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SUPREME COURT OF INDIA
30th July, 1963.
A.K. SARKAR, M. HIDAYATULLAH AND J.C. SHAH, JJ.
Bengal Nagpur Cotton Mills Ltd. Appellant
Versus
Board of Revenue, M.P. and others, Respondents.
Civil Appeal No. 416 of 1961.
Advocates appeared
Mr. S. T. Desai, Senior Advocate, (Mr. G. C. Mathur, Advocate, with him) for Appellant; Mr. H. N. Sanyal, Solicitor-General of India, (Mr. A. G. Ratnaparkhi, Advocate with him) for Respondent No.2.
An agreement of the ruler expressed in the shape of a contract cannot be regarded as a law. A law, must follow the customary' forms of law-making and must be expressed as binding rule of conduct. There is generally an established method for the enactment of laws, and the laws, when enacted, have also a distinct form. It is not every indication of the will of the ruler, however expressed, which amounts to a law. An indication of the will meant to bind as a rule of conduct and enacted with some formality either traditional or specially devised for the occasion, results in a law but not an agreement to which there are two parties, one of which is the ruler [Para 6]
There was an agreement between the ruler of the Rajnandgaon State (before its merger with the State of Madhya Pradesh) and a company whereby the company purchased a taxtile mill established by the ruler at Rajnandgaon and the ruler undertook to exempt the company from certain taxes and octroi duties. In return the company agreed to pay certain royalties. After the merger of the State with the State of Madhya Pradesh, the Rajanandgaon Municipality passed a resolution, to withdraw the concession granted to the company by the agreement. The question was whether the agreement was law and thus binding on the Municipality till it was repealed by another law passed by competent authority.
Held: The agreement could not be regarded as law but must be regarded as an agreement which might have bound the ruler as a con1racting party but not the municipal committee. 1960 JLJ 1064 distinguished; AIR 1963 SC 953 followed, [Para 7]
After the State merged with the State of Madhya Pradesh the Municipal Committee was not controlled in any way by ruler or by his agreement and the imposition of octroi upon the company which was in suspense began to take effect from such date as the Municipal Committee chose to determine. The Municipal Committee ceased to be subject to the wish of the ruler after the merger, and for a time it did not collect octroi from the company because the succeeding Government was accepting the royalty. Where the Municipal Committee resolved to recover octroi from the company in accordance with the original imposition of the tax in the State there was nothing which stood in the way of the Committee. The resolution was neither a fresh imposition of octroi because it had already been imposed nor the cancellation of an exemption because the Municipal Committee had not granted an exemption to the company. The resolution only indicated that on and from a particular date, the Municipal Committee would recover octroi which it had already imposed a long time ago upon all and sundry and to which the company was also subject and which was no longer affected by the will of the quondam sovereign. The agreement of the Ruler bound the Municipal Committee only indirectly, because the Ruler to whom the amount recovered would have gone, had agreed to forgo it but the Ruler's desire that octroi should not be collected ceased to operate from the moment he ceased to be the Ruler 1962 JLJ-SN 30 confirmed. [Para 8]
Judgment
HIDAYATULLAH J. : This is an appeal by special leave against an order of the High Court of Madhaya Pradesh dated April 4 1959 dismissing a petition filed by the appellant under Art. 226 for the Constitution. By that petition, the appellant asked for a writ of certiorari to quash an order of the Board of Revenue, dated September 15, 1956, by which the right of the Municipal Committee, Rajnandgaon, to levy octroi from the appellant was recognized, and for a mandamus directing the Committee not to realise octroi from the appellant, in the following circumstances:
2. The appellant, Bengal Nagpur Cotton Mills Ltd., Rajnandgaon is a limited company incorporated under the Indian Companies Act. and carries on business of manufacturing textiles at Rajnandgaon with its head office at Calcutta. Rajnandgaon was the capital of the former State of Nandgaon in the Eastern States Agency Group before it merged with the State of Madhya Pradesh. A mill called the Central Provinces Mills Ltd., was established in the year 1893 by the then Ruler raja Bahadur Balram Dass, who owned most of the shares. The mill was in difficulties owning to heavy losses, and in 1896, the Ruler agreed to sell it to M/s. Shaw Wallace and Company. On August 5, 1896 the Ruler wrote a letter to Shaw Wallace and Company promising to assist the mill in various ways if the company purchased it. The mill was bought by Messrs. Shaw Wallance and Company on September 13, 1896 and its name was changed to Bengal Nagpur Cotton Mills Ltd. In 1897, there was an agreement between the Raja Bahadur and Shaw Wallance and Company, which contained the following terms among others;
"2. The Rajah will assist the New Company by the special privilege of freeing its manufactured goods from octroi duties and by enhancing the present octroi of three pies per rupee ad valorem on imported goods which are the product of other mills outside the said State to one anna per rupee ad valorem.
3. The Rajah will cause that octroi on goods imported into Nandgaon by the New Company: such as cotton, fuel, oil, stores and C(*as in the original) will be levied at the same scale of rates as that levied by the Nagpur Municipality on goods imported by the cotton mills in Nagpur."
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"6. The Rajah agrees that his personal claims against the old company shall as from the date of sale be considered as discharged by the undertaking agents as aforesaid that the New Company will pay to the Rajah a royalty of twenty five per cent per annum on all net profits of the New Company after payment out of such net profits to the proprietors of a dividend of ten per cent per annum on the share capital of the New Company including in such capital such money as may be raised by ways of debentures."
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It appears that the increase of octroi on imported goods produced by other mills was later found to hamper the trade and commerce of the State, and the appellant-company was persuaded to forgo the protection, and the Municipal Committee, by a special resolution passed on April 13, 1901, restored the original rate of three pies per rupee. On October 29, 1906, another agreement was executed by the Ruler and the appellant-company. This was necessary because differences had arisen about the correct interpretation of the agreement, and the Ruler had a large claim on the appellant-company for royalty. This agreement again referred to the concessions which the Ruler had granted to the appellant company. On March 1, 1943 there was yet another agreement between the Ruler and the appellant-company. That agreement came into force from January 1, 1941. It was divided into three parts and Part III referred to the concessions in the following words:
"III. Save only as modified in manner aforesaid the Principal Agreement * (*Agreement of 1896) is confirmed as valid and subsisting.
And the Darbar in consideration of the relief given to it by the Company by reason of the modification in the Principal Agreement as stated hereby declares
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