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In this connection reliance was placed on the agreement between the President of India and the State of Madhya Bharat dated February 25, 1950 to show that there could be no intention to repeal this special law merely by the extension of the Income tax Act to the State of Madhya Bharat or by section 13 of the Finance Ac... |
In the alternative it was submitted that if the order of January 18, 1947 did not have the force of law the agreement of April 7, 1947 between the Ruler of Gwalior and the com pany created an obligation which was binding on the former State of Gwalior. FAC |
That obligation continued to be binding 901 on the State of Madhya Bharat as it was before the Constitu tion came into force by virtue of Act No. 1 of 1948 read with article VI of the covenant. FAC |
Further that obligation of the State of Madhya Bharat devolved on the Government of India by cl.(b) of article 295 (1) of the Constitution. FAC |
The obligation thus being a constitutional obligation was not and could not be affected by the extension of the Income tax Act to the Part B State of Madhya Bharat read with the Finance Act, 1950, and could only be got rid of by an amendment of the Constitution, as cl.(b) of article 295 (1) made it into a constitutiona... |
Thirdly reliance was placed on the agreement between the President of India and the State of Madhya Bharat dated February 25, 1950 under article 278 of the Constitution and it was contended that this agreement was binding under article 278 (1) (a) of the Constitution and the result of the agreement was that the concess... |
The High Court held that the order dated January 18, 1947 was a law and that it continued in force by virtue of Act I of 1948 of the State of Madhya Bharat and article 372 of the ,Constitution and that it was not repealed by the extension of the Income tax Act to the State of Madhya Bharat read with section 13 of the F... |
It further held that in view of cl.(b) of article 295 (1) of the Constitution there was a clear positive instruction in the Constitution that the obligations devolving thereby would be fulfilled and therefore the Government of India was bound to fulfil them irrespective of the extension of the Income tax Act read with ... |
The High Court summed up its conclusion as follows: 1.that the order dated January 18, 1947 of the Ruler of Gwalior State exempting the company from taxation had the effect of law and the agreement executed on April 7, 1947 cast an obligation on the Gwalior Government to exempt the ,company from taxation; 2.that by vir... |
The argument based on article 278 does not seem to have been considered by the High Court; but it has been urged before us by learned counsel for the company in support of the con clusions of the High Court. Ratio |
The questions that were raised in the High Court have all been raised before us and we now proceed to deal with them seriatim. Ratio |
The first question that falls for consideration is whether the order of January 18, 1947, is a law. Ratio |
In this connection it is contended on behalf of the company that the order must be looked at independently of the agreement of April 7, 1947 which followed it and looked at in that way it must be held to be a law. ARG |
On the other hand, learned Attorney General urges that the order was passed by the Ruler in connecting with a process which started with the letter of Birla Brothers Limited dated October 17, 1946 and ended with the agreement of April 7, 1947. ARG |
Birla Brothers Limited had asked for certain concessions in order to enable them to start certain industries in Gwalior and that matter was processed in the Secretariat of the former State of Gwalior. Ratio |
Naturally as concessions could not be granted without the sanction of the Ruler, the matter was put up before the Ruler whether he would agree to rant concessions and the order of January 18, 1947 is nothing more than the Ruler 's acceptance of the prayer for grant of concessions which eventually culminated in the agre... |
The learned Attorney General therefore contends that the order must be read in the context in which it was passed and if so read, it cannot be law. Ratio |
Before we consider the rival contentions in this behalf ' we would like to clear the ground with respect to orders of absolute Rulers. Ratio |
The High Court has relied in this connec tion on two decisions of this Court, viz. Ameer un Nissa Begum vs Mehboob Begum(1), and the Director of Endowments Government of Hyderabad vs Akram Ali(2). Ratio |
In these cases it was observed that the Firmans were expressions of the sover eign will of the Nizam and they were binding in the same way as any other law; and therefore so long as a particular Firman (1)A.I.R (2) A.I.R. 1956 S.C. 60.903 held the field, that alone would govern or regulate the rights of the parties con... |
It was on these general observations that the High Court relied to hold that the order of January 18, 1947 was law. Ratio |
Since then, however, this Court bad occasion to consider these observations in three cases, namely: (I) Maharaja Shree Umaid Mills Ltd. vs Union of India(1), (2) the State of Gujarat vs Vara Fiddali Badruddin Mithibar(2) and (3) Rajkumar Narsingh Pratap Singh Deo vs The State of Orissa(3). Ratio |
It has been pointed out in these cases that the observations in the earlier cases were not intended to lay down a general proposition that in the case of an absolute monarch no distinction can be made between his legislative and his executive acts. Ratio |
In Maharaja Shree Umaid Mills Limited(1), the agreement between the Ruler and the Mills pursuant to the order of the Ruler was held to be a mere contract and not a law within the meaning of article 372. Ratio |
The same view has been expressed by four learned Judges in the case of Vara Fiddali Badruddin Mithibar(2). Ratio |
Finally in Rajkumar Narsingh Pratap Singh Deo 's case(3) it was held that this Court had not laid down a general proposition about the irrelevance or inapplicability of the well recognised distinction between legislative and executive acts in regard to the orders issued by absolute monarchs and that the true legal posi... |
These relevant factors were, the nature of the order, the scope and effect of its provisions, its general setting and context, the method adopted by the Ruler in promulgating legislative as distinguished from executive orders, these and other allied matters would have to be examined before the character of the order is... |
We need only add that this must be so when the contention is that a particular order of the Ruler has been continued as a law by article 372 of the Constitution. Ratio |
We cannot impute to the Constitution makers an intention to continue each and every order of an absolute Ruler as a law whatsoever be its nature. Ratio |
When article 372 of the Constitution speaks of continuance of laws in 1950 the jurisprudential distinction between legislative, judicial and executive acts must have been present in the mind of the Constitution makers and that distinction must always be kept in mind by courts in deciding whether a particular order of a... |
It may be that the order might not be liable to challenge by any one in the State, while the Ruler was there and in that sense the word of a Ruler might be law in his State. Ratio |
But when we are (1) [1963] Supp. 2 S.C.R. 515.(2) A.I.R. 1964 S.C. 1043.(3) ; 904 considering whether a particular order of a Ruler continues under article 372 as law we cannot forget the jurisprudential distinction between legislative, judicial and executive acts and only those orders of the Ruler which are jurisprude... |
Therefore simply because the order dated January 18, 1947 was passed by an absolute Ruler it does riot necessarily follow that it is law for the purpose of article 372 and we have to see after looking into all the various considerations referred to above whether the order can be jurisprudentially said to be a law in or... |
Let us therefore see the circumstances in which the order came to be passed. Ratio |
We have already referred to the fact that on October 17, 1946, Birla Brothers Limited wrote to the Government of Gwalior saying that they intended to establish in some suitable place in Gwalior a kind of industrial centre in which certain new industries would be located provided certain facilities requested by them wer... |
The facilities requested were three namely, (i) provision for adequate land free at a suitable place (ii) Supply of water free or at a concessional rate, and (iii) exemption from any form of taxation on income for a period of fifteen years from the date of the starting of the factory. Ratio |
It also appears that the industries would have been started in Gwalior only if the concessions were granted. Ratio |
This request in the letter of October 17, 1946 was processed in the Secretariat of the former Gwalior State. Ratio |
The entire file has apparently not been placed before the court but from whatever material is available on the record it appears that there was first a note by the office. Ratio |
Thereafter the Secretary of the department concerned gave his opinion in which it was pointed out that Birla Brothers Limited would only establish industries in Gwalior State if they got the concessions. Ratio |
Then there is the vinanti by the Minister concerned. Ratio |
The Minister made it clear that no positive scheme had been submitted but only tentative proposals were made to ascertain if the State would be willing to grant the concessions asked for. Ratio |
The Minister also pointed out that there was no income tax in the State at that time and so if concession from such taxation was granted it would lead to establishment of industries which after fifteen years might be made liable to such taxes yielding additional income to the State. Ratio |
Therefore the Minister recommended that the concessions as to income tax as well as the other two concessions might be granted. Ratio |
This report was made on November 15, 1946. Ratio |
On November 17, 1946, the Ruler made the following note thereon: "Submit personally on my return". Ratio |
It cannot be the case of the company that even this order of the Ruler requiring papers to be submitted on his return was a law, though 905 it was certainly an order requiring the Minister to submit papers again when the Ruler returned from somewhere. Ratio |
Then on January 17, 1947, there was a Guzarish. Ratio |
In this Guzarish it was said that the concessions which had been asked for a period of fifteen years would be accepted if granted for twelve years. Ratio |
It was also made clear that unless such concessions were granted Birla Brothers Limited would not be induced to open factories within the State. Ratio |
Then followed the order of the Ruler dated January 18, 1947, headed Darbar Order, which we have already set out. Ratio |
This order is apparently on the relevant file and it is not in dispute that it was never published, though it was usual by that time in the State of Gwalior to publish laws in some form or other: see, Madhaorao Phalke vs The State of Madhya Bharat(1). Ratio |
Apart however from the fact that this order was never published in any form the circumstances in which it came to be made also clearly show that the Ruler while passing the order was merely telling his officers that they could go ahead to comply with the request of Birla Brothers Limited for the three concessions that ... |
The form of the order also shows that it could not be law. Ratio |
The order consists of three sentences. Ratio |
The first sentence says that "the Guzarihs of the Minister. dated 15 11 1946 is sanctioned". Ratio |
Obviously such a sanction for certain concessions cannot be law. Ratio |
Then comes the sentence: "exemption from any form of taxation on the income for a period of 12 years from the date of starting of the factories is granted". Ratio |
It is this sentence which according to the company is law. Ratio |
It may however be mentioned that there was no law as to income tax in Gwalior State at the time and all that this sentence could mean in the cir cumstances was that the Ruler was telling his officers that they might assure Birla Brothers Limited that he would not subject them to income tax for 12 years, even if a law a... |
In the circumstances we do not think that this sentence which was a promise to exempt Birla Brothers Limited from income tax, if and when a law of income tax was passed in future, can jurisprudentially be called a law. Ratio |
Looking at the matter jurisprudentially, the sentence means that if and when the Ruler came to pass a law as to income tax he would include therein a provision exempting Birla Brothers Limited for the period mentioned in the order. Ratio |
We are therefore of opinion that this sentence even by itself cannot amount to law. Ratio |
Then follows the third sentence, which is divided into two parts. Ratio |
The first part says that "the other two concessions he has asked for should be given". Ratio |
This cannot obviously be law and it is not even contended on behalf of the company that the concessions as to giving of land free and giving of water free or at concessional rate were law. Ratio |
Then follows the second part of the sentence ; , at 966 67. 906 which says that "attempt should be made to establish and start these factories as early as possible". Ratio |
This cannot possibly be called law and even the company does not contend that this part of the sentence is a law promulgated by the Ruler of Gwalior. Ratio |
Reading the order as a whole therefore it is obvious that the officers of the Ruler put up the request of Birla Brothers Limited for certain concessions for his order in order that they might be able to go forward and in particular make provision for land and water for the company to be started by Birla Brothers Limite... |
Therefore as we read this order of January 18, 1947, it appears that by this order the Ruler of Gwalior was saying that he was agreeable to the request of Birla Brothers Limited asking for concessions in order to enable them to start certain industries in Gwalior and that he would grant them concessions if they started... |
This order was apparently communicated to Birla Brothers Limited and it was followed on April 7, 1947 by a formal agreement between the State and Birla Brothers Limited. Ratio |
Whatever doubt might there have been as to the nature of the order, that is in our opinion completely set at rest by the fact that it was followed 2 1/2 months later by an agreement which specifically recited that in accordance with the orders of the Darbar dated January 18, 1947, the agreement was being entered into i... |
Looking at the matter therefore in the entire context beginning with the letter of Birla Brothers Limited of October 17, 1946 and ending with the agreement of April 7, 1947, all that in our opinion the order of January 18, 1947 says is that the Ruler was agreeable to grant the concessions and that his officers could pr... |
We are not prepared to accept the argument on behalf of the company that the order of January 18, 1947 must be read independently of the agreement of April 7, 1947 simply because the order did Dot say that an agreement should be taken from Birla Brothers Limited. Ratio |
The absence in the order of any reference to any agreement in our opinion makes no difference in the context in which the order came to be passed and we have no difficulty in holding that the order of January 18, 1947 was not a law by which the Ruler of Gwalior granted exemption from income tax to the company to be est... |
It only amounted to a signification of the Ruler 's acceptance of the request for concessions made by Birla Brothers Limited and an order to his officers to proceed further in the matter after this signification of the Ruler 's acceptance of the request. Ratio |
That the matter was processed further is clear from the fact that on April 7, 1947 an agreement was entered into between the Government of Gwalior and Birla Brothers Limited incorporating the terms acceptance of which had been signified by the Ruler of Gwalior on January 18, 1947. Ratio |
The fact that the 907 order is called a Darbar Order is again of no significance for it was the Ruler who was signifying his acceptance of the request and the matter was cast in the form of a Darbar Order because his officers would have to carry out what he had decided. Ratio |
There is therefore no doubt that the order of January 18, 1947 cannot be read independently of the agreement of April 7, 1947 and must be read in the context of the entire set of circumstances beginning from the letter of Birla Brothers Limited dated October 17, 1946 and ending with the agreement of April 7, 1947 and s... |
Further the form and content of the order are against its being a law. Ratio |
Finally the fact that it was never published and remained only on the file concerned has also a bearing on the question and shows that it was not a law but a mere signification of the Ruler 's acceptance of the request made by Birla Brothers Limited. Ratio |
It is plain that the order must in the context be treated as one step in the negotiations between the parties which ultimately led to the agreement; and so it would be idle to dissociate it from the said negotiations and treat it as a law. Ratio |
Besides the fact that the parties entered into a formal contract in writing embodying these concessions by the Ruler as consideration for the obligation on the part of Birla Brothers Limited to start the named industries in Gwalior State, is really decisive to negative the argument urged by the company. Ratio |
The agreement having force as a contract undoubtedly that was the intention both of the Government of the Ruler and Birla Brothers Limited is wholly irreconcilable with a law operating side by side simultaneously and de hors the contract. Ratio |
As we have come to the conclusion that the order of January 18, 1947 is not a law, we think it unnecessary to consider whether if it was a law it could be said to have been re pealed by the extension of the Income tax Act read with section 13 of the Finance Act, 1950 to the State of Madhya Bharat. Ratio |
Nor is it necessary to consider what the effect of the agreement between the President of India and the State of Madhya Bharat dated February 25, 1950 would be on the question of repeal and whether that agreement supports the view that in the circumstances there could be no repeal. Ratio |
This brings us to the alternative argument based on article 295 (1) (b) of the Constitution read with the agreement of April 7, 1947. Ratio |
The argument on behalf of the company is that in view of article 295 (1)(b) the obligation cast on the Ruler of Gwalior by the agreement of April 7, 1947 became the obligation of the Government of India through the Government of Madhya Bharat, and this was a constitutional obligation which could not be affected by the ... |
it is contended that the obligation being cast by the Constitution its binding force could only be taken away by the amendment of the Constitution and that no law, even if it was good law, could take away the exemption granted by the agreement. ARG |
On the other hand, learned Attorney General contends that article 295 (1) merely provides in the context of the coming into existence of the sovereign State of 'the Republic of India for the devolution of the property and assets, and the rights, liabilities and obligations of the Governments of the former Indian States... |
He, therefore, contends that article 295 (1) (b), when it provides that the liabilities and obligations of any Indian State corresponding to a State specified in Part B of the First Schedule to the Constitution shall in the circumstances mentioned therein be the liabilities and obligations of the Government of India, i... |
He further contends that article 295 (1) (b) does not in any manner make the liabilities and obligations arising particularly out of contract any the more binding on the Government of India than would have been the case as against the State which originally entered into the contract and that it is not correct to say th... |
It is urged that Government of India would have the same defences against a contract as the previous Indian State which originally entered into it would have had, and that article 295 (1) (b) is not a fetter on the power of Parliament to legislate in respect of matters with which such contract is concerned and that suc... |
We are of opinion that the submission of the learned Attorney General is correct. Ratio |
article 295 appears in Part XII of the Constitution dealing with finance, property, contracts and suits. Ratio |
This Part is divided into three chapters. Ratio |
The first chapter deals with finance and provides for a consolidated fund (article 266), a contingency fund if necessary (article 267), and for the distribution of public revenues between the Union and the States (articles 268 to 272) and grants by the Union to the States (articles 273 and 275). Ratio |
Article 277 provides for savings with respect to certain taxes, duties, cesses and fees which were being lawfuly levied by any Government before the constitution came into force and article 278 provides for an 909 agreement between the Union and the States for a period not exceeding ten years, with respect to certain m... |
The other Articles upto article 284 in this chapter provide for the Finance Commission and make other miscellaneous provision in financial matters relating to public revenues. Ratio |
These provi sions dealing with finances have nothing to do with legislative competence of Parliament or of State legislatures. Ratio |
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