( 1 ) THIS is a defendant's First Appeal against the judgment and decree dated the 25th of April, 1960 passed by the 2nd Addl. District Judge Gwalior, in Civil Original suit No. 6 of 1960.

( 2 ) THE suit was filed by Major Krishnarao Mahadik for possession of a house situate at Dal Bazar, Lashkur, which was on the dale of the suit in the occupation of the defendant No. 1 Govindrao Mahadik. It was alleged that Govindrao Mahadik had executed a mortgage-deed in respect of this house in favour of defendant No. 2. The Gwalior Bank Prop. , M/s Bidhichand and Sons on 9-8-1945. The plaintiff claimed cancellation of this deed. He based his claim in respect of the house on an order (Ex. P/2) dated 12-11-1942 of the then Maharaja of Gwalior State. The defendant challenged the plaintiffs title to the house in dispute and pleaded that the plaintiff had misconstrued the order of the then His Highness. The suit proceeded ex parte against the defendant No. 2. The. Gwalior Bank.

( 3 ) THE trial Court held that the house in dispute belonged to the plaintiff and that the defendant No. 1, Govindrao Mahadik had no right to mortgage it with the defendant No. 2, The Gwalior Bank. It, therefore, decreed the suit. The defendant has now come up in appeal against the decree passed by the trial Court.

( 4 ) THE trial Court, relying on a decision of this Court in State v. Behramji Dungaji, 1958 Jab LJ 83 : (AIR 1958 Madh Pra 71) held that since the order Ex. P/2 of His highness the Maharaja of Gwalior Stale has the force of law, the plaintiff's title to the house in dispute was unassailable. It also held that Ex P/2 being a subsequent durbar order had the effect of over-riding the previous order Ex. D/3 under which the defendant was allowed to remain in possession of the house during his lifetime. Lastly it was held by the trial Court that since the mortgage of the house by defendant No. 1, Govindrao Mahadik in favour of defendant No. 2. The Gwalior bank was made on 9-8-1945 after the ownership of the house had, under the durbar Order dated 12-11-1942 (Ex. P/2) vested in the plaintiff, it could not have any legal effect. At any rate the mortgage was not binding on the plaintiff.

( 5 ) THE only question which arises for consideration in this appeal is whether the order Ex. P/2 of the then Maharaja of Gwalior could be enforced in the Municipal courts of the former State of Madhya Bharat and now of Madhya Pradesh. On the formation of the State of Madhya Bharat all laws which were in force in the various integrating States were continued in force, and on the coming into force of the constitution of India, by Article 372 all laws which were in force in the States were continued until they were altered or repealed by competent legislation. The ruler of Gwalior was an absolute monarch, and his orders whether legislative, executive or judicial in character were binding on the subjects of the Gwalior State. But the taking over of the sovereign power of the ruler of Gwalior by the State of Madhya bharat amounted to ah 'act of state'. The effect of such State succession was considered by the Supreme Court in Promod Chandra Deb v. State of Orissa, 1962 supp (1) SCR 405 : (AIR 1962 SC 1288) and after reviewing the decisions both of the Privy Council as well as the earlier decisions of the Supreme Court, it was held that whether the 'act of state' has reference to public or private rights the result is the same; namely that it is beyond the jurisdiction of Municipal Courts to investigate the rights and wrongs of the transaction and pronounce upon them. The Municipal Courts of the new sovereign have the power and jurisdiction to investigate and ascertain only suchrights as the new sovereign has chosen to recognise or acknowledge, by legislation, agreement or otherwise. Where the right sought to be enforced was created by an order of the former ruler, which was made in exercise of his legislative function, the order would continue to be effective even after the coming in

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