissa High Court held that the State was not liable for the tortious
acts of the Police as the seizure was neither authorised by the State, nor was it for
the purpose of the Government. Again in State ofAndhra Pradesh v. Pabbisetty,62
the plaintiffs rice hags were seized by the Thasildar, without having any authority
of law. Although such seizure was held illegal and the ..individual officer was
made liable, the court did not award damages against the State on the ground that
there was no act on the part of the Government to make it liable. Similarly in
Kasturilal the Supreme Court held that the State was not liable for the disappearance
of gold belonging to the plaintiffs which was seized and kept in the custody of
police. His Lordship Gajendragadkar CJ observed that in the absence of any specific
law fixing State’s liability the law to be applied is pre-constitution law.
Accordingly, the court by referring to the rule propounded in the Navigation case
observed that maintenance of police being a sovereign function the State was not
liable to compensate the loss caused to the plaintiffs. It is submitted that this

61. A.I.R. 1954 Ori. 225

62. A.I.R. 1966 AP. 225
 186

approach is clearly wrong63.

However, the Judiciary, in another line of cases found that the State is vicariously

liable to compensate any damage to the property of an individual due to wrongful

act or omission of the servants of the State. In State of Saurashtra v. V.allabhadas,64

a certain quantity of gram was imported by the plaintiff’s firm. The defendant

State instructed the customs Collector to confiscate the consignment as it was not

covered by the valid permit. Subsequently on being advised that-no permit was

necessary for such import, the State Government ordered its release after about a

year. By that time the gram had become unfit for human consumption. The State

was held vicariously liable for compensation for the loss sustained by the illegal

order of confiscation and the inordinate delay in returning the grains to the plaintiffs.

In State of West Bengal v. P.T. Corporation,65 the plaintiffs stock of rice was

seized by the Additional District Magistrate for an alleged violation of Defence of

India Rules and kept the same in the custody of Bengal Bank Limited as a security

against over draft advances taken by it from the said bank. Eventually, no charge

could be framed nor the seized stock of rice released. The Calcutta High Court

held the State liable for compensation for illegal seizure as there was ratification

as well as appropriation by the State of the sale proceeds of the rice.

In Premlal v. Uttar Pradesh Government,66 the Allahabad High Court, held that an

order of requisitioning motor vehicles with a motive of depriving their owner of

63. Supra note 47

64. A.I.R. 1956 Sau. 65
65. A.I.R. 1959 Cal. 597; Similarly in Onkar Bahadur Singh v. State ofM.P. (A.I.R. 1963), (M.P.174),
The State was held liable for conversion when the plaintiff had cut the logs from a village forest and
was fined in addition to the confiscation of timber but later on the revenue officer did nothing when
the Board of Revenue set aside both the orders and directed the return of wood.
66. A.I.R. 1962 All. 223; also in Union of India v. Wazirchand A.I.R. 1966 H.P. 40, the State was
held liable when its police seized wrongfully herbs belonging to the respondent which were spoiled
and rendered useless due to their negligence.
 187

their use because he is suspected of belonging to a particular political organisation

considered by the Government to be undesirable, is malafide and an abuse of power
for which the Government cannot claim immunity. It is submitted that the power
of requisitioning of private vehicles is to be limited to enable the State to use them
in times of emergency and not to deprive political suspects of their means of
transport.

In Union of India v. Satpalf the plaintiffs goods were seized by the Land Custom
Authority maliciously and without any sufficient cause. Subsequently, they were
converted into money and the sale proceeds were lying with the Union of India.
The court held that the plaintiff was entitled to the refund of. the sale proceeds.
Kasturilal was cited and distinguished as in that case the money was not in the
custody, of the State but actually taken away by the head-constable, whereas in the
present case, the money equivalent of the goods auctioned continued to be in the
custody of the Union of India and the Court concluded by stating that there is no
reason why the Union of India should not be asked to pay back the money which
belongs to the plaintiff and to which Union of India has no title.

In Rupalal v. Union of India,™ the military Jawans of Union of India, lifted the
driftwood belonging to the plaintiff and carried it through military vehicles for
purposes of camp fire. Treating the act as falling in the course of employment, the
Union of India was held liable in damages. In State of Gujarat v. Memon Mohmed
Haji Hasan,69 the question was regarding the return of seized vehicles by the
Government. The vehicles were seized by Junagadh State under its Customs Act
and the State merged with the newly constituted State of Saurashtra. After a long

67. AI.R. 1969 J.K. 128

68. AI.R. 1972 J and K. 22
69. AI.R. 1967 S.C. 1885
 188

time the vehicles were turned into scrap and were sold away under the orders of
the Court. The party claimed its price Rs. 31,786.00 but the State offered Rs.
2,223.00 the scrap price. It was decided that the party was entitled to its price.
The Court observed that the order for its disposal that was passed by the magistrate
would not in any way interfere with or wipe away the right of the owner to demand
the return of the property or the obligation of the Government to return it. Even if
the Government cannot be said to be in the position of a bailee it was in any case
bound to return the said property by reason of its statutory obligation or to pay its
value if it had disabled itself from returning it either by its own act or by the acts
of its agents or servants.70 The Supreme Court also stated that the decisions in
Vidhyawati and Kasturilal have no relevance to this case

In Smt. B.K.D. Patil v. State of Mysore,n the Court held that it has power to
indemnify the owner of the property which is destroyed or lost whilst in the custody
of the Courts. In the instant case, a theft took place in the appellant’s house where
gold ornaments and cash worth Rs. 10,000/- were stolen. The Police recovered
and produced the ornaments before the Court of Chief Judicial Magistrate who
directed the police officer concerned to retain the ornaments in his custody until
they are verified and valued. Accordingly the ornaments were kept by the sub­
inspector of police, in the guard room of the police station.in a trunk with a list of
the ornaments and a corresponding entry in the concerned Register. When the
trunk was opened some time later by the sub-inspector of police under the
instructions of the Court to produce them before it, to his utter dismay he found
that the trunk contained only stones and no ornaments all of which had disappeared
and could never be discovered. The suit for return of the ornaments or in lieu of
them their value was rejected by the trial court which was confirmed by the sessions
70. (bid at 1889
71. A.I.R. 1977 S.C. 1749
Judge and High Court. When the case went in appeal, the Supreme Court held that
the appellant is entitled to a compensation of Rs. 10,000/- against the State and
also costs throughout. Fazal AH, J. observed “where the property is stolen, lost or
destroyed and there is no primafacie defence made out that the State or its officers
had taken due care and caution to protect the property, the Magistrate may, in
appropriate case where the ends of justice so require, order payment of the value
of the property.72 The State thereafter can recover the amount from the officer
who allowed the loss to take place due to his own negligence. It should be noted
the facts in Kasturilal are similar to the facts in this case and yet a different decision
is reached which is a welcome trend. This development shows that the loss to
property which in the beginning could not be recovered can now be recovered on
the ground of State’s liability. It is also significant to note that the Court did not
at all refer to either Kasturilal or Navigation case.

Similarly the Supreme Court in a recently decided case of far reaching importance
in N.Nagendra Rao and Company v. State of Andhra Pradesh73 observed thus:
“where the goods confiscated or seized are required-to be returned either under
orders of the Court or because of the provisions of the Act, the objection that the
goods having been lost or destroyed and the owner of the goods had no remedy in
private law and the Court was not empowered to pass an order or grant decree for
the payment of the value of the goods cannot be accepted. Public policy requires
the Court to exercise power in private law to compensate, the owner where the
damage or loss is suffered by the negligence of officers of the State in respect of
cause of action for which suits are maintainable in Civil Court.74

The appellant company was carrying on business in fertiliser and food grains under
72. Ibid at 1752
73. (1994) SS.C.C. 205
74. Ibid at 240
 190

licence. Its premises was visited by the police inspector, vigilance cell in August,

1975 and huge stocks of fertilisers, foodgrains and even non-essential goods were

seized. There upon the District Revenue Officer(DRO), in exercise of powers under

Section 6-A of the Essential Commodities Act, 1955, directed the fertiliser to be

placed in the custody of Assistant Agricultural Officer (AAO) for distribution to

the needy ryots and the foods grains and non-essential goods in the custody of

Tehsildar for disposing it of immediately and depositing the sale proceeds in the

Treasury. Due to negligence on the part of the officers concerned neither the goods

were disposed of nor returned to the appellants immediately, despite the orders of

the Collector as well as the sessions judge. By the time the appellant was permitted

to take delivery, the stock had been spoilt both in quality and quantity. The appellant

demanded for value of the stock released by way of compensation, when no

response came, it gave notice and filed the suit for the recovery of the amount.

The suit was contested, inter alia, on the grounds of sovereign immunity of the

State, discharge of statutory duty in good faith, absence of any right to claim

damages when the seizure had been found to be valid for part of the goods, absence

of any right to claim value of the goods as the only right an owner of the goods

had to get back the stock irrespective of the condition.

The trial court did not accept the defence and held that.the relationship between

the appellant company and the respondent State was of a bailor and bailee and the

bailee could not refuse of the goods nor it could delay it, when it was demanded by

the appellant. The trial court also observed that the deterioration of the goods in

the custody of respondents, was not in exercise of sovereign function of the State.

The seizure of goods was no doubt in pursuance of statutory authority, but once it
t

was seized then it was the responsibility of the State to ensure that the goods were
 191

maintained in proper condition. The officers of the State failed in discharging

their obligation and in any case there was no justification for retaining the goods

after the order was passed by the sessions Judge directing the AAO to return the

goods. Accordingly, the trial court held that the AAO acted negligently and decreed

the suit for payment of the value of the damaged stock.

The High Court of Andhra Pradesh did not interfere with the findings recorded by

the trial court on negligence, but strangely set aside the decree as a matter of law

relying on the ratio of Kasturilal and the Full Bench decision of Andhra Pradesh

High Court in Devaraseity Ramamarthy15. On appeal, a three judge Bench of the

Supreme court speaking through P^.M.Sahai, J. held that by virtue of Article 300

if a competent legislature enacts a law for compensation or damage for any act

done by it or its officers in discharge of their statutory duty then a suit for it would

be maintainable. The Essential Commodities Act 76 itself provides for return of

goods if they are not confiscated for any reason. And if the goods cannot be returned

for any reason, then the owner is entitled for value of the goods with interest. As

regards immunity of State on the ground of sovereign function, the court held that

the traditional concept of sovereignty has undergone a considerable change in the

modern times and the line of distinction between sovereign and non-sovereign

powers no longer survives. Sovereignty now vests in the people. The legislature,

the executive and the Judiciary have been created and constituted to serve the

people. According to modern thinking the State is treated in performance of its

functions like a private company. It is, therefore, obviously liable for negligence

of its officers.

75. (1985) 2 An.W.R. 402

76. Section 6-c(2) of the Essential Commodities Act, 1955, Inter alia, says that a person whose
goods have been confiscated does not suffer if the final order either in appeal or in any proceeding
is in his favour. It statutorily obliges the State to return the goods seized or to pay the value of the
goods if for any reason it cannot discharge its obligation to return it.
 192

5.1.6. Rash and negligent driving

The high rate of accidents has led to the adoption of various legal expeditions that

are designed to provide more effective means to compensate the victims of road

accidents. Although fault is the sheet anchor of the basis of the liability of death

or injuries caused by the drivers of the motor vehicles, yet the principle of vicarious

liability has been formulated to enable the accident victim to fasten upon the owner

of the vehicle, the responsibility for the careless conduct of the driver. Thus, the

State as the owner of Motor vehicle is liable for damages for the rash and negligent

accident of its drivers on the principle of vicarious liability, even though the acts

were not authorised or even prohibited, provided the acts complained of are within

the scope and in the course of employment or service of the State. But the State

often claims immunity from liability on the ground that the accident happened

during the exercise of sovereign functions. The question as to whether the driver,

who was the servant of the State was performing a sovereign function or not, was

not a pure question of law but was a mixed question of law and fact77. A large

number of cases have occurred pertaining to claims of damages against the State

by individuals for injury caused to them due to the negligence of the drivers of the

State transport. Gradually, the courts have been able to expand the area of

governmental tortious liability by restricting the concept of sovereign functions.

The first direct case on the point is Vidhyawati78 in which the supreme court made

the State Government liable, declaring that the act of driving the jeep car from the

workshop to the Collector’s bungalow, out of which arose the accident and the

claim for damages, was not an act that could claim the status of an act in the exercise

of sovereign power. It is significant to note that the court in this case applied the

77. Ganapathi v. State of Madras, A.I.R. 1960 Mad. 222 at 225

78. Supra note 38
 193

test laid down by Peacock, CJ in Navigation case and referred to the changed role
of the State and the wide ramifications of its welfare activities. It also took into
account the changes introduced in England by the Crown Proceedings Act, 1947
and questioned the wisdom of holding the sovereign immunity in its absolute form.
However, its reliance on the distinction laid down in Navigation case strengthened
the ill-founded distinction which has caused confusion and created fallacies.

For example the Andhra pradesh High Court observed that the ‘making and
maintenance of highways is a public purpose and a sovereign function;79 whereas
the Punjab High Court observed that maintenance of public high ways is a non­
sovereign function.80 Similarly in Satyanarayan81 the supreme court .ruled that
the plying of motor buses by Government is a commercial activity. The Police
vehicle carrying police trainees to a training college is a non-sovereign function.82
It was held that the activities of the truck driver of the Public Works Department
are not sovereign83. In Shyam Sunder v. State of Rajasthan,84 the supreme court
discarded the feudalistic doctrine of Government immunity in the present socio­
economic set up. Dealing with the argument that the State was engaged in
performing sovereign functions while engaged in famine relief work. Mathew, J.
observed thus: “As the law stands today it is not possible to say that famine relief
work is a sovereign function of the State, as it has been traditionally understood.
It is a work which can be and is being undertaken by private individuals. There is
nothing peculiar about it so that it might be predicated that the State alone can
legitimately undertake the work.”83 The learned Judge also doubted even the moral
I

79. Krishna Murthy v. Andhra Pradesh, A.I.R. 1961 A.P. 283

80. Rup Ram. v. Punjab, A.i.R. Punj. 336
81. A.I.R. 1962 S.C. 1161
82. A.I.R. 1967 Ori. 116
83. A.i.R. 1972M.P. 219
84. A.I.R. 1974 S.C. 890
85. Ibid at 894
 194

justification of the distinction between sovereign and non-sovereign functions by

saying that ‘today hardly any one agrees that the stated ground for exempting the

sovereign from suit is either logical or practical. Also we do not think it necessary

to consider whether there is any rational dividing line between the so-called

sovereign and proprietary or commercial functions for determining the liability of

the state’86 Thus, it was held that the mere fact that the truck was engaged in

famine relief work would not absolve the State from the liability for the negligent

accident of its driver.

The dictum of Shyam Sunder was followed in a number of subsequent decisions.

In Andhra Pradesh v. K.Padma Rani 87 the court has discovered a way out to

escape from the sovereign and non-sovereign dichotomy in determining the

vicarious liability of the State. In the instant case one K.Sriramamurthy, an

employee of the State Public Works Department while returning from Srisailam

Dam site was fatally injured due to the collision between two vehicles being used

in connection with the construction of Hydro Electric Project, a Government

undertaking. His widow and her daughter filed a claim against the two drivers and

their employer State. The Claims Tribunal awarded a sum of Rs. 25,000/- to the

claimants towards damages. The State filed an appeal in the High Court against

the award and, inter alia, contended that the acts of the drivers were referable to

the exercise of sovereign function, namely the execution of the Srisailam Hydro

Electric Project. The High Court relying on the decision of the Supreme Court in

Shyam Sunder case upheld the view taken by the Tribunal that 1 the construction

of the project is an undertaking or activity entered into by the Government in pursuit

of its welfare ideal and as such is not an activity in which the exercise of sovereign

power is involved’.

86. Id.
87. A.I.R. 1976 AP. 122
 195

The High Court further made a bold attempt by construing the provisions of the

Motor Vehicles Act, 1939 in such a manner as to put an end to the much discredited
dichotomy of sovereign and non-sovereign functions, and to make the State

vicariously liable for all the torts committed by its servants during the course of

employment. The Court referred io Sections 110(1) and 110rB of the Motor

Vehicles Act 88 (as introduced by the 1956 Amendment) and held that the same

liability is attached to the State vehicles as is applicable to other vehicles. Thus,

the court took the Amendment of 1956 as a ‘provision’ made by Parliament under

Article 300 of the Constitution modifying the extent of tortious liability in case of

Motor Vehicles. The High cpurt also held that the State was bound by the

amendment of the Motor Vehicles Act because the general Act applied to citizens
as well as to State unless it expressly or by necessary implication exempts the

State from its operation. While holding so the High Court observed thus; “Section

110 and the Rules made thereunder expressly make every owner of the vehicle

including the Government liable for the tortious acts of its servants, while driving

the vehicle. Therefore, after amending Act 100 of 1956 by which Section 110-A

of the Motor Vehicles Act has been inserted, the distinction of sovereign and non­

sovereign acts of State no longer exists as all owners of vehicles are brought with

in the scope of this section. Whether the State is bound by the provisions of the

Act is no longer res irttegrg”89. Therefore, the claim of the citizen cannot be resisted
on the ground that the tortious act was committed by the State Government
employees or the public servants while the State was pursuing a sovereign function.

88. Section 110(1) of the Act empowers the State Governments to constitute accident claims tribunals
for the purpose of adjudicating upon claims for compensation in respect of accidents involving
death, of, or bodily injury to, persons arising out of the use of motor vehicles, or damages to any
property of a third party so arising or both. Section 110 B provides inter alia, that the claims tribunal
shall hold an inquiry into the claim and may make an award determining the amount of compensation
which appears to be just.
89. Supra note 87 at 124
 196

Similarly, in Kerala V.K. Cheru Babu90 the Kerala High Court gave a liberal'
interpretation of vicarious liability of the State. In the instant case the plaintiff a
college Student was knocked down by a jeep car belonging to the Government of
Kerala. The jeep was escorting the Advisor to the Governor, after attending a
college function. As a result of the injury the plaintiff was seriously injured and
sustained multiple fractures. Thommen, J. held the State liable as the private visit
did not entail performance of any sovereign function. The learned Judge discussed
Vidhyawati, Kasturilal and Shyam Sunder cases in detail and observed that one
basic distinction that can be pointed out between Kasturilal and Shyam Sunder is
that ‘while in Shyam Sunder the tort arose while the servant of the State was engaged
in carriage of goods which on the face of it was not referable to sovereignty,
although the nature of the act was tested with reference to its object (famine relief),
in Kasturilal, the tort was held to emanate from the seizure of gold which on the
face of it was a statutory exercise of power, although the object of the tortious act
was personal gain for the tort-feasor’.91

The learned Judge also said that it will not be easy to draw any rational or clear
distinction between sovereign acts and commercial activities. It is because of this
difficulty and the inequity of exempting the State from private law obligations
that it has been increasingly recognised in most jurisdictions that an unlimited
claim of State immunity from legal proceedings has no theoretical or legal basis.
He, further stated that ‘the concept of sovereignty is not a satisfactory test for
deciding questions of immunity. Sovereign exercise of power is not the dividing
line between jurisdiction and immunity. Apart from constitutional or statutory
provisions granted certain immunities or exemptions or privileges to the State or
its instrumentalities and with the exception of matter arising from War damage,
90. AI.R. 1978 Ker. 43
91. Ibid at 47
 197

the State, in relation to its citizens has no immunity from liability or from the
jurisdiction of its Courts.

In Indian Insurance Company Association Pool v. Radhabai,92 a motor vehicle

belonging to the State of Madhya Pradesh and allocated to the primary health centre,
was being used for bringing some ailing children from another village to the centre.
On the way, due to the negligence of the driver, there was an accident and one
person was killed. The State argued that, as the accident happened in the execution
of a sovereign function of the State, it could not be held liable. The Court negatived
the contention saying that the medical relief work undertaken by the State through
the primary health centre could not be regarded as a ‘sovereign function in the
traditional sense’.

Access to Justice is an integral part of social justice, for ‘enjoyment of traditional

as well as new social rights presuppose mechanism for their effective protection,
says Krishna Iyer, J. in State of Haryana v. Darshana Dev/93- The Plaintiff a widow
' and her daughter filed a suit for compensation for the killing of their sole bread­
winner by the defendant State Transport Bus. The learned Judge was distressed to
learn that the Haryana Government ‘ instead of acting on social justice and
t

generously settling the claim, fights like a cantankerous litigant even by avoiding
adjudication through the device of asking for court fee from the Pathetic plaintiffs.
Dismissing the petition of the State he chastised the State to remember that “wiping
every tear from every eye”94 had judicial relevance, for law must keep its promise
to justice and upheld the High Court order which rightly extended the pauper

92. A.I.R. 1976 M.P. 164, Similarly in Tamil Nadu v. M.N. Shamsudeen (1981)1, M.L.J. 17, it was
held that transporting a patient to the hospital in a fire service ambulance would not make it a
sovereign function.
93. A.I.R. 1979 S.C. 855 at 856
94. Id. at 857
provisions to accident claims.

In Orissa v. Madhurilata Ray,95 a Government servant, with his father and his

family, was travelling in a Government jeep driven by the Government driver.

Both the Government servant and his father succumbed to their injuries in an

accident involving the jeep because of the negligence of the driver. The Government

was held vicariously liable to pay compensation to the widow of the deceased father

of the Government servant, for her husband’s death. The fact that he was an

unauthorised occupant of the jeep was regarded as immaterial,

In Amrutadevi v. State of Orissa,96 the Regional Transport Officer took a

Government jeep and went to check the vehicle in the morning, accompanied by

the Junior Vehicle Inspector and enforcement Officer. While returning in the

evening, the jeep was being driven not by the authorised official driver of the jeep

but by the enforcement officer having a driving licence. Because of his negligence

the jeep met with an accident and some of the persons died on the spot. As the

accident did not take place in the course of checking of the vehicles, it could not

be said to be in the discharge of sovereign functions of the State and the State was

held liable to pay compensation.

Amruta Devi was approved by the Supreme Court in a significant judgement

delivered by it recently97. The judgement and orders of the Bombay High Court

holding the State Government, the driver of the jeep in question and another of its

employee, who actually drove the vehicle at the relevant time were jointly and

severally liable to pay a sum of over two lakhs as compensation to the heirs of the

95. A.I.R. 1981 Ori. 104

96. A.I.R. 1982 Ori. 12
97.State of Maharashtra v. Kanchanmal Vijaysing Shirke (1995) 5 SCO 659.
 199

deceased, who was the victim of an accident in which the State Government jeep

was involved was confirmed by the Supreme Court. The Bench said that the crucial

test was whether the initial act of the employee was expressly authorised and lawful.

The employer that is the State Government shall nevertheless be responsible for

the manner in which the employee executed the authority. This is necessary to

ensure that so that the injuries caused to the third parties who are not directly

involved or concerned with the nature of the authority vested by the master to his

servant, are not deprived from getting compensation.

In this case a clerk in the office of a department of State Government was driving

the vehicle under the authority of the driver who was in charge of the said vehicle

and as the driver had consumed more liquor on that day he permitted the clerk to

drive the vehicle that night. Thus, the facts of the case disclosed and demonstrated

“that an authorised act was being done in an unauthorised manner”. The Court

also observed “once it is established that the negligent act of the driver and

respondent (who actually drove the vehicle) was 'in the course of employment’

the appellant State shall be liable for the same”. 97a

5.1.7. Accidents by Military Servants:-

Although the maintenance of the army is a sovereign function but this does not

necessarily mean that the State will be immune from liability for any tortious act

committed by the defence personnel. Here also a distinction between acts which

could be done by the State in the exercise of sovereign powers and acts which

could have been equally done by private individuals has been drawn. An analysis

of the cases would agaimreveal that there is no hard and fast rule to distinguish

between sovereign and non-sovereign functions.

97a. Ibid at 670

 200

During the pre-constitution judicial interpretation on this point the Court in

Cockraft98 held that maintenance of a military road is a sovereign function and so

the State is not liable for the negligence of its servant in stacking of gravel on the

road which resulted in a carriage accident causing injuries to the plaintiff. This

rule was followed after the constitution came into force even with regard to

maintenance of a civil road.99

In Union of India v. Harbans Singh,100 the driver of a military truck while engaged

in the military duty of supplying meals to the army personnel on duty fatally

knocked down the plaintiffs father due to rash and negligent driving. The Pubjab

High Court held that there was no cause of action against the Union of India as the

act of the driver was done while he was engaged in military duty. Similarly in

Baxi Amrik Singh v. Union of India 101, it was held that the checking of the Army

personnel on duty was a function intimately connected with the army discipline

and a sovereign function.

A discordant note was, however, struck on this line of cases in Thangarajan v.

Union ofIndia.102 In that case a defence personnel was driving his lorry to transport

Carbon dioxide gas from' the factory to the naval ship I.N.S. Jamuna. Because of

rash driving, a boy of ten was injured. His claim for damages was rejected by the

Court on the ground that since the lorry was being driven by a military personnel

and was carrying gas for the naval ship, it had to be regarded as engaged in the

performance of a sovereign function. The Court, however, recognised the unfairness

of the rule and recommended that an ex-gratia payment of Rs. 10,000/- be made to

98. AI.R. 1915 Mad. 993;

99. AI.R. Supra note 79
100. AI.R. 1959 Puri 39
101. (1973) 75 P.L.R.1
102. AI.R. 1975 Mad. 32
 201

the boy by the State for the grievous injuries suffered by him. Kailasam, J.

(Maharajan, J. with him) remarked caustically that it would be “cruel to tell the

injured boy who has suffered grievous injuries and was in hospital for over six

months incurring considerable expenditure and been permanently incapacitated,

that he is not entitled to any relief as he had the privilege of being knocked down

by a lorry which was driven in exercise of sovereign functions of the State”103. It

is submitted that the situation depicted by Thangarajan case appears to be ludicrous.

One could very well ask what was sovereign about driving a truck and carrying

gas? This task could be performed as well by a private operator as by a military

truck.

In several cases, the State has been held liable to pay compensation for injuries

caused by the negligent driving of military vehicles engaged in doing various odd

jobs. Thus, the supply of milk in a military truck,104 carrying coal to the Army

Head Quarters,105 transporting hockey and basketball teams of Air Force personnel

by an Air Force vehicle106, transporting a Record Sound Ranging Machine and other

equipments by a military truck from the military workshop to the school of

Artillery,107 imparting training in motor driving to new military training recruits,

t

108 transporting crushed barley for the defence department, 109 driving of a water

tanker belonging to Border Security Force110 were non-sovereign functions and

State was liable for the accidents caused by the negligence of the drivers. It is

submitted that the basic activity in all these cases is transportation, which is an
<

103. Ibid at 36
104. Union of India v. Bhagwati Prasad, A.I.R. 1957, M.P. 159
105. Union of India v. Smt. Jasso, A.I.R. 1962 Punj. 315
106. Satyawathi v. Union of India, A.I.R. 1967 Delhi. 98
107. Union of India v. Sugrabai, A.I.R. 1969 Bom. 13
108. Iqbal Kaur v. Chief of Army Staff, A.I.R. 1978 All. 417
109. Pushpa v. The State of Jammu and Kashmir; A.I.R. 1977 (J&K) 277.
110. Union of India v. Abdul Rehamen, A.I.R. 1972(J&K), 22
 202

ordinary activity and it hardly matters so far as the person injured is concerned as

to what was being carried in the truck. There is really no rational basis to distinguish

between ‘sovereign’ and ‘non-sovereign’ functions in the modern administrative

age when the range of State activities has expanded so much as to pervade all

spheres of life.

5.1.8. Post-Office - A Non-sovereign Function:-

In India Post, was first made available to the public in 1774 and it was not until

1837 that a monopoly was established in favour of the official post. Thus, the

postal Department is a “commercial-cum-public utility department of the

Government of India and it by no means constitutes a sovereign function of the

State.”111 Transmission of letters and other activities through post is one of the

most important modes of communication of information and views. A person

sending a message through post desires that it should reach the. person for whom

the communication is intended within a reasonably quick time and that it should

reach the addressee without interruption. The Indian Post Office Act, 1898 deals

with the cases where it is alleged that the post office has not performed its expected

obligations properly. A pretty large bulk of the business of the post office consists
t

of the carriage of unregistered letters. Section 6 of the Post Office Act, inter alia,

renders the Government and the post office employees immune from liability as to

loss, delay, misdelivery, damage etc., of postal articles in course of transmission

by post, with certain qualifications. At the time when the post office Bill was

under discussion in the Central legislation, certain officials of the Government

had suggested that the Post Office officials should carry a greater responsibility

than the Bill had provided. The suggestion was not accepted by the Government

as in its view “ any extremely careful sorting of letters is a practical

111. Govinda Bhat, J. in Union of India v. Jeevaraj Alva: A.I.R. 1970 Mys 13 at 19
 203

impossibility”.112

The apparently sweeping exemption from liability embodied in Section 6 of the

Post Office Act has to be read in the light of the judicial decisions thereon. In the
pre-constitution judicial pronouncements it has been held that the word ‘loss’ in
Section 6 of the Act does not mean pecuniary or other loss to the owner of the
goods sent by post, who has been wrongfully deprived of the possession or
enjoyment thereof. But it means loss to the Government of the articles sent by
post113. The Court also observed that a loss occurs where the department
involuntarily or through inadvertence loses possession of the goods. If the
Government does not prove that the article has been lost, it cannot escape liability
to pay compensation for the loss caused by non-delivery. Similarly, it has been
held that where by reason of a label having been torn, it is not possible to deliver
a VPP article, the post office is not exonerated by section 6 of the Act.114

After the Constitution came into force the Supreme Court has also held in
Commissioner of Income Tax, Delhi v. M/s. P.M. Rathod and Company,115 that the
post office was an agent(of seller for the recovery of the price against delivery of
goods. Kapur, J. speaking for the Court said: “In the case of delivery of goods by
VPP or the seller does so on his own accord because the goods handled over to the
Post Office by the seller can only be delivered to the buyer against payment and
this payment is received for and on behalf of the seller. The buyer does not pay till
the goods are received by him and once he has paid the price it is the post office
that is responsible for payment of the money received by it to the seller. The

112. Gazettee of India March, 19, 1898, PartVl, Page 99 quoted by P.M.Baxi, Legal aspected
of the Post office Act, News time Oct. 9,1995.
113. Union of India v. Narayan, A.I.R. 1933 Cai. 371 at 373
114. Secretary of State for India v. Radhy Lai A.I.R. 1924 AII.692
115. A.I.R. 1959 S.C.1394
 204

buyer has no longer any responsibility to it. Therefore, a payment to the Post

office is payment to the seller and at the place where the goods are delivered and

payment is made.....This shows that whatever be the jural relationship between

the seller and the post office in respect of carriage of goods sent by the seller

under the VPP system it becomes an agent of the seller for the recovery of the

price and if it fails to recover the price and delivers the goods it is liable for any

damage to the seller”.116

But the Supreme Court in India v. Mohammad Nazim117 has ruled that post office is

not and agent of the sender of the postal article for reaching it to the addressee. It

is really a branch of public service providing postal services subject to the

provisions of the post office Act and the rules made thereunder. In that case when

an Indian resident sent value payable article to an addressee in Pakistan and the

Pakistan Government though realised the value of the article, yet did not hand

over the money to the Government of India as it suspended the VP service and did

not make over the money realised from the addressee, it cannot be said that the

Union of India had received the money but failed to pay. If the Pakistan Government

were a sub-agent of the Government of India, payment to the Pakistan Government

would have been as good as payment to the Government of India. But this is not

the case under the arrangement entered into between the two sovereign powers,

none of them could be said to be employed by or acting under the. control of the

other.

In Debananda v. State of Orissa,118 it was held that the liability for insured articles

is statutory, rather than contractual. Under section 33 of the Indian Post Office

116. ibid at 1399

117. A.I.R. 1980 S.C. 431
118. A.I.R. 1965 Ori.118
 205

Act, subject to the prescribed conditions, the liability of the Government is to pay

to the sender of the article in case of loss compensation not exceeding the amount

for which the postal article was insured. The position is the same if the article is

damaged, not amounting to loss.

Thus, the judicial interpretation of State liability for any damage caused to an

individual by wrongful act or illegal omission on the part of the postal department

is unsatisfactory. The Post Office Act is not adequate to answer various claims of

the users of the post office. At present, the bar against recovery in the case of

registered articles arises by reason of Section 6 of the Post Office Act, which

imposes a general prohibition against recovery. Section 4 of the Act practically

conferred monopoly on the post office in respect of the carriage of letters etc.,

which was inserted at a time when private carriers and private couriers in India

were perhaps not very reliable and it was considered that in the interest of the

public themselves, such a monopoly was desirable. As has been rightly observed

by P.M. Baxi119 recent developments, and particularly the growth of business and

realities in the field, do seem to indicate that there is considerable justification for

modifying this monopoly. Therefore, it would be proper to insert a provision

making the Central Government liable to pay compensation for any loss caused to

an individual due to negligence on the part of the postal department.

5.1.9. Running of Railways : A Non-sovereign Function:-

The Indian Railways Act, 1890 was enacted at a time when the railways in India

were mostly managed by Private companies. The Government of India were

primarily played the role of coordinating and regulating authority in various matters,

such as Railway movement of traffic, apportionment of claims, liability among the

Railways, providing reasonable facilities to passengers and goods traffic, etc., This

119. P.M.Baxi, Legal aspects of the post office Act, Newstime.Oct.9.1995.

 206

role was accordingly reflected in the Act. When the country attained independence
and the growth of the passenger traffic and goods transport increased enormously
over decades, the Railways have become a part of the Government of India120

Articles 298 and 19(6) of the Constitution of India clearly indicate that the State
can carry on business and can even exclude citizens completely or partially from
carrying on business. Running of Railways by the Central Government has been
regarded as a ‘non-sovereign’ act, in Union of India v. Ladulal Jain,m, where the
plaintiff filed a suit claiming recovery of a huge sum on account of non-delivery
of the goods by the Railways. One of the contentions raised was that an undertaking
run by the Government, even if it amounts to carrying on of a business when run
by private individual would not be carrying on of a business of the Government.
Raghubar Dayal, J. While rejecting the argument observed that the fact that the
Government runs the Railway for providing quick and cheap transport for people
and goods and for strategic reasons will not convert what amount to the carrying
on of a business into an activity of State as a sovereign body. He also said that it
is the nature of the activity Which defines its character. Running of Railways is
such an activity which comes within the expression of business. The fact as to
who runs it and with what motive, cannot affect it.

In Imaman v. India 122 the appellant’s husband, a bonafide passenger having

purchased a ticket for his destination, was passing over the Railway track as there
was no overbridge provided to reach the platform to catch the train. The goods
train, passing the Station at a high speed which was in excess of the permissible
limit fatally knocked down him. Neither was any warning given by the Station

120. P.S.Narayan, Railways Laws in India, edn. (1981), p.1

121. Al.R. 1963 S.C. 1681
122. Al.R. 1976 All.85
 207

staff nor any whistle given by the train driver. In these circumstances, the Court

held the Railways liable for damages on account of negligence. In India V.S.S.

Works,123 the Supreme Court while awarding damages stated that when

consignments are booked at Railways risk, the liability of the Railway is that of a

bailee. The onus of proving that the Railway employees took the necessary amount

of care and that they were not guilty of negligence rests on the Railway authorities.

The question of tortious liability of the Railways was again raised in M/S. Krishna
Goods Carriers Private Ltd., v. India,124 In that case the gate at a level crossing
was open. There was no danger signal to warn the public of the danger of any
approaching train. A truck driver crossed the Railway line and collided against a

goods train running at full speed. As a result of the collision, the truck was damaged.

The truck owner sued the Railway for damages on account of negligence which
was decreed. The Delhi High Court held that the law was well settled. Where a

Railway line crosses a high way or public path, reasonable precautions must be
taken to reduce danger to the public to a minimum the nature of precautions

depending on the circumstances. When the train is approaching it is the practice

of Railway authorities to keep the gates at a level crossing closed. Any neglect of

this customary precautions is evidence of negligence which may render the authority

liable to any person who is hit or hurt. When the gate is open, the public is

reasonably entitled to assume that no train is approaching and that the line may
be crossed with safety. The Court said that the open gates amount to an invitation
that the plaintiff could safely pass and if he were injured he was entitled to recover
damages. The court also pointed that the Railways were in breach of a statutory
duty, and rejected the defence of contributory negligence raised by the Railways.

123. A.I.R. 1976 S.C. 1414

124. A.l.R. 1980 del. 920: also in India v. Hindustan Lever, A.I.R. 1975 P and H. 259 Leaving the
gates open at the time of the passing of train is characterised as statutory negligence on the part of
the Railway employees and the Government of India was held liable on the principle of vicarious
liability.
 208

But the Allahabad High Court in Prag Ice and Oil Mills firm, Aligarh v. India 125

held a contrary view. In that case the driver of the plaintiffs tractor while
attempting to cross the Railway line at an unmanned level crossing, got his tractor

stuck up between the rails and despite the efforts of the driver, the tractor could

not be cleared from the Railway track before the arrival of train. As a result the

tractor was thrown off by the impact of the Railway engine, causing damage to the

tractor, although the driver of the train stopped the train as quickly as he could in
the circumstances. No effort was made by the tractor driver to give some signal to
the train., The level crossing was away from any town or village. The road was
not a busy one. The Railway administration had provided chains to be hung on
each side and had also put sign boards on each side, warning the public of the

danger of passing trains. On a suit filed by the owner of the damaged truck, the

High Court held that the Railway administration was not liable, as the damage
caused to the tractor was of the plaintiffs own making. The Court observed that

while the land beneath the Railway crossing is Railway property and the public
have a right to cross the Railway line at the point where a level crossing is provided,
that does not necessarily imply a corresponding obligation on the Railway to close

all such level crossings by gates or other devices, when the train passes that way.

The public while crossing the Railway line must be on the look out for trains coming

from either direction. The fact that a level crossing carried a warning of the danger
of coming trains was sufficient and a member of the public who crosses a Railway

line does so at his own risk.

t

It is submitted that the difference between the approaches in the Delhi and Allahabad

High Courts appears to arise from the circumstance that while the Delhi High Court

ruling related to a manned crossing, the Allahabad ruling referred to an unmanned

crossing.

125. A.I.R.1980 All. 168

 209

5.1.10. Building of Reservoir : A Non-sovereign Function :

The welfare activities undertaken by the State are not included in the category of
sovereign functions. The traditional sovereign functions include the making of
laws, the administration of justice, the maintenance of order, the suppression of
crime, carrying on of war, the making of treaties of peace and other consequential
functions126 When a Government builds a reservoir for facilitating the supply of
water, but fails to provide an overflow channel to meet any contingency, the
Government would be liable to the adjoining lands by overflow of such reservoir
due to unprecedented flood. The Bombay High Court in State of Mysore v. Ram
Chandra127 held that the constructing of reservoir was an act of welfare State for
the betterment of the people and by no stretch of imagination can the act of the
State in constructing a reservoir for facilitating the supply of water, be considered
as an act in exercise of sovereign power.

Thus, the socio-economic and welfare activities undertaken by the State are not
considered as sovereign functions and the State is held vicariously liable for any
injury caused due to wrongful act or illegal omission on the part of the employees
of the State during the course of their employment. In this regard guidelines
suggested by a Full Bench of the High Court of Punjab and Haryana in Bakshi
Amrik Singh v. India 128 are worth noting: (a) Union of India and the states have the
same liability for being sued for torts, as was that of the East India Company, (b)
The nature and extent o*f liability is that the State is liable for damages occasioned
by its servants negligence, if negligence is such as would render an ordinary
employer liable (c) If the tortious act complained of has been committed in the
exercise of sovereign powers, the acts of its employees, not committed in the
126. Justice G.P.Singh in Indian Insurance Company Association Pool v. Radhabai, A.I.R. 1976
M.P. 164 at 168
127. A.I.R. 1972 Bom 93
128. (1973)75P.L.R. 1.
 210

exercise of its sovereign functions (e) The State will not be absolved of its liability
by the mere fact that the tortious act was committed by a public servant in the
course of his employment, (f) The area of employment referable to sovereign
powers must be strictly determined (g) There is a real and marked distinction

between Sovereign and non-sovereign functions of the Government. Functions

connected with trade, commerce and industrial undertakings are of latter category,

(h) Where the employment, in the course of which tortious act is committed, is

such that even a private individual can engage in it, it cannot be considered as

sovereign, (i) The mere fact that the vehicle involved in the accident is owned by

the Government and driven by its servant does not render the State immune from
liability for its rash driving. It must be further proved that the driver, was acting in

the discharge of the sovereign function of the State., (j) Though maintenance of
the army is a sovereign function it does not follow that the State is immune from
all liability for tortious acts of the army personnel, (k) The nature of the act, the
transaction in the course of which it is committed, the nature of the employment of
the person committing it and the occasion for it, all have to be considered in
determining whether the claim of immunity should or should not be allowed. It is
t

submitted that these guidelines though helpful, do not get rid off the archaic
conundrum of the sovereign functions of the State.

SECTION-II. TORTIOUS LIABILITY OF THE STATE : RECENT TRENDS

From the discussion of the cases in the preceeding section and others, it seems

clear that in respect of tortious liability of the State, the judicial approach is to
narrow down the defence of sovereign immunity. In fact, the Supreme Court in
Kasturilal suggested legislative cure and the result was the introduction of a Bill
entitled “Government (Liability in Tort) Bill 1965,” drafted on the lines
 211

recommended by the Law Commission of India in its first Report, which lapsed. It

was reintroduced in 1967 and certain modifications in the Bill were suggested in

1969 by the Joint Committee of the Parliament and again allowed it to lapse. No

further attempt is made by the Parliament to codify the law related to State’s

liability. However,, the judiciary itself, in recent years took up the responsibility

of remedying the law by widening the area of State’s liability. The creative judicial

process of adjusting the old law to new situations is discussed through some recent

cases in this section.

5.2.1 COMPENSATION THROUGH WRITS

Generally, it is not the practice of the Courts to award compensation in writ petitions
under Articles 32 and 226 of the Constitution. To claim compensation one has to
take recourse to the suit proceedings. This traditional view is indicated in Bhatnagar
and Company Limited v. Union of India,129 in which the petitioner filed five writ
petitions claiming relief against what he regards as illegal seizure of the goods. A

five member Bench of the Supreme Court speaking through Gajendragadkar, J.

while holding that the petition was not maintainable observed thus: “If the

petitioner’s grievance was that the view taken by the appropriate authorities was
erroneous, that was not a matter which could be legitimately agitated before the

Supreme Court in a petition under Article 32 of the Constitution. It might perhaps

be, that the petitioner might have a remedy by suit for damages but that was a

matter with which the Supreme Court was not concerned ...... Essentially the
petitioners grievance was against the conclusions of fact reached.by the relevant

authorities. If the said conclusion could not be challenged before the Supreme
Court in the Present writ petition, the petitioner would obviously not be entitled to
relief’.130 Similarly in Jiwan Mai Kochar v. India,131 the Supreme Court rejected

129. A.I.R. 1957 S.C.478

130. Ibid at 484-485
131. A.I.R. 1983 S.C1107
 212

the petitioner’s claim for compensation under Article 32 against the Union of India,
the State of Madhya Pradesh and other officials involved in the loss, humiliation
and indignity suffered by him, as they were responsible for certain remarks passed
by the Court in his absence. The Court merely contended itself by passing the
order that those remarks “shall not be taken into consideration in any proceeding”
against the petitioner. Thus, the Court merely followed the traditional approach in
denying the relief of compensation by saying that the relief prayed for cannot be
granted in the proceeding under Article 32 of the Constitution.

However, the Supreme Court in recent years has departed from this traditional rule
in cases of gross violation of individual rights by the administration and held the
State liable for compensation even in those cases where the contention of sovereign
function would negate the State’s liability. Thus, in Rudal Shah v. State of Bihar]n
the Supreme Court asserted .that it has power to award compensation in Writ
proceedings. In that case the petitioner was illegally detained in Mujaffarpur Jail
for over fourteen years after his acquittal by the Sessions Court in June, 1968. He
filed a Habeas Corpus Petition in the Supreme Court for his release in October,
1982 from illegal detention. He obtained that relief and he further contended that
he was entitled to be compensated for his illegal detention and that the Supreme
Court ought to pass an appropriate order for compensation in the Habeas Corpus
Petition itself.

The Court speaking through chandrachud, CJ observed: “ The important question

for our consideration is whether in the exercise of its jurisdiction under Article 32,
this Court can pass an order for the payment of money if such an order is in the
nature of compensation consequential upon the deprivation of a fundamental right”.
132. A.I.R. 1983 S.C. 1086
 213

The Court further said “that the petitioner could have been relegated to the ordinary
remedy of a suit if his claim to compensation was actually controversial, in the
sense that a Civil Court may or may not have upheld his claim. But we have no
doubt that if the petitioner files a suit to recover damages for his illegal detention,
a decree for damages would have to be passed in that suit, though it is not possible
to predict in the absence of evidence, the precise amount which would be decreed
in his favour.133

The Court ordered compensation of rupees 35,000/- for the injustice and injury
done to Rudal Shah and his family. Rejecting the Bihar Government’s plea that
the petitioner was not released even after acquittal because he had been declared
insane, Chandrachud, CJ opined that, insanity may well have been consequence
rather than the cause of detention. Under these circumstances, the refusal to pass
an order of compensation to the victim will be doing ‘mere lip service to his
fundamental right to liberty, which the State Government has so grossly violated’.
These rights “will be denuded of its significant content if the power of the Court
t

were limited to passing orders of release from illegal detention”, and further, that
“ one of the telling ways in which the violation of the right can reasonably be
prevented and due compliance with the mandate of Article 21 secured,-is-to mulct
its violators in the monetary comnensation.”_The learned Chief Justice went on to
observe: “Administrative sclerosis leading to flagrant infringements of fundamental
rights cannot be corrected by any other method open to the judiciary to adopt. The
right to compensation is some palliative for the unlawful acts of instrumentalities
which act in the name of the public interest and which present for their protection
the powers of the State as a shield. If civilisation is not to perish in this country as
it has perished in some others..... it is necessary to educate ourselves into accepting
that respect for the rights of individuals is the true bastion of democracy. Therefore,
133. ibid at 1088
 214

the State must repair the damages done, by its officers to the petitioner’s rights”.134

The remarkable feature of this decision is the attempt made by Chandrachud, CJ to.
formulate the basis for the theory of liability that right to personal liability can
give rise to a civil liability, and extreme concern to protect and preserve the
fundamental right of a citizen. Prof. Lakshminath opines that Rudal Shah decision
injects a new^element into the enforcement of the principles of public law and
strengthens the principles of rule of law, a private law duty to compensate for the
ultra vires act 135. Thus, the only object of writ of Habeas Corpus to release a
person from illegal detention has been modified by the Supreme Court of India by
laying down that where it is shown that the petitioner was arrested and imprisoned
with mischievous and malicious intent, the Court shall have the power to
compensate the petitioner by awarding suitable monetary compensation. It is
submitted that Rudal Shah case is an example of judicial activism and
statesmanship. It is a pace-setter in the direction of protection of personal liability
by the judiciary. Similarly in Bkim Singh v. Jammu and Kashmir,136 the petitioner,
t

an M.L.A. of the State of Jammu and Kashmir Assembly was wrongfully detained
by the police while he was going to attend the Assembly session. He was not
produced before the Magistrate within the requisite period. As a consequence of
this the member was deprived of his constitutional right to attend the Assembly
session. There was also violation of fundamental right to personal liberty under
Article 21 of the Constitution. By the time the petition was decided by the Supreme
Court, Bhim Singh had been released, but by way of consequential relief exemplary
damages amounting to Rupees 50,000/- were awarded to him.

5.2. 2. COMPENSATION FOR DEATH DUE TO POLICE ATROCITIES:-

Another recent trend of a petition under article 32 of the constitution is Sebastian
134. Ibid at 1089
135. A.Lakshminath, Damages in the Law of Torts: Some Reflections, A.I.R. 1993 J.P. 53
136. A.I.R. 1986 S.C, 494
 215

M.Hongray v. Union ofIndia, m where the Supreme Court by way of Writ of Habeas
Corpus required the Government of India to produce C.Daniel, the Head Master
and C.Paul, Assistant Pastor attached to the Baptist Church, who were taken away
by the Army officers for questioning and since then they were found missing. The
Government eventually failed to produce them. The Supreme Court came to the
conclusion that those persons must have met an unnatural death while in Army
custody and directed the Union of India to pay exemplary costs of rupees one lakh
each to the wives of those persons.

It is surprising to note that having once asserted the power to grant compensation,
the Court should feel shy of granting same relief to the widows of the deceased on
the ground of mental torture which is described as an inalienable component of
Article 21. Instead of following this direct path the Court adopted a circuitous
route of granting compensation in disguise. It is submitted that the mental torture
to the widows was the predominant element in imposing exemplary cost which is
t

analogous to the nervous shock cases in tort.

Peoples’ Union for Democratic Rights v. State of Bihar, 138 is yet another case
where the Supreme Court through its writ jurisdiction awarded compensation to
the death victims of police firing. The petitioners, a voluntary social organisation
committed to upholding of fundamental rights of citizens filed a public interest
litigation. It alleged that six to seven hundred poor peasants and landless people
mostly belonging to weaker sections had gathered for holding a meeting within the
compound of Gandhi Library in Gaya District. Without any previous warning by
the Police or any provocation on the part of the assembled people, the
Superintendent of Police surrounded the gathering and opened fire, as a result of
137. A.I.R. 1984 S.C. 1026
138. A.I.R. 1987 S.C. 355
 216

which several persons were injured and at least twenty one persons including
children died. Ranganath Mishra, J. held that without prejudice to any just claim
for compensation that may be advanced by the relations of the victims who have
died or by the injured persons themselves, for every case of death, compensation
of rupees 25,000/- and for every injured person compensation of Rs. 5,000/- shall
be paid. Similarly the Supreme Court in PUDR Through its Secretary v. Police
Commissioner, Delhi Police Head Quarters 139 held that the State was liable to pay
compensation of a sum of Rs. 75,000/- to the family of a labourer who was taken
to the police station for doing some work and on demand for wages was severely
beaten who ultimately succumbed to the injuries.

SAHELI, A Women’s Resources Centre v. Commissioner of Police, Delhi140 is

another bold decision of the Supreme Court on the State’s liability to pay
compensation in case of death due to police atrocities. A public interest petition
was filed by the petitioners, the Women’s and Civil Rights organisation. The
Supreme Court held that the State was as much liable for tort in respect of a tortious
act committed by its servants within the scope of its employment and functioning
as much as any other employer and directed the Delhi administration to pay
compensation to the mother of child of nine years who died due to beating and
assault by a Delhi Police Officer, of a sum of rupees 75,000/-. The Court also left
to the Delhi Administration to take appropriate steps for the recovery of the amount
paid as compensation from the officers found guilty.

The Supreme Court in Nilabati Behera v. State of Orissa,141 has laid down the
principle on which the compensation is to be awarded by the Court under Articles
32 and 226 of the Constitution to the victim of State action. In the instant case the
139. A.I.R. 1990 S.C. 513
140. A.I.R. 1990 S.C. 1026
141. 1993 (2) S.C.C. 746
 217

petitioner’s son aged about 22 years was arrested by the police on the charge of
theft. Next day his dead body was found on the nearby railway track with multiple
injuries. The petitioner sent a letter to the Supreme Court alleging custodial death
of her son and claimed compensation on the ground of violation of fundamental
right to life guaranteed under Article 21 of the Constitution. The Supreme Court
treating the letter as a Writ petition under Article 32 came to the conclusion that
the petitioner’s son died in the pclice custody and awarded Rs. 1,50,000/- as
compensation against the State. The Court, however, clarified that this will not
affect the petitioner’s right to claim compensation in other proceedings in which
case the amount awarded by the Court would be adjusted. Verma, J. explained the
extent of Supreme Court’s power under Article 32 to award monetary relief to the
victims of State wrongs thus; “ A claim in public law for compensation” for
contravention of human rights and fundamental freedoms, the protection of which
is guaranteed in the constitution, is an acknowledged remedy for enforcement and
protection of such rights, and such a claim based on strict liability made by resorting
to a constitutional remedy for enforcement of a fundamental right is “distinct from,
and in addition to the remedy in private law for damages for the tort” resulting
from the contravention, of the fundamental right. The defences of sovereign
immunity being inapplicable, and alien to the concept of guarantee of fundamental
rights, there can be no question of such a defence being available in the
Constitutional remedy. It is the principle which justifies award of monetary
compensation for contravention of fundamental rights guaranteed by the
Constitution, when that is the only practicable mode of redress available for the
contravention made by the State or its servants in the purported exercise of their
powers, and enforcement of the fundamental right is claimed by resorting to the
remedy in public law under the Constitution by recourse to Article 32 and 226 of
the Constitution.”142
142. Ibid at 762-763
 218

It is submitted that the above view finds support from the decisions of the Supreme

Court in the Bhagalpur Blinding cases143 wherein it was said that the Court is not

helpless to grant itself in a case of violation of the right to life and personal liberty,

and it should be prepared “ to forge new tools and devise new remedies” for the

purpose of vindicating these precious fundamental rights. It was also indicated

that the procedure suitable in the facts of the case must be adopted for conducting

the enquiry, needed to ascertain the necessary facts, for granting the relief, as the

available mode of redress, for enforcement of the guaranteed fundamental rights.

In Smt. Kewal Pati v. State ofU.P. 144 the Court directed the State to deposit a sum

of rupees one lakh with the Registrar of the Supreme Court towards compensation

to be paid to the petitioner and her children for the death of their bread winner

caused while he was in jail. The Supreme Court held that even though the victim

was a convict, the jail authorities were not absolved of their responsibility to ensure

the life and safety of inmates in the jail. A prisoner does not cease to have his

constitutional rights except to the extent he has been deprived of them in accordance

with law. Since the killing took place when he was in jail, it resulted in the

deprivation of his life contrary to law. The Court was of the opinion that in the

circumstances his wife and children were entitled to compensation.

Relying upon Rudal Shah, Bhim Singh and Sebastin cases the Andhra Pradesh

High Court in challa Ramakrishna Reddy v. State of Andhra Pradesh145 has held

that Kasturilal’s case has no application when there is deprivation of life or personal

liberty in contravention of Article 21 of the Constitution. In this case due to gross

143. Khatri (II) v. State of Bihar, (1981) 1 S.C.C. 627; Khatri (IV) v. State of Bihar, (1981 j 2 S.C.C.
493; Shalini Singh suggests imposition of absolute liability on the Government for the tortious acts
of the police; Shalini Singh, Tortious liability of the Government for Police Excesses, Vol.22(1)
1995, I.B.R. 13
144. (1995) S.CJ 540
145. A.I.R. 1989 A.P.235
 219

negligence of police in guarding the jail, certain miscreants entered the jail with
the help of a ladder at night and hurled bombs on inmates resulting in the death of
one of them and injury to another. The Court while awarding damages to the
dependents of the deceased observed that even if the State is acting in exercise of
sovereign power it would be liable if Article 21 is violated, as Article 300(1) does
not constitute an exception to Article 21 of the Constitution.

5.2.3. Compensation for deprivation of means of livelihood:-

The question whether deprivation of means of livelihood without any justification

is a wrong which can be redressed was decided by the Supreme Court in affirmative
in the recent decision in Sohan Singh v. Union of India.146 The petitioner was
I

employed in the Air Force as an airman. On the expiry of the period of 9 years, he
applied in terms of the relevant provisions of the regulation for extension of his
service by another six years. Unfortunately for him, he was involved in a Criminal
case in relation to theft of certain MIG Batteries. The authorities concerned, after
holding an enquiry, decided to hand over the case to the Municipal Court instead
of trying him by a Court Martial. As Sohan Singh happened to be an accused in
the criminal case the authorities concerned discharged him on the basis that he
was likely to be convicted of the charge of theft. As against the order of discharge,
he moved the Delhi High Court under Article 226, and the case was dismissed and
preferred the appeal to the Supreme Court, &fter the dismissal of the Writ petition
by the Delhi High Court. The Criminal case against him was finally disposed off
and he was acquitted of the charge of theft.

Under these circumstances the Court through A.N. Sen, J. observed thus “we have
no hesitation in coming to the conclusion that if the order of acquittal had been

146. A.I.R. 1984 S.C.1036

 220

pronounced before the date of the order of discharge of the appellant, the authority

concerned would have allowed the application for extension of the term of service

of the appellant. If extension had been allowed as in the normal course he would

have been entitled to continue in service for a further period of 6 years. The apellant

in view of the provisions of Defence of India Rules had infact served for little over

a year before he was actually discharged.”147 The Court further observed that justice
*

of the case required that the appellant should be compensated by a lump sum amount

in lieu of the benefit to which he would have been otherwise entitled, had he

continued in service for the extended period of 6 years. It is significant to note

t
that the compensation granted by the Court was not an ex-gratia payment but Sen,

J. invoked the notion of justice in order to justify the grant of compensation.

In Rajanna v. India148 the Supreme Court held that an employee of the State while

he was in service of the State met with an accident, he was entitled to compensation.

In the instant case Rajanna was a Security Assistant in the special Protection Group

(SPG) attached to the Cabinet Secretariat and was amongst the security personnel

attached to the Prime Minister’s Office. Along with other members of the SPG

personnel Rajanna was travelling by the official SPG vehicle from the staff quarters

to the South Block for duty. On the way, the vehicle was involved in a road accident,

as a result of which Rajanna sustained injuries resulting in his permanent partial

disablement. As per the circular provided for the ex-gratia payment of SPG

personnel who suffered permanent partial disablement as a result of injuries received

while performing actual VIP duty, the amount payable was rupees 15,000.

Consequently, Rajanna claimed ex-gratia payment which was rejected both by the

Government and Central Administrative Tribunal.

147. Ibid
148. A.I.R.1995S.C. 1967
 Z21

It was contended that the phrase “ actual VIP duty” mean the actual period when

the person provides security to the VIP, on commencement of duty hours. The

Supreme Court rejected the contention and held that there was a notional extension

of the actual duty which would include the journey undertaken by Raj anna in the

official SPG vehicle, between the staff quarters and south block. It is significant

to note that the Court equated the circular with the principle under the Workmen’s

Compensation Act for determining whether an accident arises out of or in the course
f
of employment of a workman, since both had the same object of payment of

compensation to the injured workman.

5.2.4. Compensation for Handcuffrng:-

The Supreme Court added yet another projectile in its armoury to be used against

the violation of human rig'hts in Prem Shankar v. Delhi Administration'*9. Krishna

Iyer J. observed “handcuffing is primafacie inhuman and, therefore, unreasonable,

is overharsh and at the first flush, arbitrary. Absent fair procedure and objective

monitoring, to inflict ' irons ‘ is to resort to zoological strategies repugnant to

Article, 21. The Court held that handcuffing should be resorted to only when there

is 'Clear and present danger of escape’ breaking out of police control and for this

there must be clear material not merely an assumption. In special circumstances

application of iron is not ruled out. But even where in extreme cases, hand cuffing

is to be put on the prisoner, the escorting authority must record simultaneously the

reasons for doing so otherwise under Article 21, the procedure would be unfair,

and bad in law. The Supreme Court went a step forward when it declared that in

appropriate cases the Court can award compensation to other victims of handcuffing

against the State in State of Maharashtra v. Ravikant S. Patil l5°. In that case an

under trial prisoner was handcuffed and paraded on streets. He was suspected to
149. A.I.R.1980 S.C. 1535
150. 1991 (2) S.C.C. 373
 222

be involved in a murder case. A local news paper carried a news item that he

would be taken in a procession from Police Station through the main streets of the

city for the purpose of investigation. The Bombay High Court held that the

handcuffing and parading of the petitioner was unwarranted and violative of Article

21 and directed the inspector of police who was responsible for this, to pay rupees
f

10,000/- by way of compensation. It also directed that this fact of violation of

Article 21 should also be entered in his service record. In appeal the Supreme

Court upheld the judgement of the High Court directing payment of compensation

but held that the police officer was not personally liable as he acted as an official.

Here, the Supreme Court favoured the concept of vicarious liability of the State

over the personal liability of the State employees.

5.2.5. Compensation for damage caused by Hazardous Industries

India is a developing country, its national resources are to be developed in the

field of science, technology, industry and agriculture. The need for industrial

development has led to the establishment of a number of plants and factories by

the domestic companies and undertakings as well as transnational corporations.

Many of these industries are engaged in hazardous or inherently dangerous activities

which pose potential threat to life, health and safety of persons working in the

factory, or residing in the surrounding areas. Though, working of such factories

and plants is regulated by a number of laws151 there is no special legislation

providing for compensation and damages to outsiders who may suffer on account

of industrial accident. The persons, affected were required to approach Civil Courts,

till recently, to claim compensation or damages. In civil Courts, the determination

of amount of compensation or damages as well as the liability of the enterprise

has been bound by the shakles of the conservative principles laid therein made it
151. The Factories Act, Industrial Development and Regulations Act and Workmen's Compensation
Act etc., Provide for compenstion to Workmen.
 223

difficult to obtain adequate damages from the enterprise and that too only after the

negligence of the enterprise was proved 152.

However, the Bhopal Gas Leak disaster and its aftermath has emphasized the need
for laying down certain norms and conditions that the State must follow before
granting permission or licence for the running of industries dealing with materials
which are of dangerous potentialities. On the night of December, 2/3, 1984,
occurred the most tragic industrial disaster recorded in human history in the city
of Bhopal in the State of Madhya Pradesh. On that fateful night there was a massive
escape of about forty tons of deadly Methyl Iso Cynate Gas from MIC Storage
tank at Bhopal Plant of the Union Carbide India Limited (UCIL), producing a big
cloud spreading over an area of forty square kilometers resulting in large scale
deaths and untold disaster. Though no one is yet certain as to how many actually
died, estimate attribute to it about 4,000. Some suffered injuries the effect of which
was carcinogenic and ontogenic, some suffered injuries serious and permanent and
some mild and temporary. Livestock was killed, damaged and infected. Businesses
were interrupted, environment was polluted and the ecology affected, flora and
fauna disturbed.

On behalf of the victims a large number of cases were filed in Bhopal against
UCIL and also in United States of America against the Union Carbide Corporation,
a multinational Company registered in United States of America. There was an
effort for an out of Court settlement between Government of India and the UCC,
but that failed. The Government of India then proclaimed an ordinance which was
replaced by “The Bhopal Gas Leak Disaster (Processing of claims) Act, 1985.
Section 3 of the Act confers an exclusive right on the central Government to
represent, and act in place of every person who has made a claim or is entitled to

152. (1868)3 H.L. 330

 224

make a claim arising out of, or connected with, the Bhopal gas leak disaster.
Accordingly the Union of India filed a suit on behalf of all the claimants, against
the UCC. in the United States District Court of New York. Thus, all the suits
earlier filed in USA by some American lawyers were superseded and consolidated.
The UCC pleaded for the dismissal of the suit, inter alia, on the ground of' forum
non convenience ‘ which was accepted by Judge Keenon. Then the Union of India
filed a suit in the District Court of Bhopal. The District and Sessions Judge, M.W.
Deo ordered the UCC to pay interim relief of Rs. 350 Crore to the gas victims. On
a civil revision petition filed by the UCC in the Madhya Pradesh High Court against
the order of the Bhopal District Court, S.K. Seth J, reduced the quantum of 'interim
compensation’ payable from 350 to 250 crores of rupees.

After a long drawn litigation for over four years there was a settlement between
the Union of India and the UCC and in terms thereof the Supreme Court in UCC v.
Union of India153 passed orders on February, 14 and 15, 1989 directing the UCC to
pay a sum of 470 Million US Dollars or its equivalent nearly a sum of rupees 750
crores as compensation. Adjudicating the constitutional validity of the Bhopal
Gas Leak Disaster (Processing of Claims) Act, 1985. K.N. Singh, J. observed thus
“In the context of our national dimensions of human rights, right to life, liberty,
pollution free air and water is guaranteed by the Constitution under Articles, 21,
48-A and 51(g); it is the duty of the State to take effective steps to protect the
guaranteed constitutional rights. These rights must be integrated and illumined by
the evolving international dimensions and standards, having regard to our
sovereignty, as highlighted by clauses 9 and 13 of United Nations code of Conduct
of transnational Corporations. The evolving standards of international obligations
need to be respected, maintaining dignity and sovereignty of our people, the State
must take effective steps to safeguard the Constitutional rights of citizens by
153. A.I.R. 1990 S.C. 273
 225

enacting laws. The laws so made may provide for conditions for granting licence
to transanational Corporations, prescribing norms and Standards for running
industries to life, liberty as well as safety for environment and ecology to enable
the people to lead a healthy and clean life”154

Industrial development in India and the hazards involved therein according to

K.N.Singh, J. “pose a mandatory need to constitute a statutory 'Industrial Disaster
Fund’, contributions to which may be made by the Government, the industries,
whether they are transnational corporations or domestic undertakings, public or
private”. 155 Exhorting the Government and the Parliament to take immediate steps
for enacting laws the learned judge rightly observed “The magnitude to the Gas
Leak disaster in which hundreds lost their lives and thousands were maimed, not
to speak of the damage of live stock flora and fauna, business and property, is an
eye opener, The nation must learn a lesson from this traumatic experience and
evolve safe guards at least for the future. The time is ripe to take a fresh look at the
out dated century old legislation which is out of tune with modern Concepts” 156

(i) Doctrine of Absolute Liability

A more stringent rule of absolute liability than the rule in Rylands was laid down
by the Supreme Court recently in M.C.Mehta v. Union of India, 157 which arose
form the following facts. Within a year of Bhopal gas leak disaster, there occurred
leakage of Oleum gas on December, 4 and 5, 1985 from one of the units of Shri
Ram Foods and Fertiliser Industries in the capital city of Delhi, belonging to Delhi
Cloth Mills Ltd., As a consequence of which, it was alleged that one advocate
practising in the Tis Hazari Court had died and several others were affected. A
154. Ibid at 1551
155. Id
156. Id at 1562
157. A.I.R. 1987 S.C. 1086
 226

claim for compensation was made through a writ petition in the Supreme Court
I

under Article 32.

A Bench consisting of seven judges of the Supreme Court took a bold decision

holding that it was not bound to follow the 19th century rule of English law, and it

could evolve a rule suitable to the social and economic conditions prevailing in

India at the present day. P.N.Bhagwati, CJ observed “where an enterprise is engaged

in a hazardous or inherently dangerous activity and harm results to any one on

account of an accident in the operation of such hazardous or inherently dangerous

activity resulting for example, in the escape of toxic gas, the enterprise is strictly

and absolutely liable to compensate all those who are affected by-the accident and

such liability is not subject to any of the exceptions which operate vis-a-vis the

tortious principle of strict liability under the rule in Rylands” 158

The Court earlier pointed out that this duty is “absolute and non delegable” and

the enterprise cannot escape liability by showing that it had taken all reasonable
care and there was no negligence on its part. The bases of the new rule as indicated
by the Supreme Court are two: (1) If an enterprise is permitted to carry on an

hazardous or inherently dangerous activity for its profit, the law must presume
that such permission is conditional on the enterprise absorbing the cost of any

accident including indemnification of all those who suffer harm in the accident
arising on account of such hazardous or inherently dangerous activity as an
appropriate item of its over-heads; and (2) The enterprise alone has the resource to
discover and guard against hazards or dangers and to provide warning against

potential hazards.

The rule in Mehta is different in many respects when compared with the rule in
158. Ibid at 1099
 227

Rylands. The rule in Rylands requires non-natural use of land by the defendant
and escape from his land of the thing which causes damage. Whereas the Mehta
rule is not dependant on these conditions; It only requires that the defendant is
engaged in hazardous or inherently dangerous activity and that harm results to any
one on account of an accident in the operation of such hazardous or inherently
dangerous activity.

The rule in Rylands will not cover cases of harm to persons within the premises for
the rule requires escape of the thing, which causes harm, from the premises. The
Mehta rule makes no such distinction between persons within the premises where
the enterprise is carried on and person outside the premises for escape of the thing
causing harm from the premises is not necessary condition for the application of
the rule.

Further, the rule in Rylands though strict in the sense that it is not dependent on
any negligence on the part of the defendant and in this respect similar to the Mehta
rule, is not absolute as it is subject to many exceptions, but the Mehta rule is not
only strict but absolute and is subjected to no exception. Another important point
of distinction between the two rules is that the damages awardable where the
Rylands rule applies will be ordinary or compensatory; but in cases where the rule
applicable is that laid down in Mehta the Court can allow exemplary damages.
Dealing with State liability for such disaster B.M.Gandhi rightly observes?fThe

liability of the State Government is also no less because it regularised residential

premises erected around the factory unauthorisedly by the people, it exercised no
precaution in granting licence to the company which had made its intentions clear
that it wanted to produce MIC based pesticides and did not formulate any rules or
regulations or carry out proper inspection for the purpose. The State Department
 228

of Environmental Board and the Bhopal Municipal Corporation also could not do

much, but to allow the things go on in their own way” 159

(ii) The Public Liability Insurance Act, 1991:-

Necessitated by growing risks from accident, resulting from hazardous industries

and processes often resulting in death of human beings and destruction of properties,

the Public Liability Insurance Act, 1991 has been passed by the parliament. The

Act aims at providing immediate relief to the victims of industrial accidents

occurring while handling hazardous substance. Under the Act any owner “handling
any hazardous substance is liable to pay compensation of rupees 25,000/- in case

of death and upto the same amount in case of permanent, total or partial disability.

The Act also provides for medical reimbursement upto a maximum of rupees 12,500/

- in each case. The liability to pay compensation is on the owner, meaning thereby
a person who has control over handling any hazardous substance and it covers all

those who control, the manufacture, processing treatment, storing, transportation,

conversion, sale etc., of such substance. The liability to pay compensation is
absolute in all such cases, fault or no fault of the owner. The Act has been amended

in 1992, which now requires the owners handling hazardous substance to take
insurance policies against accident. It also specifi^aTr-ueiimit of thirty days and
makes it possible for the District Collectors to provide interim relief.

It is significant to note that the Act is the first of its nature in any part of the world

and meets the long felt demand for some mechanism to give immediate relief to

the victims of accidents, or incidents, involving hazardous industries or operations.

5.2.6. Compensation for Damage Due to Arson and Looting:-

Damage to the property of individuals due to arson and footing at the hands of

159. B.M.Gandhi, Law of Torts , Eastern Book Co., Lucknow, 1987), P.963
 229

hooligans and anti social elements is on the increase in recent years. When the

property of the individual is subjected to destruction and he is not in a position to

trace the wrong doer, the question that arises is whether he is entitled to claim

redressal against the State for the loss suffered by him. A survey of the provisions

of the Constitution along with some of the recent judicial pronouncements would

reveal the position of the individual vis-a-vis the State. In a welfare State

maintenance of law and order and protection of life liberty and property of the

people are the primary duties of the State. No Government worth the name can

abdicate these duties and put the life and liberty the health and home of the citizens

in jeopardy. The founding fathers of the Indian Constitution incorporated several

previsions to safe guard the interests of the people. Article 38 enjoins on the State

to strive to promote the welfare of the people by securing and protecting as

effectively as it may a social order in which Justice, social, economic and political

shall inform all the institutions of the national life. Article 300-A guarantees that

“no person shall be deprived of his property save by the authority of law”. The

ambit and scope of 'right to life’ conferred by Article 21 is very wide and far-

reaching which includes right to livelihood because no person can live without the

means of living. If the right to livelihood is not treated as a part of the Constitutional

right to life, says R.P.Seth, J,160 the easiest way of depriving a person of his right

to life would be to deprive him of his means of livelihood to the point of abrogation.

Thus, the provisions of the Constitution are elaborate enough to safeguard the

property and life of individuals against invasion and destruction.

The Madras High Court in R. Gandhi v. Union of India161 granted compensation to

all those whose properties were looted and subjected to destruction in a mob

violence. The assassination of Smt. Indira Gandhi, former prime-minister of India

160. M/s. Inderpuri General Stores v. Union of India; AI.R.1992, J&K.11

161. A.I.R. 1989 Mad.205
 230

on October 31,1984 by her own bodyguards, belonging to Sikh Community resulted

in the large scale destruction of life and property of scores of innocent people in

general and members of the Sikh Community in particular. The State administration

could save the lives of 39 families of Sikh Community in the city of Coimbatore

but not their properties. The unruly hooligans took the situation under their control,

ransacked the buildings, looted the valuables and set fire to remains of Sikh

communities properties. In the process of destruction the properties of some

members of the other communities in the vicinity shared the dismal fate.

S.A.khader, J. observed that the constitutional rights of the Sikhs and few members

of the other communities have been flagrantly infringed by the inaction of the law

enforcing authorities. These unfortunate victims of arson and violence are, therefore,

entitled to seek reasonable compensation from the Government of Tamil Nadu. He

also observed that the fundamental rights are not mere brutum fulmen, they are
throbbing aspirations and realities of the civilised life.

Similarly, the High Court of Jammu and Kashmir in M/S. Inderpuri General

Stores v. Union of India162 held that the claim of the petitioners all belonging to

Sikh Community who have suffered destruction of their property in the unfortunate

communal riots which took place in the holy city of Jammu on January, 13, 1989

for a compensation to the extent of loss actually suffered by them was acceptable.

R.P. Seth, J. observed that the Constitutional set up in this country envisages that

all communities have a right to life and practice their religion according to their

conscience. All citizens of the country have a right to carry on any profession or

trade within the limits of law and the State is under an obligation to protect their

life and property ensuring them all the benefits of fundamental rights enshrined

under part III of the Constitution. As and when life and property is taken by any
162. A.I.R. 1992 J&K. 11
 231

individual or organisation, a duty is cast upon the State representing the will of the

people to compensate the victim by granting adequate compensation. He further

stated that the monarchial rule has to be distinguished from democratic set up and

the State cannot shirk in its responsibility to protect the life, liberty and property
of citizens. On their failure to protect the life, liberty and property of the citizens,
State is under a constitutional obligation to compensate the victim adequately.

In Punjab Istri Sabha v. S.S. Barnala, Chief Minister of Punjab,163 when some

persons were killed in terrorist violence, the Government granted an ex-gratia to

the tune of rupees 20,000/- each as against rupees 50,000 recommended by the

official committee constituted by the Government. In a writ of Mandamus, the

Court directed the Government to pay compensatipn as directed by the official

committee for each death and also to provide employment to an educated male
member of the family irrespective of the fact that the victim was in Government

employment, or not. Similarly, in Supreme Court Legal Aid Committee v. State of

Bihar164 one Mahesh Mahto was injured when the passengers of a railway train
where looting had been done by a crowd had beaten up several persons including

the victim.'Due to negligence and failure to provide proper medical aid Mahesh

Mahto died in Police custody. Ranganath Mishra, CJ while awarding a compensation

of rupees 20,000/- against the State of Bihar to the legal representatives of the

deceased, observed thus “It is the obligation of the police particularly after taking

a person into custody to ensure appropriate protection of the person taken into

custody including medical care if such person needs it ]Ml”,

But the High Court of Andhra Pradesh in Sri Lakshmi Agencies v. Government of

Andhra Pradeshl6S held that the State is under no obligation to pay compensation
163. 1990 A.L.J. 1064
164. (1991) 3 S.C.C. 482
164a. Ibid at 483
165. 1994(1) A.L.T. 341
 232

to the victims of mob violence in the absence of State negligence. In the instant

case in the city of Vijayawada a local MLA, who has been fasting unto-death seeking

police protection was murdered by his rival faction. It was followed by sudden

eruption of violence which resulted in arson and looting by private individuals

although curfew was imposed immediately. It was argued on behalf of the petitioners

that by reason of looting and arson, they have suffered heavy damages not only of

their properties but also in their business and this has happened because of the

negligence of the State and its officers and as such their fundamental rights under

Articles 14, 19 (1) (e), 21, and the constitutional guarantee under Article 300-A

have been violated. The question involved in these batch of cases was, is the public

remedy available for the tortious acts of the private individuals and whether the

State is liable to pay compensation for such tortious acts of private individuals.
I

Subhashan Reddy J. held that as the servants of the State has no role in the violence

indulged by the private miscreants, it is not liable to pay damages to the petitioners.

He observed thus.... “for any action committed by private individuals it cannot be

said that there is a failure of the State machinery to protect the life and property of

other individuals and the State cannot be made liable to pay any damages on that

account. It is only when the officers of the State does any act positively or failed

to act as contemplated under law leading to culpable inaction, that the State is

liable to pay the damages. There should be direct nexus for the damage suffered on

account of State action and if that is absent, Article 21 of the Constitution is totally

inapplicable. Thus, the learned single judge, distinguished this case with

R.Gandhi, Punjab Instri Sabha, M/s.Inderpuri and the Supreme Court Legal Aid

Committee cases. It is submitted that the liberal approach of the judiciary in

awarding compensation to the victims of arson and looting received a set back

with the judgement of the Andhra Pradesh High Court in this case and it needs to
 233

be overruled by the apex Court keeping in view of the welfare ideal of the State.

It is to be noted that no civilised system can permit an executive to play with the
people of its country and claim that it is entitled to act in any manner as it is
sovereign. The concept, of public interest has changed with structural change in
the society. Today, no legal or political system can place the State above law as it
is unjust and unfair for a citizen to be deprived of his property illegally by negligent
act of officers of the State without any remedy. The modern social thinking of
progressive societies and judicial approach is to do away with archaic State
protection and place the State or the Government on par with any other juristic
legal entity. Any water tight compartmentalisation of the functions of the State as
sovereign and nonsovereign or Governmental and non-governmental is not sound
and is contrary to modern jurisprudential thinking. Therefore, a law made to
carryout, the primary or inalienable functions of the State cannot be misconstrued
as a power for negligent exercise of which the State can claim immunity. No
I

constitutional system can, either on State necessity or public policy, condone

negligent functioning of the State or its officers. This rule was succinctly stated
by Lord Blackburn thus; “No action will lie for doing that which the legislature
was authorised, if it be done without negligence, although it does occasion damage
to any one but an action does lie for doing that which the legislature has authorised
if it be done negligently.166

5.2.7. Compensation Against Government Servants:-

Adding a new dimension to its writ jurisdiction, the Supreme Court, for the first
time has applied the concept of public servant’s liability in imposing hefty damages
on two former Ministers of the Union Government of India.

166. 1878 3 A.C. 430 at 435

 234

In the first case167 the Supreme Court while disposing of a public interest writ
petition from ‘Common Cause’ directed the former Union Minister for Petroleum
and Natural Gas, Captain Satish Sharma, a public servant at the relevant time, to
pay ‘exemplary damages’ 168 of Rs. 50 lakhs for his ‘illegal’, ‘arbitrary’, ‘malafide’
and ‘unconstitutional action’ in alloting 15 petrol pumps and gas agencies to those
related to politicians, various officials in the Ministry and certain members of the
Oil Selection Boards. The Supreme Court Bench consisting of Kuldip Singh and
Faizan Uddin JJ. observed that since the petrol pumps dealt with by Sharma, were
public property of the Government, which is of the people and by the people, the
State exchequer had to be compensated.

In the second case169, the Supreme Court Bench consisting of Kuldip Singh and
B.L. Hansaria JJ.'has slapped exemplary damages of Rs. 60 lakhs against former
Housing and Urban Development Minister, Mrs. Sheila Koul for ‘arbitray’,
‘unconstitutional’ and ‘malafide’ action in alloting" 52 shops and kiosks in New
Delhi to her kith and kin in 1995.

Both the former Ministers were directed by the Supreme Court to remit the damages
awarded against them to the State exchequer within nine months, failing which, it
should be recovered as arrears of‘land revenue’. It is submitted that the two orders
passed in quick succession by the Supreme Court, are unprecedented, for this is
the first time in the Country any Minister, serving or otherwise, being made
personally liable for damages. It is also pertinent to note that the Supreme Court
has slapped damages on Sharma and koul not so much for infringement-of
167. The Hindu, November, 5, 1996 p.1
168. Damages awarded in excess of the material loss suffered by the plaintiff with a view to prevent
similiar behaviour in future by the defendant are known as 'exemplary', punitive and vindictive
damages. They are not compensatory in nature, they are rather by way of punishment to the
defendant
169. The Hindu, November 9, 1996 p.1
 235

fundamental rights but on the principle of trusteeship, which implies that a public

servant holds office as a trustee of the people and any misuse of his official power

would therefore constitute a breanh of trust.

SECTION - III. TORTIOUS LIABILITY OF THE STATE AND THE

DEFENCES

The suggestion that the extent nf vicarious liability of the State for the torts

committed by its servants during the course of employment should be same as that

of a private individual of full age and capacity, is subject to certain exceptions,

because the State does not stand on equal footing with an individual. The State,

therefore, enjoys additional defences apart from those which are open to individuals.

Section - III deals with the defences of‘act of State’ and 'judicial immunity'.

5.3.1 Defence of Act of State:-

(i) Meaning:-

The English Law relating to Act of State was followed in British India and has

been followed after India became Republic. According to Turner, CJ170 acts of
l

State “ are acts done in the exercise of sovereign powers, but which do not profess

to be justified by the municipal law ...... of which municipal Courts are not

authorised to take cognizance”. As held by the Supreme Court in Madhava Rao

Scindia171 an 'act of State’ is not available against a citizen”, it is “ a sovereign act

which is neither grounded on law nor does it pretend to be so”, it is “ a catastrophic

change constituting a new departure; “in civil commotion, or even in war or peace,

the State cannot act catastrophically outside the ordinary law and there is a legal

remedy for its wrongful acts against its own subjects or even a friendly alien within

170. The Secretary of State for India v. Hari Bhanji; I.L.R. 5 Mad. (1882), 273 at 279
171. Madhava Rao Scindia v. Union of ndia; A.I.R. 1971 S.C.530 at 552
 236

the State”. Hidayatullah J172 expressed 'act of State’ as “ an exercise of power

against an alien and neither intended nor purported to be legally founded. A defence

of this type does not seek to justify the action with reference to the law but questions

the very jurisdiction of the Courts to pronounce upon the legality or justice of the

action”. Common instances of' acts of State ‘ are the declaration of war, making

of peace, recognition of foreign Governments, and acts of cession or acquisition of

territory.

(ii) Application of the Doctrine in British Ittdia:-

During the British rule in India, the defence of ‘act of State’ was on many occasions

invoked in order to oust the jurisdiction of the Court so that it may not be a subject

of judicial cognizance, consequently warding off an enquiry in the dealings of the

East India Company or the British.Government with the native rulers or their

subjects. To understand the scope of “act of State” as applicable in India prior to

the commencement of the Constitution, the earliest of the decisions available is

The Nabob of Carnatic v. East India Companym, in which the East India Company

successfully raised the defence that they were acting as sovereigns and that the

acts complained off Were acts of State. This was a suit for an account brought by

the Nabob of Arcot against the East India Company. In course of the hearing it

turned out that the subject matter of the suit was a matter of political treaty between

the Nabob and the East India Company having acted through out the transaction in

their political capacity and having been dealt with by the Nabob as if they were

independent sovereigns. On this ground the suit was dismissed.

Another leading decision quite often referred to in almost all subsequent cases is

the Secretary of State in Council of India v. Kamatc'Ke~Bove Saheba.m It was an

appeal from a decree of the eq: to establish

172. State of Saurashtra v. Memon Haji Ismail, A.I.R. 1959 S.C. 1383 at 1389.
173. (1793) 4 Bro.C.C.100 cited in C.P.IIbert, The Government of India, 198 (1915)
174. (1859) 7 M.I.A476;
 237

a claim as private property to certain property of which the Government had taken
possession. The Raja of Tanjore, Sevajee, a native independent sovereign, but in
virtue of treaties, under the protection of the East India Company, died in October,
1855, without leaving a male issue. The East India Company, then, in the exercise
of their sovereign power and in trust for the British Government seized the Raj of
Tanjore and the whole of the property of the deceased Raja as an escheat on the
ground that the dignity of Raj was extinct for want of a male heir and that the
property of late Raja lapsed to the British Government. The respondent Kamatche
Boye Saheba, as the widow of Raja sevajee claimed to inherit and possess as his
heir and legal representative, his estate. The substantial question at issue was
whether the taking possession of the deceased Raja’s property by the East India
Company, in virtue of treaties authorising the annexation of Raj of Tanjore was
not such an act of State and sovereign authority as cannot be questioned or entered
into by a Municipal Court, within territories of the company. Lord Kingsdown
while upholding the defence of act of State observed thus; “The transactions of
independent States between each other are governed by other laws than those which
Municipal Courts administer; such Courts have neither means of deciding what is
right nor the power of enforcing any decision which they may make “175. He also
observed: “of the propriety or justice of that act neither the Court below nor the
Judicial committee have the means of forming or the right of expressing if they
had formed, any opinion. It may have been just or unjust, politic or impolitic,
beneficial or injurious, taken as a whole, to those whose interests are affected.
These are considerations into which their Lordships cannot enter. It is sufficient
to say that, even if a wrong has been done, it is a wrong for which no Municipal
Court of justice can afford a remedy176.

175. Ibid at 529

176. Id at 531
 238

Waging a war and winning territory by the East India Company against the Raja of

Coorg was held to be an ‘act of State’ in Raja of Coorg v. East India Company1"

In Secretary of State v. Bai Rajbai 178 it was held that, when a territory was ceded

by a native ruler to the British Government, the landholders therein could not claim

continuation of their old rights as under the old ruler, unless there was an express

or implied agreement by the British Government to that effect. Lord Atkinson

dealing with the situation observed thus: “The relation in which they stood to their

native sovereigns before this cession and the legal rights they enjoyed under them

are, save in one respect, entirely irrelevant matters. They could not carry on under

the new regime the legal rights if any, which they might have enjoyed under the

old. The only legal enforceable rights they could have as against their new sovereign

were those, and only those, which that new sovereign, by agreement expressed or

implied or by legislation, choose to confer upon them l79.

In Nayak Vajesinghji v. Secretary of State 180 Scindia of Gwalior ceded certain

districts in exchange of other districts to the British Government and both parties

agreed to maintain intact, rights of private subjects. The plaintiff filed suits for a

declaration that they were talukdars. The Privy Council held that a mere general

statement that the existing rights would be upheld could never prevail against exact

determination. Lord Dunedin summarised the rationale of ‘act of State’ thus: “when

a territory is acquired by a sovereign State for the first time, that is an act of State.
»

It matters not how the acquisition has been brought about. It may be by conquest,

it may be by occupation of territory hitherto unoccupied by a recongnised ruler. In

all cases the result is the same. Any inhabitant of the territory can make good in

177. (186) 29 Beav, 300 cited in C.P.Ilbert supra note 22

178. A.I.R. 1915 P.C. 59
179. Ibid at 62
180. A.I.R. 1924 P.C. 216
 239

the Municipal Courts established by the new sovereign only such rights as that
sovereign has through his officers, recognised. Such rights as he had, under the
rule of predecessors, avail him nothing. Nay more, even if in a treaty of cession it
is stipulated that certain inhabitant could enjoy certain rights, that does not give a
title to those inhabitants to enforce these stipulations in the Municipal Courts.
The rights to enforce remains only with the high contracting parties"181

The above passage of Lord Dunedin has been often quoted in subsequent cases
where the defence of the ‘act of State’ was pleaded. In Sardar Sarjerao v.
Government of Bombay'*2, it was held that the determination of boundary lines is
not only ‘act of State’ but also ‘fact of State’ from which the jurisdiction of the
Municipal Courts is excluded. Thus, during the British rule, the defence of ‘act of
State’ was not confined to actions of sovereign towards foreign territories or aliens
but it could be pleaded by sovereign against its own subjects.

(Hi) Defence of Act of State under the Constitution

The integration of Indian states, their merger with the Dominion of India and
annexation of Goa, Daman and Diu by conquest, gaye rise to many cases in the
post-constitution period relating to the rights of the people residing in these
territories as against the Government of India. The Supreme Court in dealing with
these cases followed the principles laid down by the Privy Council in the cases
decided by it during the British rule.

The first important case in the post-constitution era on ‘act of State’ is Virendra
Singh v. Uttar Pradesh'*2. In this case the Supreme Court held that even on the
181. Id at 217
182. A.I.R. 1943 Bom. 427 at 430. It was held that a fact of State consists of matters and questions,
the determination of which is solely in the hands of Government.
183. A.I.R. 1954 S.C.447
 240

basis that the merger of the Indian States in the Indian Union and the treaties by

which that was accomplished, were ‘ acts of State’, still by reason of the manner in

which the constitution of India was brought into being, the acquired rights of the

inhabitants of the Indian States, and their rulers could not, after the constitution be

annulled or abrogated by arbitrary executive action on the part of the Union or

State Governments. The facts of this case in brief were that the rulers of Sarila

and Charkori states granted certain villages to the petitioners. As their rights

were sought to be nullified by an order of the Government of U.P. in 1958 they

filed a petition praying that the order of Government revoking the grants in their

favour, be declared void. It so happened that after the date of the grant in favour

of petitioners, various states including Sarila and Charkori, formed United States

of Vindhya Pradesh, which later on ceded to the Government of Indian Dominion,

later on to be absorbed into Uttar Pradesh State.

The question, whether the Government, which emerged as a result of the

Constitution, was competent to avoid or repudiate the titles obtained by the

petitioners under the previous ruler by an ‘act of State’ was answered in the negative

by Vivian Bose J. for apparently four reasons184 (a) when the constitution was

brought into existence there was no question of conquest or cession so as to attract

the rules of Public international law, relating to the effects of rights arising out of

changes in sovereignty brought about by conquest, cession, treaty etc., (b) The

subject of the former Indian rulers became, when the constitution emerged, Indian

citizens and as against its own subjects or citizens there was no question of ‘act of

State’, (c) Even if the previous rulers had vested in them autocratic power to revoke

grant by them, the Government of the Union and the States which were functioning

under a constitution, which contained guarantee of protection of property rights

184. Virendra Singh’s analysis, in the State of Gujarat v. Vora Fiddali, A.I.R. .1964, S.C. 1043,
1053-54
 241

against arbitrary executive action, could not claim to exercise those arbitrary powers
which they might have inherited from the previous rulers, and (d) The petitioners
had at the commencement of the constitution a possessory title to the property
granted to them and had also a right on that date to continue in possession unless
and until their title which was voidable, was extinguished by repudiation by the
Government established after the constitution.

In Thaker v. State of Saurashtra™5 the appellant continued to serve the Wadhwa

State till the administration of the State was made over to the Saurashtra
Government. Though the appellant was entitled to remain in service according to
Wadhwa State rules till he completed sixty years of age, by an order he was retired
by the Saurashtra State on the ground that he passed the superannuation age of
fifty five years. Bhagwati J. held that when the Wadhwa State merged with the
Saurashtra State, which later on acceded to the Dominion of India, all the existing
laws continued, until repealed following that appellant’s right under Saurashtra
law was still good and could have been enforced in the municipal Courts, until
either repealed or repudiated as an ‘act of State’. These rights were carried over
after the constitution and as the appellant then became an Indian citizen, the
repudiation as an ‘act of State’ was not any longer possible. The only way to
defeat his right was by legislation under the constitution and as such in fact no
such legislation was there, appellant’s right remained intact under the new
sovereign.

Thus, the Supreme Court in subsequent cases proceeded to accept the constitutional
doctrine enunciated by the Privy Council that any inhabitant of the territory can
make good in the Municipal Courts established by the new sovereign, only such
rights as that sovereign has through his officers recognised and that such rights as
185. A.I.R. 1954 S.C. 680
 242

he had under the rule of the predecessor, avail him nothing. In Dalmia Dadri
Cement co., Ltd., v. Commissioner, Income Taxnu the appellants Company,
incorporated in the Jind State that the income tax rate leviable upon the Company
would never exceed four percent. In 1948, eight of the Rulers of the State in East
Punjab including Jind entered into a covenant for the merger of their territories
into one State called PEPSU, under which the liability of the State was guaranteed.
The State of PEPSU promulgated an ordinance extending the Patiala Income Tax
Act to it. The appellant having been assessed to income tax under the Patiala Act
for 1948-49 contended that it was liable to pay tax only in terms of its agreement
with the ruler of Jind and not under the Patiala Act or the Indian Income Tax Act.
Rejecting this contention Venkatarama Aiyar J. held that the entering into the
covenant for the formation of PEPSU, was an ‘act of State’, and new sovereign did
not recognise any of the rights available against the old sovereigns but on the other
hand repudiated them by making the ordinance. Hence, the appellant could not
enforce his rights under the agreement secured by the covenant against the PEPSU
or its successor Government.187

In Saurashtra v. Memon Haji Ismail188 the administration of the princely State of

Junagadh was taken over by the Government of India. The administrator resumed
some property which had been gifted by the former Nawab of Junagadh . A suit
was brought against the Government claiming the price of the property.
Hidayatullah J, dismissed the suit on the ground that the act of resumption of
property by the administrator was an ‘Act of State’ even though he had allowed
186. A.I.R. 1958 S.C. 816
187. Ibid at 824-25. This judgement was delivered by a bench of five judges. Vivian Bose.J. While
agreeing with the decision on facts obs.erved that “this dicision must not be used as a precedent in
a case in which rights to immovable property are concerned” and he went on to say “it may be pity
for us to disregard the trend of modern international thought and continue to follow a line of decisions
based on the view of an older imperialisam, when we are not bound by them and are free to mould
our own laws in the light of modern thought.and conceptions” at 827.
188. A.l.R. 1959 S.C. 1383
 243

the existing law to remain in operation. As it was not done under the colour of

legal title, it was not justiciable in the Municipal Courts. The learned Judge

observed: “The essence of an ‘act of State’ is the exercise of sovereign power and

that is done.arbitrarily on the principles either outside or paramount to the Municipal

t

Law; the fact that the sovereign allows the inhabitants to retain their old laws and

customs does not make the sovereign subject to them and all rights under those

laws are held at the pleasure of the sovereign. It is only when the sovereign can be

said to have purported to act within the laws that the 'Act of State’ ceases to afford

a plea in defence”.189

Another important case where the decisions of both the Privy Council as well as

the earlier ones of the Supreme Court were reviewed and the propositions laid

down in them were examined by the Supreme Court is Pramod Chandra v. State of

Orissa 19°. In this case the petitioner was the younger brother of the Raja of Talchar

which was an independent sovereign State before its merger in the State of Orissa.

According to long established customs the junior members of the family of the

Ruler were entitled to suitable maintenance in the form of either land or money

and as such the petitioner was paid regularly a sum of money till April, 1949. In

January, 1948 Talchor was merged in the Dominion of India. The petitioner

received a letter in June, 1949 conveying that as he had extensive landed property,

the Government of India, disallows his monthly cash allowance. It was argued

that when the State of Talchar merged in the Dominion of India, in accordance

with merger Agreement, his grant was fully recognised. A constitution Bench of

five judges speaking through Sinha. CJ observed “whatever right the Ex-ruler of

Talchar may have conferred upon the petitioners, those rights could be enforced

against the respondents only in so far as they have been recognised or acknowledged

189. Ibid 1390

190. A.I.R. 1962 S.C. 1288
 244

by the new sovereign, the Government of India 191i and on fact the irresistible
conclusion was that the new sovereign by legislative order of 1948 had recognised
the customary grant in favour of the petitioner and others. So he held that the
respondents have no justification for stopping the grants. Sinha, CJ laid down ten
propositions in his judgement. They are:-
(a) ‘Act of State’ is the taking over the sovereign ppwers by a State in respect of
territory which was not till then a part of its territory, either by conquest, treaty or
cession or otherwise and may be said to have taken place on a particular date, if
there is proclamation or other public declaration of such taking over,
b) But the taking over of full sovereign powers may be spread over a number of
years, as a result of a historical process.
(c) Sovereign power, including the right to legislate for that territory and to
administer it, may be acquired without the territory itself merging in the new State.
(d) Where the territory has not become a part of the State, the necessary authority
to legislate in respect of that terriroty may be obtained by a legislation of the nature
of foreign jurisdiction Act.
(e) As an act of State derives its authority not from a municipal law but form ultra-
legal or super-legal means, Municipal Courts have no power to examine the
propriety or legality of an act which comes within the ambit of ‘act of State’.
(f) Whether the act of State has reference to public rights or private rights, the
result is the same, namely, that is beyond the jurisdiction of Municipal Courts to
investigate the rights and wrongs of the transaction and to pronounce upon them
and that, therefore, such a Court cannot enforce its decisions, if any,. It may be
that the presumption is that the pre-existing laws of the newly acquired territory
continue, and that according to ordinary principles of International Law, private
property of the citizen is respected by the new sovereign, but Municipal Courts
have no jurisdiction to enforce such international obligations.
191. Ibid at 1300
 245

(g) Similarly, by virtue of the treaty by which the new territory has been acquired,
it may have been stipulated that ;he precession rights of old inhabitants shall be
respected but such stipulations cannot be enforced by individual citizens, because
they are no parties to those stipulations.
(h) The Municipal Courts recognised by the new sovereign have the power and the
jurisdiction to investigate and ascertain only such rights as the new sovereign has
choosen to recognise or acknowledge by legislation, agreement or otherwise.
(i) Such an agreement or recognition may be either express or may be implied
from circumstances and evidence appearing from the mode of dealing with those
rights by the new sovereign. Hence the Municipal Courts have the jurisdiction to
find out whether the new sovereign has or has not recognised or acknowledged the
right in question either expressly or by implication, as aforesaid.
(j) In any controversy as to the existence of the right claimed against the new
sovereign, the burden of proof lies on the claimant to establish that the new
sovereign had recognised or ackncwledged the right in question.192

In Umaid Mills Ltd., v. Union of India192 the appellant Mills were given certain
concessions from payment of taxes and duties by the ruler of Jodhpur under an
agreement in 1941. Subsequently the ruler acceded to the Dominion of India by
means of an instrument of accession. Under the Finance Act, 1944 the appellant
became liable to pay more than four lakhs of rupees, which they paid under protest.
It was argued that by virtue of Article 295fil'b)194 of the constitution no law can be
made altering those rights, liabilities and obligations. Rejecting the argument of

192. Id. at 1299-1300

193. AI.R. 1963 S.C. 953
194. Article 295(b) declares “all rights, liabilities and obligations of the Government of any Indian
State corresponding to a State specified in part B of the First Schedule, whether arising out of any
contract or otherwise, shall be the rights, liabilities, and obligations of the Government of India......
subject to any agreement entered into in that behalf by the Government of India with the Government
of that State.
 246

the appellant, S.K.Das J. held that there is nothing in Article 295 to show that it

fetters for all times to come the power of the Union Legislature to make

modifications or changes in the rights, liabilities etc., which have vested in the

Government of India”. The Parliament may by law alter the terms and conditions

of a grant or contract under which the liability of the Government of India arises.

But in State of Rajasthan v. Shyam. Lai 195 Umaid Mills and D.D. Cement cases

were distinguished to hold the State liable, where merger of several sovereign
1

States by stages formed a new State and at each stage covenant keeping old laws in

force and new State taking over the assets and liabilities of component states were

provided. Wanchoo J., held that a subject can enforce his rights by a suit against

the new State when it had not repealed the old laws by its legislation and thus kept

the liabilities of the component State enforceable. It is submitted that the basic

difference between these two is that in D.D.Cement Company the old laws were

repealed and repudiated while in the Shyamlal the old laws were continued.

In Gujarat v. Vora Fiddali196 the ruler of the Sant State created certain rights in

the forests on the villages on the eve of its merger with the Union of India. The
Is

Government of Bombay which tcok over the administration of the Sant State on

behalf of the Centre repudiated those rights. The Bombay High Court held that the

order of the Ruler of the Sant being a law, it was protected by Article 372 197 of the

constitution and could not be abrogated by an executive act of the Bombay

195. AI.R. 1964 S.C. 1495
196. A.I.R. 1964 S.C. 1043
197. Article 372 of the Constitution deals with continuance in force of existing laws and their
adoptation. Clause(1) declares.......“all the law in force in the territory of India immediately before
the commencement of this Constitution shall continue in force therein until altered or repealed or
amended by a competent legislature or other competent authority.
 247

Government. On appeal, the Supreme Court198 held that the merger was an ‘act of
State’, the grantees from the previous ruler did not carry with them, on a change of
sovereignty, as subjects of the succeeding sovereign any inchoate rights as against
the new sovereign was concerned sprang into existence only on recognition, express
or implied, by the duly constituted competent authorities of the succeeding
sovereign. Since the rights in question were not recognised by the Government of
India, the grantees had no remedy. The Government may take time to consider
and merely delay in repudiating :he grants would not militate against the ‘act of
State’, unless there was clear indication that the Government had accepted the
rights either expressly or by implication. In the present case, the Court did not
find any evidence of acceptance of grants by implication.
. )

H.M.Seervai199 while analysing Fora Fiddali case, submits that the “adoption by
the majority of the Privy Council view was clearly right”. He argues that even on
principle the matter is not one of simple choice between the British and American
views. If acquisition was by conquest no question would arise or respecting the
rights of the inhabitants of the conquered territory. But it is often a matter of
difficulty to decide whether cession of territory was voluntary act or was brought
about by the inevitable alternative of conquest. He further argues that rights of an
individual are rights against the State and the community at large and if these have
been improperly conferred, it would be unreasonable to enforce them against the
subsequent ruler and his subjects.

198, A Bench of Seven Judges delivered six seperate judgements. N. Rajagopaia Ayyangar J. for
self and B.P. Sinha, CJ held that Virendra Singhs’s case was wrongly decided. In their opinion the
grant by the Ruler of the Sant State was a law continued in force by virtue of Article 372. Raghubar
Dayal J., agreed with the Judgement of Ayyangar J., except that he held that the grant was not a
law continued by Article 372. M.Hidyatullah J.C.Shah and J.R.Mudholkar JJ. in their seperate
judgements agreed with this view. K.Subba Rao J., gave a dissenting judgement holding that
Virendra Singh's case was rightly decided.
199! H.M.Seervai, Constitutional Law of India, (1993), p.2138
 248

It is submitted that the dissenting opinion of K.Subba Rao J., holds good: “Afterall,
an act of State is an arbitrary act not based on law, but on the modern version of
'might is right’. It is an act outside the law. In the primitive society when a tribe
conquested another tribe, the properties of the vanquished were at the mercy of
the conqueror. The successful army used to pillage plunder and commit acts of
arson and rape. When society progressed the doctrine of 'act of State’ was evolved
which really was a civilised version of the primitive acts of pillage and plunder of
the properties of the conquered tribe. But the further progress of civilization brought
about by custom and agreement, factual recognition of preexisting rights of the
people of the conquered State200.

(iv) Limited application of the defence of Act of State :

The principle that cession of territory by one State to another was an ‘act of State’
and that the subjects of the former State could enforce only those rights which the
new sovereign recognised, was treated as settled law. In Firm Banshidhar
Premsukhdas v. State of Rajasthan,201 the princely State of Bharatpur established a
mandi at Bharatpur. To encourage people to purchase plots therein, it granted a
reduction, to prospective buyers of plots, of 25 percent in the customs duty on all
goods imported from outside into the mandi and sold for consumption within the
State as well as exported from the mandi. The appellants purchased a plot in the
mandi in 1946. The State then merged with the Matsya Union which later merged
with the Rajasthan State which abolished all free mandis. Thereupon, the appellants
filed a suit for recovery of the excess amount of customs duty paid to the Rajasthan
Government. The Supreme Court while rejecting the claim of the appellants ruled
that accession of one State to another is an act of State and the successor State
does not automatically inherit the rights and obligations of the merged State. There
200. Supra note 193 at 1068
201. A.I.R. 1967S.C. 40
 249

is no subrogation the successor State is not subrogated ipso jure to the contracts
executed by the merged State. V.Rama Swami J, observed thus: “ A contract of the

preceeding State terminates with the change of sovereignty unless the contract is
ratified by the succeeding sovereign State. The contractual liability of a former
State is binding on the succeeding sovereign State only if it recognises that
contractual liability. The reason is that the taking over of sovereign powers by a
State in respect of the territory which was not till then its part, is an act of State
and the Municipal Courts recognised by the new sovereign have the power and the
jurisdiction to investigate and ascertain only such rights as the new sovereign has
chosen to recognise or acknowledge; and such recognition may be expressed or
may be implied from the circumstances.202

The Supreme Court in Punjab v. Ealbir Singh 203 held that the principle that when
one State is absorbed in another, whether by cession, conquest, merger or
integration, all contracts between the prior Government and its subjects
automatically terminate under the doctrine of ‘act o^State’ had no application to a
reorganisation of the State of Punjab, because such reorganization did not involve
the absorption of one State by another by accession, conquest, merger or integration.
The Court observed that it :’’would be chaotic if this principle were to be applied
to the case of reorganization of states in the same country 204. Consequently the
Supreme Court held that the impugned orders passed by the erstwhile Government
of Punjab continued to be the orders of the Governments of the concerned successor
states till they were changed, modified or repudiated by them.

It is submitted that there are good reasons to differ with the majority views of
Vora Fiddali case and its observations need judicial rethinking. On this point G.P.
202. Ibid at 43 Hegde J, took a similar view in Jiwannath v. State of M.P. AI.R. 1971 S.C.744
203. A.I.R. 1977 S.C.628
204. Ibid at 636
 250

Verma 205 opines that the “decision of Vivian Bose J., in Virendra Singh and Justice
K.Subba Rao's dissenting opinion in Vora Fiddali have got good support of the
authorities in national and international law”. The doctrine of total extinction of
rights with a change of sovereignty' is now giving place to the doctrine of acquired
rights throughout the world. Almost all the jurists o’f international law recognise
the continuity of title of immovable property of the erstwhile citizens of ceding
State after the sovereignty changec over to the new State. George Schwarzenberger
says that “Private rights acquired under the law of the ceding State automatically
affected by the cession. They must be respected by the cessionary State”206.
Therefore, it will not be unreasonable to State that the doctrine of acquired rights
at any rate in regard to immovable property has become crystallized in international
law.

The importance of the defence of ‘act of State’ has been watered down by the
Supreme Court in Madhava Rao Scindia v. Union of India 207 where it was held
that as between the State and its citizens there cannot be any act of State. In that
case, popularly known as the Privy purses case the Court observed that though the
agreements and covenants entered by .the Rulers of former Indian states might
have constituted ‘acts of State’ initially, the plea of act of State did not remain
tenable once the princes became citizens of India. The tendency throughout the
world now is to limit the application of the ‘act of State’ doctrine by converting
itself into State immunity doctrine. The British Courts echoed this change by
holding that the subject is entitled to compensation in Burmah Oil Company v.
Lord Advocate,20S, wherein the oil installations were'destroyed in Burma during
205. G.P.Verma, Supra note 46 at p. 282
206. George Schwarzenberger, A Manual of International Law, Vol.1 (4th ed.) p.81, Oppenheim,
International Law, Vol.1 (8th ed. 1955) p.517; Starke, An Introduction to International law, (5th ed.
Buutterworth and Co., Ltd., 1989) p.275
207. A.I.R. 1971 S.C. 530
208. 1965 A.C. 75
 251

the second world war, not as a part of actual hostilities but as a form of economic

warfare lest the installations shou.d help the enemy’s cause if they were captured

intact. In USA, the Foreign Assistance Act, 1964 in effect directs that the Courts

in USA are not to apply the act of State doctrine, but are on the contrary to undertake

an assessment of the validity of the foreign ‘act of State’ in the light of international

law. It is submitted that the ‘act of State’ doctrine is merely a principle of decision

and as Byran J.-209 rightly claimed “ a self imposed discretionary rule of judicial

abnegation “ under which the Court as a matter of policy declines to decide the

issue of validity of a foreign act cf State.

5.3.2. JUDICIAL IMMUNITY:-

It is said that those who give up their freedom for their safety deserve neither

freedom nor safety and this applied no less to a judge who is to administer justice

according to law. Freedom of speech without fear or favour is considered to be a

foundation of democracy and is indispensable for the proper and effective

administration of justice. This freedom has been vested in the judiciary, ’’with the

knowledge that the Courts of justice are presided over by those who from their

high character are not likely to abuse the privilege and who have the power and

ought to have the will to check any abuse of it by those who appear before them”

21°. Thus, their privilege is their defence. The English law extends immunity to a
I

judge acting as a judge. In India, the principles are no less different. Section 1 of

the Judicial Officers protection Act, 1850 provides for personal immunity to all

classes of judicial officers, according to which no Judge, Magistrate, Justice of the

Peace, Collector, or other person acting judicially, can be sued in any Court for

any act done by him in the discharge of his official duty, whether or not within the

limits of his jurisdiction, provided that he, at the time in good faith, believed himself

209. Banco Nacional de Cuba v. Sabbatho (1965) 243 F.SuppI 957.

210. Fleming; Torts 5th ed. 1977) p.550
 252

to have jurisdiction to the act complained of. Similarly no officer of any Court or

other person bound to execute the lawful warrants or orders of any such Judge,

Magistrate, Justice of the Peace, Collector or other person acting judicially, can be

sued in any civil Court for the execution of any warrant or order, which he would

be bound to execute, if within the jurisdiction of the person issuing the same.

The Act thus protects judicial officers, acting judicially, and also officers acting

under their orders. It does not protect judicial officers from being sued in a Civil

Court for their administrative functions. The principle behind the Act is ‘public

interest’, that is a person holding a judicial office should be in a position to discharge

his functions with independence and without fear of consequences. Though the

Act enacts the Common law rule of immunity of judges, it is somewhat wider in

scope unlike the Common Law rule it makes no distinction between Judges of

Superior Courts, Judges of inferior Courts and Magistrates. Every person acting

judicially, whether high or low, has the same protection. The scope of Section 1

of the Judicial Officers Act came up for construction before the Supreme Court in

Anwar Hussain v. Ajay Kumar 211 wherein the following propositions were laid

down.

(a) If an act done or ordered to be done by a judicial officer in the discharge of

his judicial duties is within the limits of his jurisdiction, he is protected whether

or not he has discharged those duties erroneously, irregularly, or even illegally, or

without believing in good faith that he had jurisdiction to do the act complained

off.
I

(b) If such an act is without the limits of the officer’s jurisdiction, he is protected

if, at the time of doing or ordering it, he, in good faith, believed himself to have

jurisdiction to order it;

211. A.I.R. 1965 S.C. 1651

 253

(c) The expression “Jurisdiction” in Section 1 of the Act does not mean the power

to do or order the act impugned, but generally the authority of the judicial officer

to act in the matter;

(d) The act protects a judicial officer only when he is acting in his judicial capacity

and not in any other capacity; and

(e) If a judicial officer arrests a person “recklessly and maliciously” not in discharge

of the duties of his office as a Magistrate but on the ground that he acted under the

direction of his superior officer, he can be said to be acting in an executive capacity

and not in a judicial capacity and, therefore, he is not protected under the Act.

If a Magistrate fails to act reasonably, carefully, and circumspectly in the exercise

of his duties, he cannot be permitted to say that at the time he thus acted, he, in

good faith, believed himself to have jurisdiction to do the act complained off. This
was explained in Collector ofSea Customs v. Chidambaram,212 where Chidambaram
was fined by the Collector of Sea Customs, having no jurisdiction over him, he
being a resident of Ceylon and in Ceylon at that time. To realise the fine the

Collector seized certain vessels, the property of the plaintiff at Madras. The

question whether the Collector in good faith believed himself to have jurisdiction

was negatived. Because, it was shown that the Collector had taken no legal advice
and had held no formal trial whatever except merely telegraphing to the plaintiff
that he had been fined rupees 50,000 for smuggling opium fifteen months after the
date of offence which was followed by immediate seizure of the vessels. Under
these circumstances it was held, that though the defendant might have believed
himself to have jurisdiction such belief was not a belief in good faith, which must
be a belief resting on reasonable and probable grounds for action.

212. (1876) I.L.R. 1 Mad.89

 254

Similarly, the Patna High Court i:i S.Pande v. S.C. Gupta 213 held that wilful abuse

of his authority by a judge is a good cause of action by the Party who is injured.

The Allahabad High Court in State v. Tulasiram 214 held that if a Magistrate

negligently signs an arrest warrant against acquitted persons he is not protected by

the Judicial Officers protection Act.

The expression “or other person acting judicially “ in Section 1 of the Act is wide

which will obviously cover not merely judicial officers and revenue officers

manning ordinary civil, criminal and revenue courts, but also persons functioning

as tribunals or authorities which are invested with the judicial power of the State

to determine disputes which are entrusted to their special jurisdiction 215

SUMMARY:-
From the above discussion, it becomes clear that the legal position of State’s liability
for the tortious acts of its servants under the constitution to a major extent continues
to be the same as it was prior to the commencement of the constitution. The
judiciary invariably referred to the ‘great and clear distinction’ between the
sovereign and non-sovereign or commercial functions as propounded by Peacock
CJ in Navigation case in deciding State’s liability leading to unavoidable confusion.
This gave rise to the prevalence of two conflicting views. One view is that the
State is liable in the same manner and to the same extent as that of an individual
except in cases which constitute the ‘act of State’., The other view is that only
those suits can be brought against the State which are in respect of acts done in the
conduct of undertakings and which might be carried out by Private individuals
without sovereign powers. Even r.his limited liability of the State for tortious acts
of its servants while discharging non-sovereign or commercial functions has been
restricted by the judiciary by holding that the State will not be liable in cases

213. A.I.R. 1969 pat.94

214. AI.R. 1971 All. 162.
 255

where: (a) the tortious acts are dene under the authority of a Statute or (b) where
the tortious acts though done in tire course of employment, has not been ratified by
the State, and (c) where the State has not derived any benefit out of the tortious
acts of the employee. The Judiciary has also not neen able to evolve a clear test to
determine the character of a function as a sovereign and non-sovereign. The
efficiency of the law laid down ir. Vidhyawati was considerably watered down by
the Supreme Court in Kasturilal. Until recently, the tendency to declare more and
more governmental functions as sovereign functions immune from liability was
on the increase.

However, with the adoptation of the Human Rights Jurisprudence, the Judiciary
itself has taken up the responsibility of amending the law by widening the area of
State’s responsibility. The decision of the Supreme Court in Rudal Shah is a
trend setter of the modern judicial activism in granting remedies in a writ petition
to individuals who suffer at the hards of the servants of the State by their negligence
or excessive use or misuse of powers under the name of sovereign functions. The
rule of absolute liability, a more stringent one than the rule" of strict liability
propounded in Rylands case was laid down by the Supreme Court in M.C.Mehta.
Rudal Shah is followed in a line of cases and confirmed in Nilabati Behera wherein
the Supreme Court held that the award of compensation in a writ petition under
Articles 32 and 226 is a remedy available in public law based on strict liability for
contravention of fundamental rights. The modern trend is thus to narrow down the
area of immunity claimed in the name of sovereign functions.
1

The defence of ‘act of State’ though subjected to divergent opinions in respect of

its content and application, the Supreme Court in Madhava Rao Scindia limited its
scope by holding that as between :he State and its citizens there cannot be any ‘act
of State’. The interpretation of 'Judicial immimity’ under the Judicial Officers
Protection Act is on the expected lines.