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TMI Blog1994 (9) TMI 316X X X X Extracts X X X X X X X X Extracts X X X X ..... the claim of the appellant was negatived mainly on the sovereign power of the State, but, that was only one of the reasons, as the High Court further held that the goods of the appellant having been seized in the exercise of statutory power for violation of the Control Orders and the seizure having been found, by the appropriate authorities, to be valid at least for part, no compensation was liable to be paid to the appellant for the goods which were directed to be returned. The further questions, therefore, that arise for consideration are, whether seizure of the goods in exercise of statutory powers under the Act immunises the State, completely, from any loss or damage suffered by the owner. Whether confiscation of part of the goods absolves the State from any claim for the loss or damage suffered by the owner for the goods which are directed to be released or returned to it. 2. Since the High Court did not interfere with the findings recorded by the trial court and decided the appeal as a matter of law, it is not necessary to narrate the facts in detail, except a gist of it so far it is helpful in deciding the issues in question. It has been found and is not disputed that the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gs of 40 kgs each 4 7. " 125 bags of 50 kgs each 12 8. Urea 2 3 9. Ammonium Phosphate 581 (19.5; 19.5; 0) x 10. Complex 17:17:17 121 x 11. Complex 14:28:14 36 x 12. Mixture 0: 12:80 13 x The appropriate authority while directing release of the stock or equivalent value therefor made it subject to consent of the Vigilance Officer. But this condition was deleted on 15-10-1976 in appeal filed by the appellant. 3. Despite Collector's order and the order passed in appeal by the Sessions Judge, the AAO did not release the stock and the efforts of the appellant with the Chief Minister, Revenue Minister, Agriculture Minister and various other departmental heads did not yield any result. However, the AAO issued a notice in the last week of March 1977 to the appellant to take delivery of the stock released in its favour. But when the appellant went to take delivery it found that the stock had been spoilt both in quality and quantity.. Therefore, after getting its objection endorsed by the officer concerned the appellant came back and made a demand for value of the stock released by way of compensation. When no response came it gave notice and filed the suit for recovery ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... version, which stood supported from the evidence of the respondents, that when new fertilisers come in the market the demand for it is more than for old stocks. Therefore, the trial court was of opinion that it was incumbent on the respondents to have taken prompt and immediate steps to dispose of the fertilisers before expiry of the relevant season. The trial court did not believe the AAO that he could not dispose of the stock as the appellant was insisting that the sale should not be made below a particular price, as no such restriction was placed by the DRO, and the AAO who was duty bound to comply with directions of his superior failed to carry it out. In these circumstances the trial court held that the AAO acted negligently in not disposing of the stock in time but also in failing to obtain necessary directions from the DRO if no purchaser was forthcoming or, if any doubt was entertained by him, regarding the right of the appellant for the rates at which the stocks were to be sold. It was in these circumstances and on the findings recorded on the negligence of the AAO that the trial court decreed the suit in part for the loss suffered by the appellant. In appeal the findings ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... if any contravention is about to be committed. The expression "reason to believe" has been interpreted by this Court to mean that even though formation of opinion may be subjective but it must be based on material on the record. It cannot be arbitrary, capricious or whimsical. It is, thus, a check on exercise of power to seize the goods. The procedure after seizure is provided for by Section 6-A of the Act. Sub-section (1) of it is extracted below : "6-A. Confiscation of essential commodity.- (1) Where any essential commodity is seized in pursuance of an order made under Section 3 in relation thereto, a report of such seizure shall, without unreasonable delay, be made to the Collector of the district or the Presidency town in which such essential commodity is seized and whether or not a prosecution is instituted for the contravention of such order, the Collector, may, if he thinks it expedient so to do, direct the essential commodity so seized to be produced for inspection before him, and if he is satisfied that there has been a contravention of the order may order confiscation of- (a) the essential commodity so seized; (b) any package, covering or receptacle in which such essen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... racted below : "(2) Where the Collector, on receiving a report of seizure or on inspection of any essential commodity under sub-section (1), is of the opinion that the essential commodity is subject to speedy and natural decay or it is otherwise expedient in the public interest so to do, he may- (i) order the same to be sold at the controlled price, if any, fixed for such essential commodity under this Act or under any other law for the time being in force; or (ii) where no such price is fixed, order the same to be sold by public auction: Provided that in the case of any such essential commodity the retail sale price whereof has been fixed by the Central Government or a State Government under this Act or under any other law for the time being in force, the Collector may, for its equitable distribution and availability at fair prices, order the same to be sold through fair price shops at the price so fixed." When a statute gives a power and requires the authority to exercise it in public interest then the person exercising the power must be vigilant and should take it as a duty to discharge the obligation in such a manner that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (2) of Section 6-C relevant part of which reads as under : "(2) Where an order under Section 6-A is modified or annulled by the State Government, or where in a prosecution instituted for the contravention of the order in respect of which an order of confiscation has been made under Section 6-A, the person concerned is acquitted, and in either case it is not possible for any reason to return the essential commodity seized, such person shall, except as provided by sub-section (3) of Section 6-A, be paid the price therefor as if the essential commodity had been sold to the Government with reasonable interest calculated from the day of the seizure of the essential commodity; and such price shall be determined- " This sub-section ensures that a person who has been prosecuted or whose goods have been confiscated does not suffer if the ultimate order either in appeal or in any proceeding is in his favour. It is very wide in its import as it statutorily obliges the Government to return the goods seized or to pay the value of the goods if for any reason it cannot discharge its obligation to return it. The circumstances in which the goods are to be returned are- (a) an order under Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xercise of sovereign powers, thus, squarely covered by the ratio laid down by this Court in Kasturi Lal1. Immunity of the State from compensating its citizens for a wrong done by it or its officers either for its activities of commercial or private nature or for acts of State or for those for which suit could be brought into Municipal Courts has been through various stages due to reflection of English juristic philosophy that King can do no wrong, and its extension and application to our system of governance. In England it was recognised that the King could not be sued. In illustrating the doctrine that the "Queen can do no wrong" Prof. Dicey gives what he describes as an "absurd example", "if Queen were herself to shoot the Prime Minister through the head", he says, "no court in England could take cognizance of the act". The basis for it in England was both substantive and procedural. The former flowed from the divine right of the Kings and the latter from the feudal principle that the King could not be sued in his own courts. Yet it did not mean that he was above law. The true meaning of the expression "that King can do no wrong" meant "that the King has no legal power to do wron ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was a departure from the English common law that no proceedings, civil or criminal, could be filed against the Crown. In Peninsular & Oriental Steam Navigation Co. v. Secretary of State for India (1868-69) 5 Bom HCR (App. A) 1 which came up before the Supreme Court of Calcutta, on a reference made by the Subordinate Judge, on the liability of the State for negligence of its officers, Chief Justice Peacock held that since East India Company was not a sovereign, its liability for negligence of its officers would be same as of an employer for acts of its employee. But the observations which were to influence the courts for years to come, both before coming into force of the Constitution and thereafter, were made while deciding the other issue whether the Secretary of the State in Council was personally liable. It was observed that there was a "clear distinction between acts done in exercise of what are usually termed sovereign powers and acts done in the conduct of undertakings which might be carried on by private individuals without having such powers delegated to them". To that extent there could have been little difficulty. But the learned Chief Justice in the next breath went on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nbsp; "Acts done by the Government in the exercise of the sovereign powers of making peace and war and of concluding treaties obviously do not fall within the province of municipal law, and although in the administration of domestic affairs the Government ordinarily exercises powers which are regulated by that law, yet there are cases in which the supreme necessity of providing for the public safety compels the Government to acts which do not pretend to justify themselves by any canon of municipal law. Acts thus done in the exercise of sovereign powers but which do not profess to be justified by municipal law are what we understand to be the acts of State of which municipal courts are not authorised to take cognizance." (emphasis supplied) The doctrine or the defence by the "act of State", is not the same as sovereign immunity. The former flows from the nature of power exercised by the State for which no action lies in civil court whereas the latter was developed on the divine right of Kings. 10. When the law was in this fluid state, the Constitution was enforced and in Province of Bombay v. Khushaldas S. Advani AIR 1950 SC 222: 1950 SCR 621 Justice Mukhe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tment. The suit of his widow, minor daughter and mother was decreed, on the finding that the driver was guilty of negligence. But the decree was granted against the driver only. In appeal, however, the High Court decreed the suit against the State as well. This Court after examining in detail the scope of Article 300 of the Constitution of India and the earlier provisions in the Government of India Act beginning from Section 68 of the Act of 1858, approved decision in Narayan Krishna Laud5 and observed that the decision in Viscount Canterbury4 being based upon the principle that "the King cannot be guilty of personal negligence or misconduct and consequently cannot be responsible for the negligence or misconduct of his servants" was not applicable as held in Peninsular case as the liability of the Secretary of State in place of East India Company was specifically provided for. The Court further held : (SCR p. 1002 : AIR p. 938, para 10) "This case also meets thesecond branch of the argument that the State cannot be liable for the tortious acts of its servants, when such servants are engaged on an activity connected with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... against the Crown. In the case of State of Bihar v. Abdul Majid1954 SCR 786: AIR 1954 SC 245, this Court has recognised the right of a government servant to sue the Government for recovery of arrears of salary. When the rule of immunity in favour of the Crown, based on Common Law in the United Kingdom, has disappeared from the land of its birth, there is no legal warrant for holding that it has any validity in this country, particularly after the Constitution. As the cause of action in this case arose after the coming into effect of the Constitution, in our opinion, it would be only recognising the old established rule, going back to more than 100 years at least, if we uphold the vicarious liability of the State. Article 300 of the Constitution itself has saved the right of Parliament or the Legislature of a State to enact such law as it may think fit and proper in this behalf. But so long as the Legislature has not expressed its intention to the contrary, it must be held that the law is what it has been ever since the days of the East India Company." (emphasis supplied) But this Constitution Bench decision was distinguished in Kasturi Lal(supra) by another Constitution Bench as, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee. Such infringements have been held to be wrong in public law which do not brook any barrier and the State has been held liable to compensate the victims. (See Rudul Sah v. State of Bihar (1983) 4 SCC 141: 1983 SCC (Cri) 798, Sebastian M. Hongray v. Union of India (1984) 3 SCC 82: 1984 SCC (Cri) 407, Saheli, A Women's Resources Centre v. Commissioner of Police, Delhi Police Headquarters (1990) 1 SCC 422:1990 SCC (Cri) 145: AIR 1990 SC 513, State of Maharashtra v. Ravikant S. Patil (1991) 2 SCC 373: 1991 SCC (Cri) 656 In Nilabati Behera v. State of Orissa (1993) 2 SCC 746: 1993 SCC (Cri) 527 Hon'ble Mr Justice J.S. Verma observed as under: (SCC p. 758, para 10) "It may be mentioned straightaway that award of compensation in a proceeding under Article 32 by this Court or by the High Court under Article 226 of the Constitution is a remedy available in public law, based on strict liability for contravention of fundamental rights to which the principle of sovereign immunity does not apply, even though it may be available as a defence in private law in an action based on tort." In the same decision, it was observed by Hon'ble Dr Justic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reliance on a Full Bench decision of that very Court in Baxi Amrik Singh v. Union of India (1973) 75 Punj LR 1: 1974 ACJ 105 (P&H) held that where the accident was caused by negligence of the driver of military truck the principle of sovereign immunity was not available to the State. 15. That apart, the doctrine of sovereign immunity has no relevance in the present-day context when the concept of sovereignty itself has undergone drastic change. Further, whether there was any sovereign in the traditional sense during British rule of our country was not examined by the Bench in Kasturi Lal though it seems it was imperative to do so, as the Bench in Vidhyawati had not only examined the scope of Article 300 of the Constitution, but after examining the legislative history had observed : (SCR p.997 : AIR p. 937, para 7) "It will thus be seen that by the chain of enactments beginning with the Act of 1858 and ending with the Constitution, the words 'shall and may have and take the same suits, remedies and proceedings' in Section 65 above, by incorporation, apply to the Government of a State to the same extent as they applied to the East I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to an action, the general principles applicable to Sovereigns and States, and the reasoning deduced from the maxim of the English law that the King can do no wrong, would have no force. We concur entirely in the opinion expressed by Chief Justice Grey in the case of Bank of Bengal v. East India Co. Bignell Rep 120: 12 ER 473: 2 Knapp 245 (1834) 229 which was cited in the argument that the fact of the Company's having been invested with powers usually called sovereign powers did not constitute them sovereigns." The Company ceased to exist after the Government of India Act, 1858 came into force. The administration was taken over by the Crown. But Section 65 of the Government of India Act of 1858 expressly provided that all persons and body politic shall and may take the same suits, remedies and proceedings, legal and equitable, against the Secretary of State in Council in India as they could have done against the East India Company. The effect of it was that the liability of the East India Company and its extent prior to 1858 became the foundation and furnished basis for determining liability of the Secretary of State in Council. If the East India Company was not a sovereign and th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rrying on hostilities or for the act of any of its naval officers in seizing the property of a subject under the supposition that it was the property of an enemy". The practical effect of it was that the officers of the Company acting negligently and causing damage to the people were rendered immune from any action in a court of law. This was contrary both to English and Indian law. Truly speaking the concept of sovereign immunity in the English sense, was nonexistent during British rule. 18. Though the Company was not a sovereign but it did exercise some power as a delegate of the Crown. What was the nature of this power? In the Charter issued during what is known as, "double Government period" the Company was permitted, in addition to carrying on trading activities, power to carry on war, inflict hostilities, seize property, negotiate peace, etc. with the Indian States. The activities such as these are indicia of what is legally known as "act of State". It means- "an act of the executive as a matter of policy performed in the course of its relations with another State including its relations with the subjects of that State." 9 H.W.R. Wade: Administrative Law, 6th Edn. 230) But ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nicipal Court. The answer of the East India Company in that case did not rest on the simple assertion that the seizure was an act of State, but set out the circumstances under which the Rajah's property was taken. After referring to the treaties made with the Rajah, it averred that in entering into these treaties, and in treating the sovereignty and territories of Tanjore as lapsed to the East India Company in trust for the Crown, the Company acted in their public political capacity, and in exercise of the powers (referring at length to them) committed to them in trust for the Crown of Great Britain, and that all the acts set forth in the answer 'were acts and matters of State'. As far as their Lordships are aware, it will be found that in all the suits brought against the Government of India, whether in this country or in India, the pleas and answers of the Government have shewn, with more or less particularity, the nature and character of the acts complained of, and the grounds on which, as being political acts of sovereign power, they were not cognizable by the Courts. (See Nabob of Carnatic v. East India Co. 1 Ves Jun 371: 30 ER 391; Ex- Rajah of Coorg v. East India Co. 29 Be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y Musgrave24 the Privy Council, while determining liability of the Governor, observed that it cannot "be assumed that he possesses general sovereign power. His authority is derived from his commission, and limited to the powers thereby expressly or impliedly entrusted to him. Let it be granted that, for acts of power done by a Governor under and within the limits of his commission, he is protected, because in doing them he is the servant of the Crown, and is exercising its sovereign authority; the like protection cannot be extended to acts which are wholly beyond the authority confided to him. Such acts, though the Governor may assume to do them as Governor, cannot be considered as done on behalf of the Crown, nor to be in any proper sense acts of State." The Company was, thus, immune from being sued in courts only in those limited cases where its activities were political and mainly in relation to the Indian State. It did not enjoy any sovereign immunity like the Crown in England. 20. Even otherwise the concept of sovereign immunity and the distinction between sovereign and non-sovereign powers were neither relevant either before or after the Constitution came into force. The do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... may thus be divided and partial, i.e., owed in certain areas of conduct. When divided in this way the power of each is limited by the other and each has a limited power to prescribe for the other." Dias : Jurisprudence, 5th Edn., 1985 29 (1970) 3 SCC 400 21. This change in outlook is consequence of gradual growth of the concept that sovereignty vests in the people. Its roots germinated with the rise of federalism in America. The English doctrine of parliamentary sovereignty was superseded in America by the doctrine of popular sovereignty. Wills in the book on Constitutional Law of the United States observed : "Who then is in the United States, the sovereign? It is the people." It was said by Pt. Jawaharlal Nehru while moving the Objective Resolution in the Constituent Assembly on 13-12-1946, "all power and authority of the sovereign independent India, its constituent and part and organs of the Government are derived from the people". Justice Douglas in his book from Marshall to Mukherji observed : "India and the United States both recognise that people are the basis of all sovereignty." 22. The old and archaic concept of sovereig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... between sovereign or nonsovereign power thus does not exist. It all depends on the nature of power and manner of its exercise. Legislative supremacy under the Constitution arises out of constitutional provisions. The legislature is free to legislate on topics and subjects carved out for it. Similarly, the executive is free to implement and administer the law. A law made by a legislature may be bad or may be ultra vires, but since it is an exercise of legislative power, a person affected by it may challenge its validity but he cannot approach a court of law for negligence in making the law. Nor can the Government in exercise of its executive action be sued for its decision on political or policy matters. It is in public interest that for acts performed by the State either in its legislative or executive capacity it should not be answerable in torts. That would be illogical and impractical. It would be in conflict with even modem notions of sovereignty. One of the tests to determine if the legislative or executive function is sovereign in nature is whether the State is answerable for such actions in courts of law. For instance, acts such as defence of the country, raising armed force ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... law" gradually gave way to the movement from, "State irresponsibility to State responsibility". In Welfare State, functions of the State are not only defence of the country or administration of justice or maintaining law and order but it extends to regulating and controlling the activities of people in almost every sphere, educational, commercial, social, economic, political and even marital. The demarcating line between sovereign and non-sovereign powers for which no rational basis survives has largely disappeared. Therefore, barring functions such as administration of justice, maintenance of law and order and repression of crime etc. which are among the primary and inalienable functions of a constitutional Government, the State cannot claim any immunity. The determination of vicarious liability of the State being linked with negligence of its officers, if they can be sued personally for which there is no dearth of authority and the law of misfeasance in discharge of public duty having marched ahead, there is no rationale for the proposition that even if the officer is liable the State cannot be sued. The liability of the officer personally was not doubted even in Viscount Canterb ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nctions is a different matter. But when similar powers are conferred under other statute as incidental or ancillary power to carry out the purpose and objective of the Act, then it being an exercise of such State function which is not primary or inalienable, an officer acting negligently is liable personally and the State vicariously. Maintenance of law and order or repression of crime may be inalienable function, for proper exercise of which the State may enact a law and may delegate its functions, the violation of which may not be sueable in torts, unless it trenches into and encroaches on the fundamental rights of life and liberty guaranteed by the Constitution. But that principle would not be attracted where similar powers are conferred on officers who exercise statutory powers which are otherwise than sovereign powers as understood in the modem sense. The Act deals with persons indulging in hoarding and black marketing. Any power for regulating and controlling the essential commodities and the delegation of power to authorised officers to inspect, search and seize the property for carrying out the object of the State cannot be a power for negligent exercise of which the State ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ence of officers was to be decided on general principle. In other words, if a competent legislature enacts a law for compensation or damage for any act done by it or its officers in discharge of their statutory duty then a suit for it would be maintainable. It has been explained earlier that the Act itself provides for return of the goods if they are not confiscated for any reason. And if the goods cannot be returned for any reason then the owner is entitled for value of the goods with interest. 30. In this case after conclusion of proceedings the authorities intimated the appellant to take the goods as they having not been confiscated, he was entitled for return of it. The appellant in response to the intimation went there but it refused to take delivery of it as, according to it, the commodity had deteriorated both in quality and quantity. This claim has been accepted by the lower courts. What was seized by the authority was an essential commodity within the meaning of clause (d) of sub-section (2) [sic Section 2(a)]. What the law requires under sub-section (2) of Section 6-C to be returned is also the essential commodity. Any commodity continues to be so, so long as it retains ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... operty has to return it when its owner is found and demands it, so the State Government was bound to return the said vehicles once it was found that the seizure and confiscation were not sustainable. There being thus a legal obligation to preserve the property intact and also the obligation to take reasonable care of it so as to enable the Government to return it in the same condition in which it was seized, the position of the State Government until the order became final would be that of a bailee. If that is the correct position once the Revenue Tribunal set aside the order of the Customs Officer and the Government became liable to return the goods the owner had the right either to demand the property seized or its value, if, in the meantime the State Government had precluded itself from returning the property either by its own act or that of its agents or servants. This was precisely the cause of action on which the respondent's suit was grounded. The fact that an order for its disposal was passed by a Magistrate would not in any way interfere with or wipe away the right of the owner to demand the return of the property or the obligation of the Government to return it." 32. Sim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hall be failing in its duty if it is not brought to the attention of the appropriate authority that for more than hundred years, the law of vicarious liability of the State for negligence of its officers has been swinging from one direction to other. Result of all this has been uncertainty of law, multiplication of litigation, waste of money of common man and energy and time of the courts. Federal of Torts Claims Act was enacted in America in 1946. Crown Proceedings Act was enacted in England in 1947. As far back as 1956 the First Law Commission in its Report on the liability of the State in tort, after exhaustive study of the law and legislations in England, America, Australia and France, concluded : "In the context of a Welfare State it is necessary to establish a just relation between the rights of the individual and the responsibilities of the State. While the responsibilities of the State have increased, the increase in its activities has led to a greater impact on the citizen. For the establishment of a just economic order industries are nationalised. Public utilities are taken over by the State. The State has launched huge ir ..... X X X X Extracts X X X X X X X X Extracts X X X X
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