1961 Supreme(HP) 24

HIGH COURT OF HIMACHAL PRADESH
C. B. CAPOOR, J.
Shri Amar Chand Butail
Versus
The Union of India
First Appeals Nos.5 and 6 of 1959
Decided On : 01-08-1961

The accession of a territory by a sovereign State for the first time, whether it be by conquest or cession, is an Act of State and the pre-merger commitments made by the ex-sovereign are not binding on the new sovereign even though by a treaty the latter may have agreed to honor such commitments.

Headnote:

JUBBAL STATE ACCESSION - ACT OF STATE - PRE-ACCESSION COMMITMENTS - RECOGNITION BY SUCCESSOR STATE - INTEREST - AWARD OF FUTURE INTEREST - DISCRETION OF COURT.

Fact of the Case:

The plaintiff, a contractor for the supply of foodgrains to the labourers engaged by the Jubbal State for exploiting the forests and a supplier of foodgrains to the Jubbal State under the Grain Procurement Scheme, filed a suit against the Union of India, Himachal Pradesh Administration, and Jishan Lal Kuthiala for recovery of a sum of Rs. 1,44,522/6/9 comprising various items, including food-grains, transport charges, and interest. The defendants denied the liability and pleaded that the accession of the Jubbal State to the Dominion of India was an act of state and that the municipal courts had no jurisdiction to entertain a claim with regard to any such liability.

Finding of the Court:

The court held that the accession of the Jubbal State to the Dominion of India was an act of state and that the claim of the plaintiff could not be entertained by the municipal courts unless such claim had been recognized by the appellants either expressly or impliedly. The court further held that the appellants had recognized the claim of the plaintiff to the extent of Rs.1818/15/- and that to that extent the claim was entertainable in the Municipal Courts of the land. The court also held that the plaintiff was entitled to recover interest at the rate of 9 per cent per year for the period prior to the institution of the suit and future interest at the rate of 4 per cent per year.

Issues: 1. Whether the accession of the Jubbal State to the Dominion of India was an act of state. 2. Whether the claim of the plaintiff can be entertained by the Municipal Courts. If so, in what circumstances? 3. Whether the appellants expressly or impliedly recognized the claim of the plaintiff. 4. Whether the plaintiff was entitled to be awarded past and future interest? If so, as what rate?

Ratio Decidendi: 1. The accession of a territory by a sovereign State for the first time, whether it be by conquest or cession, is an Act of State. 2. The pre-merger commitments made by the ex-sovereign are not binding on the new sovereign even though by a treaty the latter may have agreed to honor such commitments. 3. A claim by the subjects of the ex-sovereign cannot be entertained by the municipal Courts of the new sovereign unless such claim has either expressly or impliedly been recognized by the new sovereign. 4. The non-recognition by the new sovereign of a pre-merger claim by the subjects against the ex-sovereign is not an Act of State rather the right not to recognize such a claim flows out of and is inherent in the antecedent Act of State. 5. The principle that there cannot be an Act of State between a sovereign and his subject is not applicable when a claim in respect of a liability incurred by the ex-sovereign prior to the acquisition or cession of his territory is lodged by the subject against the new sovereign in his municipal Courts. 6. The award of future interest is discretionary with a Court.

Final Decision: The appeals were partly allowed and the judgment and decree of the lower Court were modified to the extent that the suit of the plaintiff-respondent No.1 was decreed against the appellants for recovery of a sum of Rs.2,337/5 and pendente lite and future interest at the rate of 4 per cent per year. Respondent No.1 and the appellants shall receive and pay costs of the suit and of appeal No.6/59 in proportion to success and failure Respondent No.2 will bear his own costs or the aforesaid appeal. The costs of appeal No.5/59 shall be borne by the parties themselves.