Case Note & Summary
The appeal arose from a suit filed by a Hindu joint family firm, Hira Lal & Bros., against the State of Madhya Pradesh for recovery of Rs. 80,000 with interest based on a promissory note executed by the erstwhile Maharaja of Surguja. The firm had constructed the District Court and Secretariat buildings in Ambikapur in 1936, and after a dispute over measurements, the Maharaja executed a promissory note on 27-9-1947. Following the merger of the princely state with Madhya Pradesh on 1-1-1948, the State Government took possession of the buildings but refused to honour the promissory note. The trial court decreed the suit holding the State liable, but the High Court reversed, accepting the defence of act of State. The Supreme Court, by certificate under Article 133(1)(a), considered whether the successor State was bound by the liability and whether its request for details constituted acceptance. The Court held that an act of State is the exercise of sovereign power over newly acquired territory, and the successor State is not bound by the obligations of the former sovereign unless it expressly or impliedly accepts them. A mere request for details does not amount to acceptance or waiver. Accordingly, the appeal was dismissed without costs, affirming the High Court's decision.
Headnote
A) Act of State - Defence of Act of State - Successor State's Liability - Common Law - The defence of act of State is an exercise of sovereign power over territory not earlier subject to its sway; the successor State is not bound by liabilities of the former sovereign unless expressly or impliedly accepted. Held that in the absence of such acceptance, the State could successfully plead act of State.
B) Acceptance of Liability - Implied Acceptance - Request for Claim Details - Common Law - Asking the appellants to supply details of their claim did not amount to acceptance of liability or waiver of the act of State defence. Held that mere consideration of a claim does not constitute acceptance.
Issue of Consideration
Whether the State of Madhya Pradesh, as successor to the erstwhile State of Surguja, is liable to honour a promissory note executed by the former Maharaja for the construction of public buildings, despite the defence of act of State.
Final Decision
Appeal dismissed without costs; High Court's judgment upholding act of State defence affirmed.
Law Points
- Legal points not extracted
- act of state doctrine
- successor state not bound without express or implied acceptance
- request for details not waiver
- liability of merged princely state
- construction of public buildings
- promissory note enforcement
Case Details
Civil Appeal No. 97 of 1966
P. Jaganmohan Reddy, S.M. Sikri, G.K. Mitter
Citation not available, 1970 AIR 1430, 1970 SCR (3) 208, 1969 SCC (3) 682
M. S. Gupta, I. N. Shroff
Choudhry Jawaharlal & Ors.
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Nature of Litigation
Suit for recovery of money based on promissory note against State of Madhya Pradesh as successor to merged princely state.
Remedy Sought
Appellants sought decree for Rs. 80,000 with interest from the State of Madhya Pradesh.
Filing Reason
Failure of the State to pay despite claim and notice under Section 80 CPC.
Previous Decisions
Trial court decreed suit in favour of appellants; High Court reversed and dismissed suit, upholding act of State defence.
Issues
Whether the State of Madhya Pradesh is liable to honour the promissory note executed by the erstwhile Maharaja for construction of public buildings.
Whether asking the appellants to supply details of their claim constituted acceptance of liability and waiver of the act of State defence.
Submissions/Arguments
Appellants argued that the State had asked for details and thus accepted liability, and that the buildings were public property taken over by the State.
State argued that the defence of act of State applied and no express or implied acceptance of liability had occurred.
Ratio Decidendi
An act of State is the exercise of sovereign power over newly acquired territory; the successor State is not bound by the obligations of the former sovereign unless it expressly or impliedly accepts them. A mere request for details of a claim does not constitute acceptance or waiver of the defence.
Judgment Excerpts
The fact that appellants were asked to supply details of their claim and the first respondent was prepared to consider it has been urged as being tantamount to the acceptance of the liability. In our view no such inference can be drawn.
What constitutes an act of State has been considered and the principles enunciated in numerous cases... It is the exercise of sovereign power over a territory which was not earlier subject to its sway.
It is the acceptance of the claim which would have bound the new sovereign State and the act of State would then have come to an end. But short of an acceptance, either express or implied, the time for the exercise of the Sovereign right to reject a claim was still open.
Procedural History
Suit filed in court of Additional District Judge, Ambikapur; Trial Court decreed suit against State of MP and discharged Maharaja; High Court of Madhya Pradesh in First Appeal No. 115 of 1958 reversed and dismissed suit; appeal to Supreme Court by certificate under Article 133(1)(a) of the Constitution; Supreme Court dismissed appeal on 30-10-1969.
Acts & Sections
- Code of Civil Procedure, 1908: 80, 86
- Constitution of India: 133(1)(a)
