Judgement

GAJENDRAGADKAR, C.J.I. : This appeal arises out of a suit filed by the appellant, Mirza Ali Akbar Kashani, against the two respondents, the United Arab Republic, and the Ministry of Economy, Supplies, Importation Department of the Republic of Egypt at Cairo, on the Original Side of the Calcutta High Court. By his plaint, the appellant claimed to recover from the respondents damages assessed at Rs. 6,07,346 for breach of contract. According to the appellant, the contract in question was made between the parties on March 27, 1958. Respondent No. 2 which was a party to the contract had agreed to buy tea from the appellant upon certain terms and conditions: one of these was that respondent No. 2 would not place any further orders in India for purchase of tea with anyone else during the tenure of the contract and that it would, in every case, give the appellant the benefit of the fist refusal for respondent No. 2 s additional requirements. The appellant alleged that during the tenure of the contract, the respondents had wrongfully placed an order for the supply of tea with a third party without giving the appellant a chance to comply with the said requirement. That is how the respondents had committed a breach of a material term of the contract.

2. Formerly, the Republic of Egypt and the Republic of Syria were two independent sovereign States. They, however, merged and formed a new Sovereign State on February 22, 1958. This new sovereign State is know as the United Arab Republic and is referred as respondent No 1 in the present appeal. This new State has been recognised by the Government of India. Respondent No 2 has been working as a department of respondent No. 1 and is a part and parcel thereof. The present suit was instituted on August 10, 1959. It is common ground that the appellant did not obtain the consent of the Central Government to the institution of the suit under S. 86 of the Code of Civil Procedure. The appellant, however, applied for leave under Cl. 12 of the Letters Patent in view of the fact that a part of the cause of action had arisen within the jurisdiction of the Calcutta High Court. This leave was granted to the appellant by the learned trial Judge.

3. On December 3, 1959, the respondents entered appearance in the suit: and on December 17, 1959, they applied for an order that the leave granted under Cl. 12 of the Letters Patent should be revoked, the plaint should be rejected and further proceedings in the suit should be stayed. According to the respondent, the trial Court had no jurisdiction to entertain the suit inasmuch as the President of the United Arab Republic was its Ruler and the suit was, in reality, and in substance, a suit against him and as such, it was barred under S. 86 of the Code. It was further averred on their behalf that no part of the alleged cause of action had arisen within the jurisdiction of the Court; and so, leave could not be granted under Cl. 12. At the hearing of this petition, the respondents were allowed to urge an additional ground in support of their plea that the leave should be revoked; they urged that respondent No 1 was a foreign sovereign State and as such, it enjoyed absolute immunity from being sued in the trial Court under the Rules of International Law as adopted and applied by the municipal law of India.

4. These pleas were controverted by the appellant. It was urged that S. 86 of the Code was not a bar to the present suit, as the said section created a bar only against a Ruler of a foreign State and the present suit clearly did not fall in that category. According to the appellant, the immunity from being sued without the sanction of the Central Government to which S. 86 of the Code referred could not be invoked by a foreign State such as respondent No. 1. The appellant also urged that in view of the fact that the transaction which has given rise to the present suit has nothing to do with the governmental functions of respondent No. 1, no immunity could be cla