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TMI Blog2002 (3) TMI 37X X X X Extracts X X X X X X X X Extracts X X X X ..... ibunal that no property either on account of 'Sagbara Estate' or any personal property passed on the death of Shri Karansinhji Fatehsinhji Vasava in 1957 and there was no question of levy of any estate duty therefor, is correct in law and sustainable from the material on record?" Shri Karansinhji Fatehsinhj, former Vasava of Sagbara Estate died on April 17, 1957, and an account in Form No. ED-1 was filed by his eldest son, Ramsinhji Fatehsinhji, under the provisions of the Estate Duty Act, 1953, stating that there was "nil" property which the deceased was competent to dispose of at the time of his death, and he accordingly submitted a "nil" return. The Deputy Controller of Estate Duty, Western Zone, Bombay, however, held that the deceased had complete proprietary rights over the villages of the estate before the estate was taken over by the Government in 1948, and that the deceased had not accepted the fact of the dispossession and was fighting for his rights. It was held: "It will appear therefore that as at present the Vasava has complete proprietary rights over all the lands of 92 Khalsa villages. He has also proprietary rights over the 22 Dumala villages even though he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it passed on his death. The estate duty was worked out at Rs.72,62,068 by the said assessment order under section 61(1) of the said Act and a demand notice was issued pursuant thereto. Thereafter, the accountable person preferred Estate Duty Appeal No. GUJ-16 of 1962-63 under section 62 of the said Act before the Appellate Controller of Estate Duty, New Delhi. The Appellate Controller, by his order dated October 20, 1970, upheld the finding of the Deputy Controller that the deceased left an estate which passed on his death and in respect of which estate duty was payable. In paragraph 6 of the order, he held: "In my opinion, the deceased at the time of his death had an 'actionable claim' which materialised when the Government of Bombay passed the resolution dated January 13, 1958, by which the rights of the Vasava over the Sagbara property were restored to the present Vasava in January, 1958. Section 2(16) of the Estate Duty Act states that the property passing on the death includes the property passing either immediately on the death or after any interval either certainly or contingently. In this case, property passed after an interval. The Sagbara Estate was in the possession ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich, Rajpipla State merged into the Province of Bombay in 1948 and the Government of Bombay took over the charge of the estate by appointing an administrator. The Tribunal noted in paragraph 6 of the order that the Government of India, in 1948, proceeded under the assumption that Sagbara Estate was a part of the Rajpipla State and took over the full control and entire administ ration without any separate agreement with the Vasava. The Vasava thereafter protested to the Government of Bombay by taking a stand that the accession of Rajpipla State did not affect the status and right of Sagbara since it was a distinct and separate political entity. On November 16, 1950, the Government of Bombay sanctioned Rs.2,000 per month for his life on the application of the Vasava of the Sagbara Estate for maintenance allowance. The then Vasava Karansinhji made an application on August 29, 1953, to the Government of India for sanction of a privy purse for him. The Government of India, however, informed him by letter dated June 28, 1954, that he could not be recognised as a Ruler and, therefore, no privy purse can be allowed, and further that, the villages which were claimed by him as private prope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the Government of India did not keep in mind that the Sagbara was not a part of Rajpipla State when the administration was taken over on June 10, 1948. Not only the possession of the estate was taken over, but the personal properties of the Vasava consisting of three Dumala villages were also taken over. It was held by the Tribunal in paragraph 24 of the order that such action of the Government of India amounted to annexation of the said territory. It was, therefore, held that the Sagbara became part of the then Indian territory by "act of State". The Tribunal took note of the letter dated June 28, 1954, written by the Government of India, Ministry of States, in response to the representation of the Vasava informing him that, after carefully considering the matter, the Government of India regretted that it was not possible for it to recognise him as a ruler and, therefore, there was no question of fixation of a privy purse for the Vasava. It was held in terms that it will not be possible to restore Dumala villages to him since he had failed to produce supporting evidence before the Bombay Government. However, those villages were taken into account in calculating his allowanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vive. The reference came to be made by the Tribunal in view of the order dated April 28, 1987, of the Supreme Court of India in Civil Appeal No. 1256 (NT) of 1987 (CED v. Pratap Singhji Ramsinghji [1987] 167 ITR 210). Earlier, a Division Bench of the High Court (Coram: Mr. justice B.J. Divan and Mr. Justice S.B. Majumdar) had rejected the Estate Duty Application No.3 of 1980 on October 21, 1980, by observing that the Tribunal had interpreted the grant to Ramsinhji as a fresh grant, and that the same contention was also urged before the Division Bench of this court in First Appeal No. 157 of 1972, which was disposed of on September 28, 1970, in which, it was held that there was a fresh grant to Ramsinhji, because, by an act of State, the grant which was earlier in favour of Karansinhji had come to an end. It was noted that an application for leave to appeal filed against that decision before the Supreme Court, was rejected by the Supreme Court and, therefore, the decision of the High Court in First Appeal No. 157 of 1972 had become final. It was held that the Tribunal, on its own, analysing the terms of the grant in the historical background, had also come to the same conclusion. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Government officials could not have forcibly taken over the estate. It was submitted that, because the old initial takeover was erroneous, the Government of India restored the estate to the Vasava in January, 1958. It was argued that the Government realised that the possession of the estate property was wrongly taken over as it was not the property of the Rajpipla State and, therefore, on the representation by the Vasava, the possession of the estate was restored under the resolution dated January 13, 1958, along with the personal properties to Ramsinhji as the heir apparent of the deceased Karansinhji. It was submitted that since the income derived from June 10, 1948, was also to be returned, and the cash amount seized from the treasury in 1948 to be accounted for that would show that the estate continued to be of the late Karansinhji till it came to be abolished under the Sagbara and Mevasi Estates (Proprietary Rights Abolition, etc.) Regulation Act, 1962, and even the compensation came to be paid under those regulations to Ramsinhji. Therefore, on the date of death of Karansinhji, i.e., on April 17, 1957, Ramsinhji should be deemed to be holding the estate which passed to him o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Vasava Karansinhji by the seizure of the whole estate after merger on June 10, 1948, no title had remained outstanding in anyone as per the aforesaid legal position", and that, "... in any event, the State having recognised by this fresh grant exhibit 237, only defendant No.3, as Vasava, no outstanding title remained in any other heir of Karansinhji so as to confer any title on the deceased plaintiff by the aforesaid registered document, exhibit 411, dated December 15, 1959." Learned senior counsel further argued that, whether the state could or could not have taken possession of the estate was not a matter of any consequence, because, once it is found that the estate was, in fact and reality, taken over by the Government, the subject would no more own the property and it vested in the State by the act of State. It was submitted that it was undisputed that the Sagbara Estate was taken over as a part of the State of Rajpipla under the merger agreement and by statutory orders that property which had merged in the Province of Bombay was dealt with, and therefore, it could not be said that, in 1957 when Karansinhji died, he had any such estate or property which could passed on h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ajpipla and Petition No. 340 of 1954 was by the Jagirdars of the erstwhile State of Rajpipla, and these petitions along with other cognate matters, in which the provisions of the Bombay Merged Territories and Areas (Jagirs Abolition) Act, 1953, were challenged, were dismissed, by holding that, if the grievance was that the impugned Act had brought about discrimination in breach of clause 5 of the letter of guarantee which was to be regarded as a part of the merger agreement entered into by the States with the Governor General of India, then the dispute clearly arose out of the letter of guarantee and would by article 363 of the Constitution be placed beyond the jurisdiction of the Supreme Court. (c) The decision of the Supreme Court in State of Gujarat v. Vora Fiddali Badruddin Mithibarwala, AIR 1964 SC 1043, was relied upon for the proposition that the integration of Indian States with the Dominion of India was an act of State, and that it was open to the new sovereign not to recognise any grant created on the eve of the merger by a "Tharao". (d) The decision of the Supreme Court in T.R. Bhavani Shankar Joshi v. Somasundara Moopanar, AIR 1965 SC 316, was relied upon for the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y Government that some time in 1949, they gave a sum of Rs.10,000 as a solatium, and later on, sanctioned from November, 1949, a monthly allowance of Rs.2,000 to the petitioner..." In paragraph 10 of that petition, it was contended that- "The merger of Rajpipla was not an effective act for the merging of Sagbara, which was a distinct political entity itself..." In paragraph 11 of that petition, it was alleged that- "The action taken in dispossessing the petitioner of his State has been something like a police action. His all 'Daftar' and records of his administration together with all the account books have been seized and forcibly taken possession of; all cash, moneys lying in his treasury have been forcibly removed; and his places of abode and the residence in which he was living have been also forcibly taken possession of. His staff was dismissed; and Sagbara territory was put under the control and administration of the Broach Collector, the Collector being nominated as the administrator. This tragedy was enacted on the eventful day, at 10 o'clock in the night, on June 9, 1948, all suddenly without any notice being given to the petitioner, and behind his back, and in h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inary, Part IV, dated the December 24, 1947). This Act was enacted to provide for the exercise of certain extra-provincial jurisdiction of the Central Government in respect of jurisdiction that the Central Government had or which it may acquire in relation to areas outside the provinces of India by treaty, agreement, grant, usage, sufferance and other lawful means. "Extra-provincial jurisdiction" was defined to mean, "any jurisdiction which by treaty, agreement, grant, usage, sufferance or other lawful means the Central Government has for the time being in or in relation to any area outside the Provinces". Under section 4 of that Act, the Central Government was empowered by notification in the official gazette, to make such orders as may seem to it expedient for the effective exercise of such extra-provincal jurisdiction of the Central Government. Section 5 of that Act provided that, every act and thing done, whether before or after the commencement of this Act, in pursuance of any extra-provindal jurisdiction of the Central Government in an area outside the Provinces shall be as valid as if it had been done according to the local law then in force in that area. Sagbara was a fe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, i.e., the date of the commencement of the said order, as provided in clause (3) thereof. Accordingly, any reference to acceding State in the Government of India Act, 1935, or in any Act or Ordinance made on or after the appointed day was to be construed as not including a reference to any of the merged States, and any reference in any such Act or Ordinance as afore said to a province specified in a Schedule to this order was to be construed as including the territories of all the States specified in that Schedule. All the laws in force in a merged State or any part thereof immediately before the appointed day, including orders made under section 3 or section 4 of the Extra-Provincial jurisdiction Act, 1947, were to continue to be in force until repealed, amended or modified. Schedule II mentioned the names of the States merged in the Province of Bombay which included Rajpipla. By Notification No. 2751/46-F issued by the Government of India and republished in the Bombay Government Gazette Extraordinary, Part IV-A, dated June 4, 1948, the jurisdiction for, and in relation to, the governance of the States specified in the Schedule annexed thereto, which included "Rajpipla (inclu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bara shall merge with and form part of the Broach District and shall be administered accordingly...". All enactments, notifications, orders, schemes, rules and bye-laws issued, made or prescribed under such enactments and in force in the Province of Bombay were extended to the areas merged with and included in the existing district or districts by this notification, as ordered in paragraph 9 thereof. The Government of India, by a notification published on June 8, 1948, in the Bombay Government Gazette Extraordinary, Part IV, page 243, appointed the Collector of Broach to be the district magistrate for "Rajpipla with the including the State Segbara". In exercise of the powers conferred by section 4 of the Extra-Provincial Jurisdiction Act, 1947, the Government of Bombay had issued Judicial Committee (Integrated States) Order, which came into force from July 12, 1949 (published in the Bombay Government Gazette Extraordinary, dated July 12, 1949, Part IV-A, at page 574A), by which a judicial committee consisting of two judges of the Bombay High Court was constituted with full powers and jurisdiction to decide all civil and criminal appeals and other proceedings pending before th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... creating the judicial district of Broach for the purpose of civil and criminal jurisdiction were issued and Sagbara Mahal (115 villages) was shown as a part of the judicial district of Broach. The above facts will show that Rajpipla including its Sagbara Estate had effectively merged with the Province of Bombay and had become part of the reconstituted Broach District. After the possession of Sagbara Estate was taken over along with Rajpipla State, it stood so merged with effect from June 10, 1948, with the Province of Bombay pursuant to the merger agreement with the Dominion Government. The effective legislative, administrative and judicial control was established over the merged State of Rajpipla (including Sagbara) and that integrated State ceased to exist with effect from June 10, 1948, and became part of the Province of Bombay, as a result of which its territories came to be included in the reconstituted District of Broach. By the merger agreement, the States of Rajpipla including Sagbara ceded with the Dominion of India and became part of the Province of Bombay. By voluntarily merging into another State, a State loses all its independence and becomes a mere part of anothe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sea over which it has not previously claimed or exercised sovereignty of jurisdiction. The acquisition of territory by a sovereign State for the first time is an act of State which cannot be challenged, controlled or interfered with by the courts of the State. This principle precludes any contest between the executive and judicial branches of the State as to whether a territory does or does not legally belong to the State. The act of State by which the area is acquired by the State and its sovereignty established over it is not justiciable in the municipal courts. It will be seen from the provisions of article 363 of the Constitution that, neither the Supreme Court nor any other court shall have jurisdiction, in any dispute arising out of any provision of a treaty, agreement, covenant, engagement, sanad or other similar instrument which was entered into or executed before the commencement of the Constitution by any Ruler of an Indian State and to which the Government of the Dominion of India or any of its predecessor Government was a party and which has or has been continued in operation after such commencement, or in any dispute in respect of any right accruing under or any liab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n power, and therefore, cannot be challenged, controlled or interfered with by municipal courts. Its sanction is not that of law, but of sovereign power, and, whatever it be, municipal courts must accept, as it is, without question. But it may, and often must, be part of their duty to take cognizance of it. For instance, if an act is relied upon as being an act of State, and as thus affording an answer to claims made by a subject, the courts must decide whether it was in truth an act of State, and what was its nature and extent. In the case of Salaman v. Secretary of State in Council of India [1906] 1 KB 613 (CA), where the East India Company, as representing the Crown, annexed the territory of a native State, and confiscated the State property, granting to the Maharajah, the Ruler of the State, who was then an infant, a pension for life, and the company also assumed the custody of his person during his minority, and took possession of his private property, and an action was brought after his death by the trustee in bankruptcy of his residuary legatee against the Secretary of State for India, as the successor of the East India Company, for arrears of the pension, and for an account ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , which they might have enjoyed under the old. The only legal enforceable rights they could have as against their new sovereign were those, and only those, which that new sovereign, by agreement expressed or implied, or by legislation, chose to confer upon them..." The Supreme Court also referred to the decision of the Privy Council in Asrar Ahmed v. Durgah Committee, Ajmer AIR 1947 PC 1, in which Lord Simonds said: " 'From this, it follows that the rights, which the inhabitants of that State enjoyed against its former rulers, availed them nothing against the British Government and could not be asserted in the courts established by that Government except so far as they had been recognised by the new sovereign power. Recognition may be by legislation or by agreement express or implied.'......." In paragraph 29 of the judgment, the Supreme Court held: "'That a new sovereign emerged on the unification of India by the merger or absorption of the Indian States with the Provinces of British India cannot be questioned and that this was by the process of the sovereignty of the rulers of the former Indian States being extinguished cannot be disputed either'." In paragraph 30 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... volume 7, an act of State is defined in para. 593 as follows: "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, unless they are temporarily within the allegiance of the Crown, is an act of State." An act of State is a prerogative act of policy in the field of foreign affairs performed by the sovereign in the course of its relationship with another State or its subjects. Making of treaties, annexation of area or territory, seizure of land are typical acts of State. Thus, while acquisition of Sagbara Estate by cession pursuant to the merger agreement and by its effective merger was indeed an act of State on the part of the Dominion of India, the subsequent release in favour of Ramsinhji was not an act of State, but was only a grace shown by the Government of India towards its own citizen, because, after merger, Ramsinhji became the subject of the Dominion of India. One more aspect needs to be noted here. When on cession or by subjugation sovereignty is passed on to the acquiring State over a territory and sovereignty is assumed over it by the new sovereign, there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were taken over on June 10, 1948, by the Dominion of India under the merger agreement with the erstwhile ruler of Rajpipla, Vasava Karansinhji, who was reduced to penury as lamented by him in paragraphs 2 and 3 of his letter dated August 29, 1953 (at annexure L in the paper-book), there remained no property with Karansinhji, who at the time of his death on April 17, 1957, was not competent to dispose of any of the properties which were taken over by the act of State on June 10, 1948, and had vested in the Dominion of India under the merger agreement. Only the property which the deceased had at the time of his death and which he was competent to dispose of, shall be deemed to pass on his death, as provided by section 6 of the Estate Duty Act. Since there was no property which could pass on the death of Karansinhji under section 5 of the Estate Duty Act, there could arise no question of levy of estate duty from the accounting person. The Tribunal was, therefore, in our opinion, right in holding that, at the time of death of Karansinhji of Sagbara, no property which was part of Sagbara Estate or personal property of the deceased which stood on the same footing, passed on his death ..... X X X X Extracts X X X X X X X X Extracts X X X X
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