1. These three appeals arise out of three suits instituted by three different plaintiffs against the same defendant, the State of Bombay. They have been heard together and the principal points raised and argued before us are common to them; accordingly they will be disposed of by one judgment which will be delivered in F. A. No. 172 of 1956.
2. F.A. No. 172 of 1956 is preferred by the State of Bombay against the decree passed in favour of the plaintiff, Dr. Raghunath Balkrishna Chandrachud, in Special Suit No. 46 of 1952.
3. On March 14, 1925, Dr. Chandrachud was taken up in the former Baroda State Service as Principal Medical Officer of the State General Hospital and Chief Medical Officer of the State on an initial pay of Rs. 1,000 per month. The post on which he was appointed was the post of public service in the State. In January 1927, he was confirmed in his office and became a permanent member of the State Public Service. From April 3, 1945, his pay was increased to Rs. 2,000 per month. In October 1947, he was appointed the Naib Diwan (an official member of the Executive Council) of the State of Baroda. In the ordinary course he was due to retire from service of the State on February 14, 1952.
4. On January 9, 1948, His Highness the Gaekwar of Baroda issued a Proclamation announcing his intention of constituting an interim Government by appointing popular representatives to his Executive Council. In view of such Proclamation it was considered likely that the services of the official members of the Executive Council in the position of the plaintiff would have to be prematurely terminated. On January 28, 1948, the salary of the plaintiff was raised from Rs. 2,000 to 2,500 per month. In order to provide for the contingency of compulsory and premature retirement of such Government members of the Executive Council, His Highness the Gaekwar issued an order (exh. 97) on February 8, 1948. It was a follows:-
1. Department. Secretariat,2. No. and date of Tippan.3. Subject:-Hazur Order dated 8-2-1948:His Highness the Maharaja Saheb has been pleased to order that in the event of premature retirement of the Government Members, Messrs. D. V. Gaekwad and Chandrachud, they will get forthwith as compensation an amount equal to the total amount they would have received had they continued in service upto the due date of retirement and a full pension of Rs. 500 per month from the date of premature retirement.
2. Mr. D. V. Gaekwar's salary is raised to Rs. 2000 from the date of his confirmation as Naib Diwan.
5. With effect from June 1, 1948, plaintiff was made to retire from his office as Naib-Diwan and on or before that date he was paid by the State of Baroda in terms of the aforesaid Huzur order an amount of Rs. 95,196-5-0 as compensation for his premature, compulsory retirement. The Executive Council of which the plaintiff was the Naib Diwan and a Government Member was itself dissolved and Dr. Jivraj N. Mehta was appointed by His Highness the Gaekwar to officiate as the Dewan of his State from June 1, 1948, and was asked to form a new Ministry as early as possible.
6. It appears some difficulty was felt in construing and giving effect to the Huzur Order dated February 8, 1948. His Highness the Gaekwar issued another order on July 22, 1948, as follows: -
1. Department. Political and Secretariat.
2. Number and date of tippan. Independent.
3. Subject matter of tippan or order. Pension and compensation to Messrs. Sudhalkar and Damojirao and Dr. Chandrachud.
The Hazur Orders granting compensation and pension to Mr. S. A. Sudhalkar, Dr. R. B. Chandrachud and Mr. Damojirao Gaekwar require clarification as some misunderstanding seems to have arisen in this connection.
The compensation sanctioned to these three officers should be drawn by them as soon as they give up their offices in the State, but the pension is to be drawn only when and as each one of them reaches his age of retirement. Dr. R. B. Chandrachud as Minister-in-Waiting is allowed to draw such salary over and above his pension to which he may be eligible under the Account Rules.
Sd. P. F. Gaekwar.
7. With the advent of Independence, the popular urge in the State of Baroda for attaining the same measure of freedom as was enjoyed by the people of the neighbouring Province of Bombay gained momentum and manifested itself in public movements for power from the Ruler to his people. Presumably to meet such public demands to some extent, His Highness the Gaekwar announced some further reforms in the Constitution of the Government for his State, by issuing a Proclamation vkKk&if;=dk** on August 29, 1948. The Proclamation read as follows:-
** JhvkKk&if;=dkcMksnjk jkT;rkjh[k 29 ekgs vkWx'V 1948
By my Proclamation of the 9th January 1948 I ordered the Setting up of a body elected on the basis of adult franchise to frame a Constitution for my State after excluding from its purview the subjects specified in Schedule II to that proclamation; and pending the promulgation of the new Constitution I announced my intention of creating an Interim Government by appointing popular representatives to my Executive Council,
Since then certain unfortunate difficulties have arisen in the implementation of the above declarations and I am determined not only to remove those difficulties but also to provide adequate safeguards against the emergence of any difficulties in future;
I, therefore, hereby announce that-
First: The Constitution-framing Assembly to be elected in pursuance of my proclamation of the 9th January 1948 shall have full and unrestricted authority to frame such constitution for my State as it deems necessary or expedient and no matter or subject whatsoever shall be excluded from its purview. My proclamation of the 9th January 1948 shall be deemed to be amended accordingly and the schedules thereto shall be deemed to be omitted.
Second: Pending the promulgation of the new Constitution to be framed by the Constitution-framing Assembly, my Executive Council shall consist of a Dewan who enjoys the confidence of a majority of the Dhara Sabha, and such other members as will be appointed by me on the recommendation of the Dewan; and the entire executive authority of the State shall vest in the Executive Council. The Government of Baroda Act shall be deemed to be amended accordingly and in particular the words 'or as may be otherwise directed by His Highness' occurring in Section 3 and the whole of Section 4 of the said Act shall be deemed to be omitted.
Third: There shall be a Council of State consisting of (1) Her Highness the Maharani Shantadevi, (2) the Dewan, and (3) the Minister in charge of the portfolio of Law, and whenever His Highness is absent from the State the said Council shall have and exercise all the powers, authorities, jurisdiction and functions of His Highness whether prerogative or statutory, and every act of the said Council shall have the same force and effect as an act done by His Highness. In the event of any difference of opinion in the said Council, the decision of the majority shall prevail. Any vacancy occurring in the said Council shall be filled by the Government of India.
The said Council may make rules for the more convenient transaction of the business of the Council and may provide for the manner in which any order or other instrument made and executed in the name of the said Council shall be authenticated, and the validity of any order or instrument which is so authenticated shall not be called in question on the ground that it is not an order or instrument made or executed by the said Council.
New Delhi, Sign-Manual.25th August 1948.
8. On April 22, 1949, the Executive Council appointed by His Highness the Gaekwar passed an order by which they purported to cancel the orders passed by His Highness the Maharaja Saheb about the retirement, compensation and pension in respect of the Ex-Dewan Mr. S. A. Sudhalkar and the two Ex Naib-Diwans, Dr. R. B. Chandrachud and Mr. Dainajirao V. Gaekwad and directed that the amount received by Dr. R. B. Chandrachud and Mr. Damajirao Gaekwad as compensation having been wrongly allowed should be forfeited to the State and returned by them to the State Treasury. The order passed by the Executive Council was in these terms:-
GOVERNMENT OF BARODA.
GOVERNMENT ORDER No. (R) 87/18 dated 22-4-1949.
1. Name of the department in which the order issues. Secretariat.
2. Number and date of the tippan. Independent.
3. Number in the current register of the Secretariat.
4. Name of the head of the department submitting the tippan.
5. Subject of the tippan.
Government dues from
Mr. S. A. Sudhalkar, Dr. R. B. Chandra-
chud and D. V. Gaekwar.
Key-word: GOVERNMENT ORDERThe Government have given their serious consideration to the orders passed by His Highness the Maharaja Saheb about retirement, compensation and pension in respect of the Ex-Dewan, Mr. S. A. Sudhalkar, and the two Ex-Naib Dewans, Dr. R. B. Chandrachud and Mr. Damajirao V. Gaekwad. The Government are convinced that these orders have been passed either in ignorance of facts, or on submission of misleading statements, deliberately to create an unjustifiable and illegal charge on the State Exchequer. Had Mr. Sudhalkar discharged his duties, faithfully and lawfully as a Dewan should have particularly when as a former Chief Justice of the State he should have understood the duty and the law all the more clearly, no such orders would have been passed at all. To grant both pension and that of a very high amount in contravention of all rules and precedents-and a very heavy compensation at the same time is an act of arbitrary authority for which no legal justification or moral explanation can be found.
2. As regards Mr. Chandrachud and Mr. Damajirao Gaekwad, the case is somewhat different in that they have not misused the trust put in them, to the extent it has happened in the case of Mr. Sudhalkar, who as Dewan owed special responsibility both to the Ruler and the State.
3. In view of the above, the Government direct that the amounts received by Dr. R. B. Chandrachud and Mr. Damajirao Gaekwad as compensation, having been wrongly allowed, should be forfeited to the State and returned by them to the State Treasury. These officers could have, however, asked for 4 months privilege leave prior to retirement under the rules, and the same could have been granted by His Highness. In view of the circumstances under which their services came to an end, Government feel that they may be allowed 4 months privilege leave from the date on which they relinquished their charges. The amount due to them on this account, reckoning the amount of the pension of Rs. 500 per month granted to them by His Highness as from the date of the expiry of the leave upto 31-3-1949, the total amount due to them comes to Rs. 17,780-5-0 and Rs. 10,532-12-0, respectively, which amounts can be deducted from the amounts of Rs. (1) 11,206-14-0 (less income-tax) and Rs. 60,580-10-3 (less income-tax) drawn as compensation by them, respectively, from the State. The balance of the amount thus due by them viz., Rs. 77,416 in the case of Dr. R. B. Chandrachud and Rs. 43,196-13-0 in the case of Mr. Damajirao Gaekwad be recovered from them. The recovery is ordered under Section 148 of the Baroda Land Revenue Code. They would continue to draw pension of Rs. 500 per month each, as from 1-4-1949.
4. For reasons explained in para. 1 above, the conduct of Mr. Sudhalkar is not such as would entitle him either to 4 months privilege leave or to pension as in the case of the other two officers. Government, however, have no desire to be vindictive and they, therefore, have no objection to his drawing a pension of Rs. 500 as from 1-6-1948, the date of his retirement; but they feel that they cannot justifiably allow him four months privilege leave as in the case of other two officers. After taking into consideration as in the case of the said two officers, the amount of pension due to him upto 31-3-1949, the income-tax paid by him while drawing compensation and the amount of income-tax to be paid by him on his annual income based on the amounts drawn or to be drawn by him as salary or pension for the years 1947-48 and 1948-49, respectively, the balance due by him comes to Rs. 1,40,947-2-0. This amount should be realised from him under Section 148 of the Baroda Land Revenue Code. Mr. Sudhalkar will continue to draw his pension of Rs. 500 per month as from 1-4-1949. Baroda. Sd. Jivraj N. Mehta.22nd April, 1949, 22-4-49,President of the Council. Sd. C. J. Sutaria.Sd. C. P. Shah.Sd. M. C. Patel.Sd. R. J. Amin.Sd. G. M. Tambe.Sd. R. T. Luwa.
9. On April 24, 1949, the Suba of Baroda informed the plaintiff that the Government by their order dated April 22, 1949, had revised the previous order about his retirement, compensation and pension and directed that the sum of compensation received by him should be forfeited to the State and returned by him to the State Treasury. He informed him that the amount due from him to the State came to Rs. 77,416 which was to be recovered under Section 148 of the Baroda Land Revenue Code. He called upon the plaintiff to pay the amount immediately. On or about April 26, 1949, the City Wahiwatdar, Baroda, passed an order to attach and auction the movable and immovable properties of Messrs. Sudhalkar, Dr. Chandrachud and D. V. Gaekwad, under Sections 121-122 of the Land Revenue Code. Plaintiff refunded to the treasury of the State of Baroda a sum of Us. 55,000 on April 27, 1949, and a further sum of Rs. 10,000 on April 29, 1949, aggregating in all to Rs. 65,000.
10. On March 14, 1952, the Collector of Baroda sent a registered notice (exh. 93) to the plaintiff calling upon him to pay the balance of Rs. 12,416.
11. After giving notice to the State of Bombay on April 17, 1952, under Section 80 of the Code of Civil Procedure, plaintiff filed the present suit on June 23, 1952. Plaintiff's case as made out in the plaint was that the Hazur order (exh- 97) passed by His Highness the Gaekwar of Baroda on February 8, 1948, was a valid and binding order passed by His Highness in his capacity as the Ruler of Baroda, that the subsequent order (exh. 106) dated April 22, 1949, passed by the Executive Council of the Baroda State was without any authority or jurisdiction and was illegal and ultra vires and the Government of Baroda were not entitled in law to call upon and compel the plaintiff to refund or to repay any sum or sums of money lawfully and rightly paid to him by the State as and by way of compensation for the premature termination of his services. He further contended that the aggregate sum of Rs. 65,000 was illegally recovered from him by the Government of Baroda under threat of process of law and under circumstances amounting to undue influence, threat and coercion and that he was, therefore, entitled to recover the said amount of Rs, 65,000 from the State of Bombay on whom had devolved all the liabilities and the obligations of the former State of Baroda. It was also stated that the amount which the plaintiff had had to pay could not have been lawfully recovered under the provisions of the Baroda Land Revenue Code. The amount of compensation had already been lawfully received by the plaintiff and it could not thereafter be forfeited to the Baroda State as was purported to be done by the order dated April 22, 1949. The said order was also challenged on the ground that it had contravened the rules of natural justice in that it had been passed without hearing the plaintiff and without due inquiry. Plaintiff further stated that the Hazur order dated February 8, 1948, passed by His Highness the Gaekwar of Baroda being a valid and lawful order was binding upon the defendant who is the successor Government to the State of Baroda and the Government of Bombay was not entitled in law to claim back from the plaintiff the balance of Rs. 12,416, Accordingly, plaintiff prayed for declarations that the Huzur order dated February 8, 1948, of His Highness the Gaekwar of Baroda was a proper and valid order passed in exercise of the Sovereign powers vested in the Gaekwar of Baroda and that it is valid and binding on the defendant and that the order dated April 22, 1949, passed by the Government of Baroda was invalid, ultra vires of the Executive Council of the State of Baroda and without any authority and jurisdiction and is not binding on the plaintiff, and for recovery of Rs. 77,300 which was made up of two items:-
Rs, 65,000 paid by plaintiff.Rs. 12,300 Interest at 6 per cent, per annum on Rs. 65,000 calculated from 29-4-1949 till date of suit (23-6-1952).-----------Rs. 77,300-----------
He also prayed for a perpetual injunction restraining the defendant from demanding or recovering or attempting to recover the balance of Rs. 12,416.
12. S.A. No. 218/1955 arises out of suit No. 184 of 1951 instituted by Mr. D. V. Gaekwad for the same declarations as asked for by Dr. Chandrachud in his suit and also for a permanent injunction restraining the defendent from executing the order dated April 22, 1948. Before the recovery of the amount as mentioned in the said order was made from Mr. Gaekwad, on his properties having been attached by the Revenue Arthorities of the former State of Baroda, he approached the Civil Court and filed the aforesaid suit on April 30, 1949, against the Government of Baroda State itself. After the merger of the State into the State of Bombay, the plaint was got amended and the State of Bombay was impleaded as defendant in place of the former Government of Baroda State.
13. F.A. No. 407 of 1957 is preferred by the State of Bombay against the decree passed in favour of Mr. Sakharam Amrit Sudhalkar-plaintiff in Special Suit No, 49 of 1952. In 1934 he was appointed as a Judge of the High Court of the State of Baroda under a special contract which entitled him to earn pension of one fourth of his salary on his completing his 58th year. On November 19, 1945, by an order of His Highness, the age of retirement for High Court Judges was raised to 60. Plaintiff was then the Chief Justice of the High Court. On June 2, 1946, he was appointed a member of the Executive Council. On December 7, 1946, His Highness the Maharaja Saheb by his Hazur order confirmed his appointment as such member and continued to him the privileges already sanctioned to him as Chief Justice. In October 1947 he was appointed the President of the Executive Council and Prime Minister of Baroda. When the question of his compulsory and premature retirement arose, there was no provision in the law and rules of the State for awarding compensation to servants prematurely retiring for reasons of State. Accordingly, in consideration of services rendered by the plaintiff in various capacities and of the agreement with him when he was appointed as High Court Judge and as member of the Executive Council, His Highness passed a special order on February 8, 1948, in the exercise of his sovereign powers as Head of the State. The order is at exh. 134 and was as follows:-
1. Name of the department. Secretariat
2. Number and date of the case.
3. Subject. Compensation and pension to Mr. S.A. Sudhalkar, the Dewan, in case of early retirement.
HAZUR ORDER DATED 8-2-1948.
His Highness the Maharaja Saheb is pleased to direct that in case Mr. S. A. Sudhalkar, the Dewan is retired before he has completed sixty years fixed for his retirement, he will get as compensation, the amount equal to the total amount of his salary which he would have drawn if he would have completed sixty years and will forthwith on retirement get a pension of Rs. 1,250 per month as agreed to at the time of his appointment.
On May 18, 1948, His Highness passed the following order: (exh. 125)
Rajkaryadhurandhar S. A. Sudhalkar, B.A., LLB., Dewan, Baroda State, is allowed to retire on pension with effect from the 1st June 1948.
2. Dr. Jivraj N. Mehta to officiate as Dewan:-Dr. Jivraj N. Mehta shall officiate as the Dewan, Baroda State, from 1st June 1948 on a salary of Rs. 5000 (five thousand) per month and he shall form a new Ministry as soon as possible.
14. In accordance with the order exh. 134, plaintiff was paid Rs. 1,49,947 as compensation calculated at Rs. 5,000 per month for the period from June 1, 1948, till April 30, 1951, the date of superannuation.
15. By its order dated April 22, 1949, the Executive Council ordered the recovery of Rs. 1,40,947-2-0 from the plaintiff. Plaintiff saw the Dewan on April 30, 1949. The Dewan heard the plaintiff and the Executive Council thereupon cancelled their previous order and passed a fresh order No. 99A dated April 30, 1949, as follows (exh. 123) :-
GOVERNMENT OF BARODA
GOVERNMENT ORDER No. 99/A Dated 30-4-49.
1. Name of the department in which the order issues.
2. Number and date of the tippan.
3. Number in the current register of the Secretariat.
4. Name of the head of the department submitting the tippan.
5. Subject of the tippan; Regarding the retirement, compensation and pension amount to Mr. S. A. Sudhalkar.
The Government have considered afresh the C.O. No. 87/18, 22-4-49 passed in regard to the orders of H. H. the Maharaja Saheb about retirement, compensation and pension in respect of Ex. Dewan Mr. S. A. Sudhalkar, which along with the remarks made against him they hereby cancel, and order that Mr. Sudhalkar be paid the leave salary due to him from the date of his retirement, to the date of superannuation on reaching 58 years of age i.e. upto 30-4-49 on the basis of salary drawn by him on the date of retirement and a further period of leave on full pay for four months thereafter and a pension of Rs. 625 per month, as from 1-9-49. It is hereby ordered that the payment made in excess of the above terms of retirement be refunded to the Government; half, on or before 31st May 1949 and the balance before 30th June 1949. June 1949. Sd. Jivraj N. Mehta.30th June 1949. Sd. C. J. Sutaria.Sd. C. P. Shah. Sd. R. J. Amin.Baroda. Sd. G. M. Tambe.30th June 1949. Sd. R. T. Luwa.
16. It is the plaintiff's case that he had to pay Rs. 4,000 by a cheque to the Dewan under coercion before his properties were released from attachment. The said amount was collected and received by the present Government-the State of Bombay. On July 15, 1949, plaintiff received a notice from the 'Wahiwatdar (Mamlatdar) of Baroda City that the balance of the amount under Order No. 99A dated April 30, 1949, was ordered to be recovered and that plaintiff should pay the amount within four days. On July 18, 1949, plaintiff paid Rs. 67,034-3-2 by two cheques under protest and without prejudice to his rights to contest the legality of Baroda Executive Council's orders. The amount under these two cheques was also collected and received by the present Government-the State of Bombay.
17. Plaintiff contended that the two orders dated April 22, 1949, and April 30, 1949, were illegal and ultra vires the Executive Council which purported to pass them and that the Executive Council being itself not a sovereign body had no authority or power to rescind, cancel, modify or revise the orders passed by His Highness the Maharaja Saheb as Sovereign and Supreme Head of the State. He also contended that the order dated February 8, 1948, passed by His Highness being in accordance with the contract of service entered into between him and the Government of Baroda was binding on the Government of Baroda and also upon its successor the present defendant, the State of Bombay. It was also stated that the amount paid to the plaintiff had become his property, and the Executive Council had no authority or power to order its recovery, or forfeit the same or reduce his pension. Plaintiff further contended that the amount illegally recovered from him had passed into the hands of the defendant and that the defendant had no authority to keep the same. He prayed for a declaration that the orders passed by His Highness the Maharaja Saheb of Baroda State dated February 8, 1948, and May 18, 1948, are binding upon the defendant and the orders passed by the Executive Council No. R. 87/18 of April 22, 1949, and No. 99A of April 30, 1949, are illegal, ultra vires and void and also for consequential relief that the defendant be restrained from withholding the implementation of the said orders of His Highness, the Maharaja Saheb. He also asked for a decree for the recovery of the following amounts:-
Rs. 4,000-0-0 Money paid on 30-4-1949.Rs. 758-0-0 Interest from 30-4-1949 to the date of suit (27-6-1952) at the rate of 6% per annum.Rs. 67,034-3-2 Money paid on 18-7-1949. Rs. 11,840-0-0 Interest at the abovementioned rate from 18-7-1949 till date of suit.---------------Rs. 83,632-3-2---------------
18. The contentions of the defendant, the State of Bombay, to the three suits were more or less the same. It was admitted that the Maharaja of Baroda had passed the Hazur order dated February 8, 1948, but it was stated that it was highly improper and against public interest as it purported to award both pension and compensation. It was contended that the order had been passed by the Maharaja in his executive capacity as the Head of Government of Baroda for the time being and that it had not been passed in the exercise of his prerogative rights or inherent sovereign authority. The Executive Council had every right to revise or modify the said order in view of the fact that all the executive authority had been transferred to it. It was asserted that the order dated April 22,1949, was quite legal and effective and the plaintiff was bound to refund the amount of Rs. 77,416 under the same. The defendant further stated 'As the order dated 22-44949 passed by the Government of Baroda was legal, proper and effective, the Government of Bombay had a right to claim back Rs. 12,416 from the plaintiff' (exh. 13, para. 17 in Dr. Chandrachud's suit). Plaintiff's claim for interest was also denied by the Government.
19. In Mr. Sudhalkar's suit it was contended by the State of Bombay that the orders (dated February 8, 1948), were in respect of salaries, allowances or pensions to be paid to public servants. There were already in force Rules and Orders relating to salaries and allowances to be paid to public servants in the Civil Service of Baroda State. The orders dated February 8, 1948, were in the nature of supplementary provisions regulating payment to be made to members of public service. These orders were, therefore, of the nature of executive orders. As regards the revised order dated April 30, 1949, it was contended that the said order embodied the terms voluntarily agreed to by the plaintiff (Mr. Sudhalkar) as a result of the discussion at his interview with the Dewan and that the terms thereof were binding on the plaintiff and he had no right to go behind the same or to dispute their legality and that plaintiff was estopped by his conduct from going behind that consent order.
20. Dr. Chandrachud's suit came up for hearing before the Joint Civil Judge, S.D., of Baroda. He held that the order dated February 8, 1948, had been passed by the Maharaja of Baroda in his legislative and sovereign authority and, therefore, the Executive Council could not by its order dated April 22, 1949, vary the said order of the Maharaja. He also held that plaintiff had been made to pay the amount under coercion. He, accordingly, made a decree on August 31, 1955, in favour of plaintiff as claimed in his suit.
21. Mr. Sudhalkar's suit came up for hearing before the same Judge in 1956. In this suit it was further held that the order No. 99A dated April 30, 1949, had not been passed with the consent of Mr. Sudhalkar and that he was not estopped from going behind the said order and filing the present suit. There was thus a decree in his favour on December 24, 1956.
22. The suit filed on behalf of Mr. D. V. Gaekwad came up for hearing before-another Joint Civil Judge (S.D.), Baroda. He held that the order of April 22, 194,9, was illegal and without authority and, accordingly, granted injunction as prayed for by the plaintiff. The State of Bombay preferred Civil Appeal No. 146 of 1952 against the decree of the trial Court. The learned Assistant Judge at Baroda before whom the appeal came up for hearing dismissed the appeal on September 30, 1954. He held that the Executive Council had no power to revise the order passed by His Highness when he had full sovereign authority.
23. The first question that arises for consideration in these appeals is, what is the nature of the order dated February 8, 1948, passed by His Highness the Maharaja of Baroda? Is it merely an Executive order as contended by the defendant or as contended by the plaintiff an order having the force of law and of the nature of legislative enactment providing for compensation in a situation which was then anticipated and which indeed happened on June 1, 1948 ?
24. Before the nature of the order in question could he ascertained, it is necessary to know what is an executive act and what are the executive functions of Government.
25. The powers of Government are generally classified into three main departments-the Executive, Legislative and Judicial. In Halsbury's Laws of England (third edn., Vol. 7, para. 409, page 192), it is stated that
Executive functions [of the State] are incapable of comprehensive definition, for they are merely the residue of the functions of Government after legislative and judicial functions are taken away. They include, in addition to the execution of the laws, the maintenance of public order, the management of Crown property and nationalised industries and services, the direction of foreign policy, the conduct of military operations and the provision or supervision of such services as education, public health, transport and state assistance and insurance.
The Executive is only a department of the State and not the Sovereign or the State itself. The Executive carries out the policy of the Government; and undertakes properly to execute the laws enacted by the Legislature and interpreted by the Judiciary. In his treatise on Constitutional Law, (1936) Willis, after considering Mr. Green's definition of the three governmental powers, observes (p. 131) :
Mr. Green has defined the legislative power as the power to create rights, powers, privileges, or immunities, and their correlatives, as well as status, not dependent upon any previous rights, duties, etc. (or for the first time), that is, apparently, the power of creating antecedent legal capacities and liabilities. He defines judicial power as the power to create some right or duty dependent upon a previous right or duty, that is apparently, the power to create remedial legal capacities and liabilities. He finds difficulty in defining executive power, except as including all governmental power which is not a part of the process of legislation or adjudication, that is, the power which is concerned mostly with the management and execution of public affairs.. .Perhaps it would be better to say that it is a legislative function to make all substantive law, and a judicial function finally to determine constitutional jurisdiction and the application of substantive law to specific facts...The legislative function, then, is general and relates to the future, whereas the judicial function is specific, final, and ordinarily relates to the past. The executive function is the function of administering public affairs and enforcing or carrying out the law.
Messrs, Kotwal and Gupte, the, learned Counsel for the respondents, rely on these observations of Willis and contend that the order dated February 8, 1948, of His Highness the Maharaja of Baroda was not an executive order but an order passed by him in the exercise of his legislative and judicial authority.
26. Since before 1948 there were in force in the State of! Baroda, Government Servants Rules and Regulations by which the appointments of Government servants used to be made and their pensions and other emoluments regulated. In the trial Court it was contended by the defendant that the amount of compensation to the plaintiffs should have been based on the principles adopted by the Government of India and the premature retirement Rules made by the Government of India in the year 1987 were referred to and relied upon. These Rules had been made, as the learned trial Judge observed, either on the floor of the Indian Legislature or by the Government of India on the strength of the power derived from the Legislature to make such rules. As in the case of these rules, Baroda Government Servants' Rules and Regulations must have also been framed and sanctioned under the power derived from the Baroda State Legislature and can, therefore, be regarded as having the force of law and partaking of the characteristics of legislative enactment. Rule No. 3 of the Rules regarding Government servants has been supplied to us in English translation and it is as follows :-
Rules regarding Government Servants
(Civil Service Regulations)
(3) Application of Rules.
(1) It is to be understood that these rules apply to all Government Servants in all departments of the State.
Special resolution made in regard to other servants.
(2) But those-
(k) Servants who would have been employed after making special contract with them;
(kha) Servants in relation to whom
(a) special resolution, or
(b) an order
has been passed or would be passed, then, in regard to such servants, this regulation will not apply, so as to contravene such- (g) special contract
(gh) such resolution
(ng) such order.
It will be seen that Clauses (k) and (kha) of Sub-rule (2) act as provisos to Sub-rule (1) of Rule 3. The learned Counsel Mr. Munshi, who appears for the appellant in these three appeals, has contended that the Hazur order dated February 8, 1948, was such an order as is contemplated by the second proviso (kha) of Sub-rule (2) of Rule 3; he also stated that such an order must have been passed in the exercise of prerogative and inherent powers which had been expressly declared under Sections 3 and 4 of the Government of Baroda Act, 1940, to be and to have always been possessed and retained by His Highness. Mr. Munshi, however, added that the prerogative or the inherent power thus exercised by the Ruler in the present case manifested itself into an executive order and not a legislative or judicial act. If the Hazur order were such an order as is contemplated by the proviso (kha) of Sub-rule (2) of Rule 3; and if that proviso itself is to be found in the Rules which have the force of law and which partake of the characteristics of legislative enactment, then it must be held that the Hazur order must have been passed by His Highness in the exercise of his sovereign legislative authority. Such an order when passed would find its appropriate place in the proviso. The nature of the proviso and the rules in which such proviso appears would help us determine the nature of the power in the exercise of which the Huzur order was passed. If the source of authority for the rules was the Legislature, the source of authority for the order covered by the proviso was the supreme legislative power vested in the Ruler himself. The authority was the same, though the sources were different.
27. In England, pensions and allowances of different kinds have always been the subject-matter of legislative enactments. In Halsbury's Laws of England (3rd. edn., Vol. 7, para. 914) it is mentioned that the grant of superannuation benefits in respect of service in the civil service of the State is regulated by the Superannuation Acts, 1834 to 1950, and by the rules, regulations and warrants made under them. The Acts provide that an established civil servant who has completed the necessary period of service and who has reached the retiring age or retired earlier on a medical certificate is entitled to a pension called a superannuation allowance and in most cases to a lump sum payment called an additional allowance, (para. 921). Under the provisions of Section 6 of the Superannuations Act, 1909 (9 Edw. VII, C. 10) a compensation allowance may be granted to any person retiring or removed from the public service in consequence of the abolition of his office (para. 922).
28. The wording of the Hazur order also leaves no doubt in my mind that what was intended and passed by His Highness in the exercise of his sovereign powers was only a special law in the nature of a private Act providing for a future contingency which was expected to arise and conferring fresh rights upon certain specified members of the public service whose tenure of office was to be prematurely terminated on the contingency happening. It is not disputed that Baroda Government Servants Rules as they were in force at the material time did not have any provision regarding the awarding and fixation of compensation and pension to an officer who was required to retire prematurely from the service. Either the Dhara Sabha (Legislative Assembly) of the State functioning under the Government of Baroda Act with the previous sanction of His Highness or His Highness himself in the exercise of his overriding legislative powers could provide for such a contingency. The Hazur order in terms relates to a future event, namely 'the event of premature retirement of the Government members'. The right to get compensation was created and declared for the first time by this order. Applying the definition of legislative power as discussed and given by Willis in his treatise on Constitutional Law, it must be held that the Hazur order could have been passed by His Highness only, in the exercise of his supreme legislative power. In this connection, I may also refer to another argument of the learned Counsel Mr. Gupte. He referred us to several sections of the Government of Baroda Act, 1940, particularly those dealing with the financial matters or matters of revenue and also Section 18. His contention was that such matters had been always left to be dealt with solely by the Legislature under the Act; and the Hazur order making as it did an entirely new and unforseen provision of expenditure from the Exchequer of the State must also be regarded as having been passed under the same kind of legislative authority vested not in the Legislature but in the Ruler himself.
29. Mr. Gupte advanced a further argument in regard to the Hazur order passed in connection with the compensation and pension of Mr. Sudhalkar. He contended that so far as the determination of the age of retirement and the amount of pension was concerned the Hazur order amounted to a judicial adjudication by His Highness as the Supreme Judicial authority in the State made on consideration of the terms of the special agreement entered into between the Government and Mr. Budhalkar at the time of the latter's appointment. If the view of Willis on the threefold classification of governmental powers is any guidance for construing the Hazur order, then it is difficult to say that this contention is without any substance.
30. Then there is another difficulty in the way of construing the Hazur order as one passed by His Highness, only in his executive capacity. At the time when this order was passed by His Highness, the Government of Baroda Act, 1940, was in force in the State of Baroda. But this Act left untouched the prerogative and the sovereign powers of the Ruler in all matters, legislative, executive and judicial. Sections 3 and 4 of the Act expressly declared that such powers of His Highness were not at all affected by anything contained in the Act or in any other Act then in force. Those sections provided:-
Government of the State by His Highness.
3. The territories for the time being vested in His Highness are governed by and in the name of His Highness and all rights, authority and jurisdiction which appertain or are incidental to the government of such territories are exercisable by His Highness except in so far as may be otherwise provided by or under this Act, or as may be otherwise directed by His Highness.
His Highness' inherent powers.
4. Notwithstanding anything contained in this or any other Act, all powers, legislative, executive and judicial, in relation to the State and its Government are hereby declared to be and to have always been inherent in and possessed and retained by His Highness and nothing contained in this or any other Act shall affect or be deemed to have affected the right and prerogative of His Highness to make laws, and issue proclamations, orders and ordinances by virtue of his inherent authority.
31. It is already stated in the earlier part of this judgment that it is common ground between the parties that the Hazur order had been passed by His Highness in the exercise of his prerogative and sovereign powers. Thus, so far as the internal sovereignty was concerned, the Ruler of the State was the absolute monarch. His will was the law in respect to all matters upon which it was proclaimed. He was bound by no will except his own. He could make and administer laws. He was the fountain-head of justice. He could have justifiably described himself in the words attributed to Louis XIV of France:- 'The State, it is I'. All the political power was centred in him. Despite the Government of Baroda Act, he was still in strictness a sovereign of his State in the legal sense of that term. Any law made by him was binding and there was no power in his State which could annul or otherwise affect such law, except with his previous sanction. The powers of the Ruler of an Indian State were considered in two recent decisions of the Supreme Court. In Ameer-Un-Nissa Begum v. Mahboob Begum : AIR1955SC352 , on February 8, 1938, one Mahboob Begum had filed a suit in the Court established under the law of the State, praying for a declaration that she was the legally married wife of the deceased Nawab Wali-Ud-Dowlah. When the suit was pending, the Nizam issued a 'Firman' on February 19, 1939, directing the withdrawal of the suit from the said Court and appointing a Special Commission to investigate the matter of the dispute of Mahboob Begum and to submit a report to him (Nizam) through the Executive Council. The Commission made a report in' favour of Mahboob Begum and on March 20, 1946, the Executive Council recommended that the findings of the Commission should he accepted and this recommendation was approved by the Nizam by a 'Firman' dated June 26, 1947, which directed that the decision of the Commission which was in favour of Mahboob Begum should be implemented. On February 24, 1949, the Nizam issued another 'Firman' by which he dismissed the claim of Mahboob Begum. But this 'Firman' had been issued ex parte, and 011 a representation by Mahboob Begum, the Nizam issued a further 'Firman' which revoked the earlier 'Firman' of February 24, 1949, and the whole case was referred for opinion and report to one Sir George Spence.
32. Their Lordships of the Supreme Court considered the meaning and the effect to be given to the abovementioned three 'Firmans' of the Nizam. They held (p. 359):.that prior to the integration of Hyderabad State with the Indian Union and the coming into force of the Indian Constitution, the Nizam of Hyderabad enjoyed uncontrolled sovereign powers. He was the supreme legislature, the supreme judiciary and the supreme head of the executive, and there were no constitutional limitations upon his authority to act in any of these capacities. The 'Firmans' were expressions of the sovereign will of the Nizam and they were binding in the same way as any other law; -nay, they would override all other laws which were in conflict with them. So long as a particular 'Firman' held the field, that alone would govern or regulate the rights of the parties concerned, though it could be annulled or modified by a later 'Firman' at any time that the Nizam willed.
33. Then their Lordships considered the question whether the 'Firmans' were in the nature of legislative enactments or judicial orders. They observed (p. 359) :
The Nizam was not only the supreme legislature, he was the fountain of justice as well. When (by his first Firman of February 19, 1939) he constituted a new Court (the Commission), he could, according to ordinary notions, be deemed to have exercised his legislative authority. When he affirmed (by his second Firman of June 26, 1947) or reversed (by his third Firman of February 24, 1949) a judicial decision, that may appropriately be described as a judicial act. A rigid line of demarcation, however, between the one and the other would from the very nature of things be not justified or even possible.
If the law-making powers of the State belonged only to the Legislature and the judiciary and if the law of the State, therefore, could express itself either in the form of legislative enactment or in the form of judicial decisions, it would be indeed difficult to ascertain which 'Firman' would be legislative and which judicial in character, when the 'Firman' issuing authority were one and the same being both the Supreme Legislature and the Supreme Judiciary. It was for this reason that their Lordships of the Supreme Court considered the effect of the 'Firmans' not only on the footing that they amounted to judicial decisions but also on the footing that they were in the nature of legislative enactments determining private rights somewhat on the analogy of private Acts of Parliament. In another place of their judgment their Lordships observed that
the Firmans issued by the Nizam could be likened to judicial pronouncements only in the sense that they affected the rights and parties to a civil dispute.
They also rejected the argument that as there was no higher judicial authority above the Nizam, the 'Firman' of February 24, 1949, could be held to be an order passed on review by which the decision of the Commission was set aside and the claim of Mahboob Begum dismissed. Their Lordships observed that
As the Nizam enjoyed untrammelled authority to pass any order he liked, the importing of a fiction of a proceeding by way of review, prior to the 'Firman' of 24th February 1949, seems to us to be altogether unwarranted.
The 'Firmans' issued by the Nizam from time to time might have been arbitrary and capricious but the later 'Firman' could not be regarded as having 'reviewed' the earlier.
34. The same view was expressed by their Lordships of. the Supreme Court in another case reported in Director of End., Govt. of Hyd. v. Akram Ali : AIR1956SC60 . In that case there were disputes about the right to possession and supervision of a Darga between Akram Ali (respondent) and one Azam Ali. The Ecclesiastical Department of the State entrusted the supervision of the Darga to Azam Ali in 1914. He was however removed in 1920; and the Department took over the supervision under a 'Firman' dated December 31, 1920, of the Nizam which directed the Department to supervise the Darga until the rights of the parties had been inquired into and decided by a Civil Court. The 'Firman' was as follows:-
Pending enquiry of the case, the said Maash (Dargah) need not be handed over to any one. Let it remain in the supervision of the Government. I should be informed of whatever the results of the enquiry establishes so that proper orders may be passed.
35. Their Lordships considered the effect of this 'Firman'. They observed (p. 62) :
Now the Nizam was an absolute sovereign regarding all domestic matters at that time and his word was law. It does not matter whether this be called legislation or an executive act or a judicial determination because there is in fact no clear cut dividing line between the various functions of an absolute ruler whose will is law. Whatever he proclaimed through his Firmans had the combined effect of law and the decree of a Court; see the judgment of this Court in-Ameerunnisa Begum v. Mahbood Begum.
Therefore the effect of this Firman was to deprive the respondent (Akram Ali) and all other claimants of all rights to possession 'pending inquiry of the case'...the Nizam was at that time an absolute ruler and could do what he pleased. His will, as expressed in his 'Firman', was the law of the land. Therefore, even it be assumed that the respondent was in possession, his rights to immediate possession, whatever they may have been, were taken away and held in abeyance till he could establish them in the civil Courts.
36. The position of His Highness the Ruler of Baroda was the same as that of the Nizam. In Ganpatrao v. State of Bombay : AIR1959Bom263 , it was observed by this Court while dealing with the position of another Indian State Ruler (Kolhapur) that just as His Exalted Highness the Nizam was the fountain head of all judicial, legislative and executive authority, His Highness the Maharaja of Kolhapur was equally the fountain head of the legislative, executive and judicial authority. There cannot be any doubt whatever that the same was the position of His Highness the Maharaja of Baroda. If so, respectfully adopting the language of their Lordships of the Supreme Court in the case mentioned above, whatever the Maharaja of Baroda proclaimed through his order dated February 8, 1948, had the combined effect of law and decree of a Court and the Hazur order was the law of the land. The Hazur order even if assumed to be a mere executive act must in the last analysis have the combined effect stated by their Lordships and must be the law of the land for the simple reason that at the time when it was issued His Highness was the absolute sovereign whose will was law.
37. I have, therefore, no doubt whatever that the Hazur order dated February 8, 1948, had the combined effect of law and judicial determination and that it was the law of the land in the nature of a legislative enactment, a private Act.
38. It was also contended by Mr. Munshi that the Hazur order, whether legislative or executive, had not been shown to have been published in the Adnya Patrika or in any other manner prescribed by Huzoor and, therefore, could not have the force of law. This contention was not taken by the Government in their written statement. The legality of the Hazur order was not questioned in the lower Court. Section 4 of the General Clauses Act relied upon in this connection only says that every Act, or Regulation or any order or rule made under any Act shall be published in the Adnya Patrika or in any other manner which may be prescribed by Hazoor. The Hazur order in the present case is not an order passed under any Act. It was an order passed under the prerogative powers of the Sovereign. It is clear, therefore, Section 4 does not apply to such orders.
39. The next question that arises for consideration is whether such Hazur order was cancelled or otherwise modified by an order of the Executive Council as was purported to be done by the order dated April 22, 1949. If the Hazur order of February 8, 1948, were in the nature of legislative enactment, it is not disputed by the learned Counsel Mr. Munshi that the order of the Executive Council dated April 22, 1949, could not have annulled or otherwise modified it. It has been rightly pointed out by the learned Counsel for the respondents that the only way by which an attempt could have been made for getting the Hazur order modified or annulled was for the Legislature-the Dhara Sabha of the State-to move in the matter, in accordance with the provisions of Section 18 of the Government of Baroda Act, 1940. The section so far as material provided :-
There shall not be introduced into or moved in the Dhara Sabha without the previous sanction of His Highness any Bill or amendment-...(c) which would affect any Act, proclamation or order made or passed by His Highness in the exercise of His Highness' prerogative.
Incidentally, it may also be noted that it is clear from this provision as urged by the learned Counsel for the respondents that any order of His Highness passed in the exercise of his prerogative is legislative in character, liable only to be affected by a Bill or an amendment in the manner mentioned therein. It is not disputed that the Government order of April 22, 1949, was only an order passed by the Executive Council as then constituted by His Highness. Clearly, therefore, the order of the Executive Council was ultra vires its powers and was void, when it, purported to affect, modify or annul a legislative enactment of the nature of the Hazur order which had been issued by the Sovereign himself in the exercise of his legislative prerogative.
40. What is, however, strongly urged on behalf of the appellant is that powers of the Executive Council had been enlarged since the Proclamation of August 29, 1948, and that in view of such enlarged powers the Executive Council could revise and annul the Hazur order of February 8, 1948. This argument, it may be noted, proceeds only on the assumption that the Hazur order was an executive order. In support of this argument reliance is placed upon certain clauses of the Proclamation. The Proclamation states that
the entire executive authority of the State shall vest in the executive council. The Government of Baroda Act shall be deemed to be amended accordingly and in particular the words 'or as may be otherwise directed by His Highness' occurring in Section 3 and the whole of Section 4 of the said Act shall be deemed to be omitted.
It is contended that the only authority competent to carry on the executive functions of the State was, after the Proclamation, the Executive Council itself and His Highness was divested of all executive prerogatives; and that it was implicit in the competency of such Executive Council that it should have powers, for the efficient carrying out of its functions, to revise or to review, to annul or to modify the previous orders of the executive authority. The only effect of the Proclamation was, it seems to me, to constitute the Executive Council the sole executive authority in the administration of the State and to take away the executive powers, i.e. to say, administrative powers of His Highness to the extent that they conflicted and interfered with the executive council becoming the sole executive authority in the administration of the State. It may at best be said that such executive prerogatives, which were and had always been inherent in and possessed and retained by His Highness were not to and could not be exercised after the Proclamation in view of the deletion of Section 4 of the Government of Baroda Act. But there is nothing in the Proclamation or the rules framed under Section 6 of the Act even remotely to suggest that such inherent and prerogative powers of His Highness were conferred upon the Executive Council. Even after the Proclamation., the Executive Council was to exercise only such powers as were assigned to it by His Highness. Section 5(c) of the Government of Baroda Act provides:
The Dewan and other members of the Executive Council shall be responsible to His Highness and shall hold office during his pleasure.
Section 5(d) mentions that
The Executive Council, the Dewan and other members of the Executive Council shall respectively exercise such powers as are assigned to them by His Highness.
The Baroda State Executive Council Rules came into force from September 15, 1948. Rule 6 says:
The Executive Council shall have entire executive authority in regard to the administration of the State in all matters without any reservation.
These matters must obviously be those which pertain to the day by day administration of the State and which were capable of being carried out in the exercise of such powers as had been assigned to the Executive Council by His Highness as mentioned in Section 5(d) of the Act. Besides, it is inconceivable how an Executive Council, only an organ of the State, brought into existence by His Highness himself after the Proclamation, could ever act retrospectively and could exercise powers of revision over previous orders which had been validly passed not by the Executive Council as then constituted, but by the Sovereign himself in the exercise of his prerogative powers. Surely, it cannot be suggested that powers of revision such as the Executive Council purported to exercise were only incidental powers necessary for carrying out the day to day administration and the statutory duties cast upon it by the Proclamation, the Government of Baroda Act or the rules made thereunder. That the Executive Council had no power under the Rules which had come into force on September 15, 1948, to revise even its own decisions (much less a Hazur order passed by His Highness) is clear from what appears to be an official note on the report which an officer of the State, one Mr. Joshipura had been asked to make on the transaction of the business of the Bombay Cabinet system. The official note is to be found at pages marked in red pencil as 428 and 430 of exh. 175 in F.A. No. 407 of 1957. The note says:
Even in cases decided by the Cabinet, the Dewan may be empowered to put up any case so decided by the Cabinet for its revision if and when he deems it necessary and. expedient and for this purpose he can take such steps as he deems proper. With this modification in our present rules of business, over present system of working, I think, will come on par with the Cabinet system of working without much change.
This note does not bear any date but appears to have been put in some time after the Baroda. State Executive Rules came into force; and it does not also seem that the rules were ever appropriately amended as suggested in this note. Even this limited power of revising its own decisions as recommended in this note was not possessed by the Executive Council at the material time.
41. Their Lordships of the Supreme Court in Ameer-Un-Nissa Begum v. Mahboob Begum, observed that the importing of a fiction of a proceeding for reviewing an earlier 'Firman' of the Nizam was altogether unwarranted as the Nizam enjoyed untrammelled authority to pass any order he liked. If an order of this kind were not subject to a review much less could it be revised by an Executive Council acting as the revising and, therefore, the higher authority over His Highness the Maharaja of Baroda-a wholly impossible position to conceive. Nor is it possible to hold, in the absence of anything contained in the Proclamation in that behalf, that the sovereign and prerogative powers of His Highness himself in so far as they related to the executive functions of the State were conferred upon the Executive Council. In Halsbury's Laws of England (Vol. 7, 3rd edn., para. 465, p. 222) it is stated that the general rule is that prerogatives cannot be affected or parted with except by express statutory authority. Blackstone in his Commentaries (1 Ch. 7, 239) defined the Royal Prerogative as
that special pre-eminence, which the King hath, over and above all other persons, and out of the ordinary course of common law in right of his regal dignity. It signifies, in its etymology something that is required or demanded before, or in preference to, all others. And hence it follows.. .that it can only be applied to those rights and capacities which the King enjoys alone, in contradistinction to others and not to those which he enjoys in common with any of his subjects.
It was such a prerogative that His Highness the Maharaja of Baroda possessed in right of his regal dignity. It could be exercised in his own discretion or even arbitrarily in any manner he liked. If such royal prerogatives were, therefore, the special and inalienable attributes of His Highness, it is difficult to conceive how, after the Legislature had stepped in, the same arbitrary powers would be conferred upon and the same prerogatives would be allowed to manifest themselves in the Executive Council. Before the Proclamation, as in all monarchies, the executive authority had largely and substantially vested in His Highness. It was an authority by which His Highness carried the laws into effect or superintended their enforcement in any manner he liked. The Proclamation only curtailed such authority in His Highness, but it is inconceivable that the same authority would again reincarnate itself in the same arbitrary form in the Executive Council which was to be responsible to the Legislature and enjoy the confidence of the majority of the Dhara. Sabha. The function of such executive council as stated by Chalmers and Hood Phillips in their Constitutional Law (VIth edn.) was only the general and detailed carrying on of Government according to law including the framing of policy and the choice of the manner in which the law may be made to render that policy possible.
42. Another test may be applied to see whether the Executive Council could have set aside the Hazur order of February 8, 1948. Could the Executive Council itself have passed such an order as the one passed by His Highness, in the exercise of its statutory powers? The Executive Council, had been constituted according to the Government of Baroda Act as amended by the Proclamation. Section 4 of the Government of Baroda Act was no longer on the statute book. His Highness himself could not have passed any executive order in the exercise of his inherent powers after the Proclamation, though his inherent powers to pass legislative orders had been still retained by him; see Buddhisagar Bhaijibhai v. Lakha : AIR1954Bom162 . It is not contended that an order like the Hazur order could have been passed either under the provisions of the Government of Baroda Act or any other Act. How could then an Executive Council, a legally constituted body which was expected to function only within the ambit of the law invoke powers which had been denied even to His Highness and which never came to it
43. It is difficult to see what is the source of legislative authority for the Executive Council even to pass the order which it did on April 22, 1949, apart from the fact that such an order could not have, as discussed above, in any way affected the Hazur order. While considering the powers and duties which properly belong to the executive department, Garner in his Political Science and Government (Chap. XXIII) says that executive power has to do with the execution of the laws and the administration of the Government. This administration of Government must, of course, be in accordance with the laws enacted by the Legislature and the rules made thereunder. II. J. Laski in his 'A Grammar of Politics' (Chap. VIII) describes the legislative power as the power which enacts the general rules of the society and which lays the principles by which the members of the society must set their course. And the executive power-seeks to apply those rules to particular situations. He brings out the clear distinction between the legislative and the executive power by a pithy illustration :
Where for instance an Old Age Pension law has been enacted it (Executive power) pays out the specified sum to those entitled to receive it.
If, therefore, the executive power must always conform to the laws and rules laid down by the Legislature, I vainly look for such laws and rules in the present case for justifying the order that was passed by the Executive Council on April 22, 1949. It is true that the entire executive authority was conferred upon the Executive Council by the Proclamation, but it need hardly be stated that such executive authority could be exercised only in accordance with the existing law and the rules made thereunder. What was intended and emphasised by the Proclamation was that His Highness was not to meddle with the administrative affairs of the State and to exercise the executive authority in the administration and the governance of his State which he used to do before the Proclamation under his prerogative powers, but that the executive authority was to vest exclusively in the Executive Council. In matters executive it was the sole authority. It was not to be any longer controlled by the inherent executive powers which had till then been possessed by His Highness as mentioned in Section 4 of the Government of Baroda Act.
44. Therefore, all what was in effect done under the Proclamation was that limitations were imposed upon the discretionary executive authority which had till then vested in His Highness as his prerogative. But it is impossible to conceive and spell out from the words of the Proclamation that the same prerogative was conferred upon the legally constituted Executive Council which was to consist of popular representatives enjoying the confidence of the Dhara Sabha and yet could act as arbitrarily and without regard to the existing law as His Highness could have done before, the Proclamation. It could not for a moment be suggested that the Executive Council could act beyond the purview of the law and thus ignore and defy the legislative power whether vested in the Legislature-the Dhara Sabha, or in His Highness himself, whose inherent and overriding legislative powers were in spite of the Proclamation still intact.
45. It is also pertinent to note that the Merger Agreement which is dated March 21, 1949, was entered into by the Ruler of the Baroda State with the Governor Genera] of India refers to the full and exclusive authority, jurisdiction and powers for and in relation to the governance of his State. It is the contention on behalf of the Government that all his sovereign powers were transferred by the Ruler under this Agreement. This would show that he was still the de jure executive head of his Government, though he could not have interfered with the executive administration of the State. If he had lost all the exclusive powers under the proclamation before March 21, 1949, full sovereignty of his State could not have been transferred under the agreement. The agreement also indicates the limitations under which the Executive Council even after the Proclamation was functioning and its order which came after the agreement was passed.
46. Mr. Kotwal also contended that when compensation money had already been paid to the plaintiffs and when they had become the absolute owners thereof. what had been granted to the plaintiffs under the Hazur order must be regarded as an irrevocable gift, not liable to be cancelled by the Executive Council. In this connection he relied upon The Scretary of State for India in Council v. Kasturi Reddy I.L.R. (1902) Mad. 268, where it was held that a grant of land duly made by a Revenue officer could not be annulled or revoked by the officer who made the grant or by his successor in office or even by the Governor-in-Council, Such a grant was subject under the rules only to one condition, namely, it could be revoked or annulled by an officer of a higher grade on an appeal being preferred to him. Mr. Kotwal also relied upon. R. T. Rangachari v. Secretary of State (1936) 39 Bom. L.R. 688, P.C. In that case their Lordships of the Privy Council observed that after Government officials duly competent and duly authorised in that behalf had arrived honestly at one decision, their successor-in-office, after the decision had been acted upon and was in effective operation, could not purport to enter upon a reconsideration of the matter and to arrive at another and totally different decision. Their Lordships further held that no demonstration was required to show that an order purporting to remove a person from the service at a time when he had for some months duly and properly ceased to be in the service was a mere nullity and could not be sustained. These decisions, though not strictly in point, do show what must be regarded as the limitations under which the Executive Council (even assuming it to be a full successor-in-office so far as the executive powers of the State were concerned) was functioning and how it could not reconsider and annul a decision of the former executive authority which had been honestly arrived at, had been acted upon and was effective in operation.
47. Mr. Kotwal then contended that the order dated April 22, 1949, of the Executive Council contravened the rules of natural justice in that plaintiff was not given any hearing at all before it was passed so as to affect his rights in the property which had become of his ownership by the Hazur order having been already carried into effect. It is admitted, no hearing was given to plaintiff at all. In his evidence (exh.122) Dr. Jivaraj Mehta stated that no intimation was given to plaintiff that the Government was going to reconsider his case, before the Government order was passed. He says it was not necessary to give previous intimation as the previous order (Hazur order ) was bad. It is conceded that no notice would be necessary if the executive power were exercised within the ambit of the law. What is, however, contended is that the Executive Council was bound to give a notice to the plaintiff and hear him before it revised the Hazur order and passed an order which in terms directed forfeiture of the amount received long before, as compensation. It is admitted by Mr. Munshi that compensation money had become the property of the plaintiff after it had been paid to him in terms of Hazur order. What is, therefore, urged is that the plaintiff was entitled to a notice before that compensation money which was his property was ordered to be forfeited on the basis that it was an illegal payment. The Executive Council proceeded to reconsider and revise the Hazur order as though it was a higher quasi-Judicial Tribunal. First, it gave a reason as to why it was convinced that the Haxur order had been passed either in ignorance of facts or on submission of misleading statements deliberately to create an unjustifiable and illegal charge on the State Exchequer. It stated that had Mr. Sudhalkar discharged his duties faithfully and lawfully as a Dewan should have, particularly when as a former Chief Justice of the State he should have understood the duty and the law all the more clearly, no such Hazur order would have been passed at all. This ground has been mentioned prominently in the first and second paragraphs of the order. The second ground mentioned in the order was that compensation and pension had been awarded at the same time. This second ground did not in fact exist in view of the clarifying Hazur order dated July 22, 1948. This Hazur order was known to the Executive Council when it passed the impugned order. By a subsequent order dated April 30, 1949, the Executive Council cancelled the earlier order of April 22, 1949, in so far as it related to Mr. Sudhalkar and all the remarks made against him. The basis of the first order was thus taken away by the Executive Council itself; and all what remained to be enforced against Dr. Chandrachud and Mr. Gaekwad was a mutilated order from which the reasons as originally given disappeared and in which the mode of recovery as directed was admittedly illegal. Mr. Munshi, the learned Counsel for the Government, has fairly conceded that recovery as ordered under Section 148 of the Baroda Land Revenue Code was illegal and has advanced no arguments in support of that part of the impugned order. In the written statement filed by the State of Bombay the Government also appears to have conceded this position.
48. Mr. Kotwal further says that Government itself had started proceedings to take away from the plaintiff what had been validly granted to him under the Hazur order and had in effect made plaintiff a party to the controversy and, therefore, it was all the more necessary to hear him before it could decide anything against him. He relies upon Rambhau Sakharam v. Tatke (1958) 61 Bom. L.R. 148, and the ease of tile House of Lords referred to therein and also upon Ganyaram v. Dharamchand (1939) 61 Bom. L.R. In the present case the Executive Council was not passing an order in conformity with the specific provisions of any statute or any other law. My own view is that the Executive Council was passing an extraordinary order sitting in judgment over the Hazur order, though purporting to do all this in the exercise of its executive authority, and it had the effect of depriving the plaintiff of his property. It seems to me, therefore, that the rules of natural justice required that an opportunity should have been given to the plaintiff of being heard before the order was passed.
49. Plaintiffs, Dr. Chandrachud and Mr. Sudhalkar, have further contended that they were made to pay the amounts to the Government as directed in the orders of April 22, 1949, and April 30, 1949, under threat and coercion from the Government and, therefore, the Government was bound to repay the amounts to them in view of Section 72 of the Indian Contract Act.
50. As already mentioned above, the order of the Executive Council directing that the amounts paid to the plaintiffs as compensation under the Hazur order should be forfeited to the Government and the same be recovered under Section 148 of the Baroda Land Revenue Code was passed on April 22, 1949. Immediately thereafter, the Government started proceedings for the recovery of the amounts. On April 24, 1949, the Suba (District Collector) of Baroda by his letter exh. 92 informed Dr. Chandrachud that Rs. 77,416 had been ordered to be recovered from him and called upon him to pay up the amount immediately. Dr. Chandrachud was then in Bombay. He got the letter exh. 92 on April 25, 1949. Without waiting for his reply, the City Wahiwatdar (Mamlatdar) passed an order on or before April 26, 1949, to attach and auction the movable and immovable properties of all the three plaintiffs under Sections 121-122 of the Land Revenue Code; see exh. 89 (Wahiwatdar's Report). At about this time, the Wahiwatdar also wrote to the Manager of the Baroda Bank not to hand over the movable and immovable properties of the plaintiffs that may be with the Bank. He was informed by the Bank that it was necessary to have an order from the Shrimant Sarkar (Government) to freeze the properties of the plaintiffs. The Chief Secretary of the Government was, therefore, requested to obtain the necessary Government orders immediately. At about this time, Dr. Chandrachud was staying with his family in a building called 'Jaybag' of his friend Shri Tulsidas Kilachand who was then the Chairman of the Board of Directors, Bank of Baroda. One Chimanlal was the manager of the estate and business of Sheth Tulsidas Kilachand at Baroda. He has been examined in the ease and his evidence is at exh. 101. He was called by Mrs. Chandrachud to go to her place when the Government officers had gone there to attach the property of Dr. Chandrachud. He went there. He found Mrs. Chandrachud in a frightened state. The Wahiwatdar, his clerk and a peon were there. The witness tried to console Mrs. Chandrachud and told her there was no reason to be frightened. He was told by the Wahiwatdar that there was an order from Government to attach the property of Dr. Chandrachud and, therefore, he had come there. At that time Mrs. Chandrachud was alone in the house. Dr. Chandrachud who was then in Bombay got a telephonic message from his wife. After consulting Tulsidas, who was also then in Bombay, he telephoned to the manager of the Bank to transfer Rs. 55,000 to the State, In his evidence Dr. Chandrachud has stated that he would not have paid Rs. 55,000 if no attachment had been brought to his house. He telephoned to Dr. Jivraj immediately and told him that he did not expect such treatment from. him. He told him that it was not fair to send attachment to his house in. his absence and. without previous intimation. Dr. Jivraj Mehta has admitted in his evidence that Dr. Chandrachud had told him on the phone that the Wahiwatdar had gone to his bungalow to inquire about his property, though he adds that he did not tell him, that the Wahiwatdar had come to attach his property, This was according to Dr. Jivraj between April 24 and 26, 1949.
51. I have not referred to the talks which Dr. Chandrachud had with his wife and Sheth Tulsidas and the Manager of the Bank. Dr. Chandrachud has no doubt deposed to these talks in his evidence. But that part of his evidence would be hearsay when the persons with whom he had those talks either directly or on the phone have not been examined as witnesses. But even the evidence summarised above leaves no doubt in my mind that it was because of the coercive measures adopted by the Recovery officers that Dr. Chandrachud was made to pay the amounts. The order for attachment had already been passed. A freezing order had been sought for. The attaching officer with his clerk and peon had come to his house. Mrs. Chandrachud was in frightened condition. She was alone in her house. The situation between the parties was wholly unequal, on one side an Executive Council of the Government which could summon all its resources to speed up the recovery, on the other side an Ex-Naib Dewan of the former regime, compulsorily retired and no longer in office and was presumably about to leave the place for good. Besides Dr. Chandrachud was himself to leave India for abroad within a few days. Under these circumstances, it is 110 wonder if he hurriedly arranged for the funds and immediately paid them over to the Government Treasury to save himself and his family from further harassment, loss of prestige and honour. The learned Counsel Mr. Munshi has, however, contended that the payment made by Dr. Chandrachud must under the circumstances of this case be regarded as a voluntary payment, made without protest, with a view to close the matter between him and the Government, once for all, and that, therefore, Section 72 of the Indian Contract Act was not attracted. He relies upon two letters written to Dr. Jivraj by Dr. Chandrachud. Exhibit 124 is the first letter which appears to have been written on or about April 26, 1949. Exhibit 125 is the second letter sent on April 29, 1949. Both these letters may be set out therein below:-
95, Napean Sea Road,
Dear. Dr. Jivraj,
I hope you have received the Cheque for Rs. 55,000 from the Manager, the Bank of Baroda.
I am now approaching you with a request for your favourable consideration.
I have been allowed only 4 months privilege leave on full pay prior to retirement while all the servants who desire to retire prior to merger are allowed 6 months privilege leave on full pay and 14 months' furlough on half. I, therefore, request you to allow this concession in my case also.
As you know I was regularly attending the office every day for 3 months till 4th September. I request that I should be allowed to draw pay for these three months.
If both these requests of mine are granted, I will be entitled to receive the following amount:
6 months' privilege: .. .. 2,500/- x 6 ...15,000/-14 Furlough on half-pay: ...... 1,250/- x 14 ......17,500/-3 months' pay whenI attended office: .. 2,500/- x 3 ...... 7,500/----------40,000/----------(Income Tax will have to be deducted from this amount)
I have been allowed Rs. 17,780-5-0. If the difference between these two amounts viz. Rs. 22,219-11-0 (Rupees Twenty two thousand, two hundred and nineteen and annas eleven) is deducted from 77,416-0-0 which I am asked to pay, my liability to Government will amount to Rs. 55,196-5-0.
I have already sent you a Cheque for Rs. 55,000-0-0.
I, therefore, earnestly request you to consider this request of mine sympathetically.
I will send a Cheque for remaining amount when I know the exact amount that I still owe to Government.
The date from which I will be entitled to draw my pension will have to be changed. Thanking you,
Sd. R. B. Chandrachud.
95, Napean Sea Road, Bombay.
29th April 1949.
Dear Dr. Jivraj,
I am enclosing herewith a cheque for a sum of Rs, 10,000. I would have paid the rest of the amount as well but I find that I am short of cash just at present as I have paid a very large sum of money for the Plots of land that I have purchased for the Nursing Home.
I am once more to request you to reconsider the request of mine for giving me more privilege leave as well as furlough as is done in case of servants who are going to retire prior to merger.
In case my request is turned down I should be allowed to repay the balance at the end of this year (1949).
But I do hope it will be possible for you to extend to me the same privilege as has been given to other servants,
Please accept my congratulations on your appointment as an Adviser to the administrator.
Yours Sincerely, Sd.
What is urged from the contents of these letters is. that Dr. Chandrachud was asking for some concessions and he was prepared to abide by the order of the Executive Council and had acquiesced in the payment already made by him. There was no protest from him. It is true that these two letters were written at about the time when the payments were made. The case now suggested before us from the contents of these letters was not put to Dr. Chandrachud in his cross examination. In fact, these letters were allowed to be produced in the examination-in-chief of Dr. Jivraj Mehta, long after the evidence of Dr. Chandrachud was over. Besides, these letters as observed by the learned Judge only show the subjugated mind of the writer. He had to bow to what he feared was the inevitable and suppliantly crave for concessions and for further time to enable him to pay the amounts as ordered. This is not the conduct of the person who voluntarily wanted to pay and in fact paid the amounts in obedience to the order of the Executive Council. The coercive process which was resorted to for recovering the amount under the Land Revenue Code was admittedly illegal and it must be held that because of the order dated April 22, 1949, which intimated to Dr. Chandrachud that the amounts would be recovered under Section 148 of the Land Revenue Code and of the subsequent steps taken by the recovery officers under the said Code, he was compelled to pay the amounts. The recovery itself was illegal in the present case, and this circumstance alone without any thing more entitled the plaintiff to the repayment of the amount illegally recovered. In Karanja Municipality v. New East India Press Co. A.I.R. Nag. 215, it was held that in a ease where taxes were illegally recovered, the money was recoverable under Section 72 as payment made under coercion. In the course of the judgment the learned Judges observed (p. 217) :
The next question is whether it is necessary for the man to pay under protest in circumstances of that kind... .In a case of active coercion where threat of force or bodily injury is used it might be dangerous for the man to protest, in any case he might be much too frightened to do so. Therefore, if in a case like that it is not necessary to protest we do not see that it would be essential in a case when no threats are openly employed but they are covert in the demand made.
In Sri Sri Shiba, Prasad Singh v. Maharaja Srish Chandra Nandi , it was held that payment 'by mistake' in Section 72 of the Indian Contract Act, 1872, which provides that 'A person to whom money has been paid.. .by mistake... must repay or return it' refers to a payment which was not legally due and which could not have been enforced, the mistake was thinking that the money paid was due when in fact it was not due. In the present case I have already held that the order of the Executive Council by which the liability was created was illegal and ultra vires. Therefore, there was no amount legally due and which could be enforced under that order. Further the process by which the amount was sought to be recovered was admittedly illegal. Plaintiff would be entitled to the restitution of the amounts paid by him even on the limited ground that the mode of recovery was not warranted by law.
52. It was at this stage that the learned Counsel Mr. Munshi tried to develop a new point for our consideration. He urged that the plaintiff had received and accepted the benefits under the order of the Executive Council as follows:-
(i) 4 month's leave pay Rs. 10,000.
(ii) Pension recovered from 1-10-1948 to 14-2-1952: Rs. 20,250.
(iii) Subsequent pension uptodate.
According to the learned Counsel plaintiff must be held to have elected to stand by the arrangements contained in the order, and he is now, therefore, precluded from disputing the validity of that order either on the ground of estoppel or on the principle of approbate and reprobate. Mr. Munshi contends that this point arises on the facts which are already on the record and, therefore, should be considered by us in appeal. In support of his contention he relies on Somnath Singh v. Ambika Prasad : AIR1950All121 , where it was held that a party cannot be penalised for not suggesting through its pleadings a rule of law to the Court; a party is not bound to plead the law, where all necessary facts were pleaded and proved by the defendants and what remained was only to draw the legal inference from them that the plaintiffs were estopped it is for the Court to draw it and not for the defendants to plead it. In the present case there was not even a suggestion in the pleadings of the Government as to what facts amounted to election or estoppel. There was no appropriate issue sought for at the trial. In his evidence plaintiff was not asked whether he had not elected to stand by the order of the Executive Council. He was not given any opportunity to explain, under what circumstances he had been drawing the pension. In the trial Court there was no argument either on estoppel or on election. The point of estoppel or election was not taken in the memorandum of appeal, not even in the additional grounds submitted before us. It was taken for the. first time before us in the course of the arguments. We have not, therefore, allowed Mr. Munshi to raise this point before us at this stage in any of the three appeals.
[His Lordship after dealing with points not material to this report, proceeded].
53. Lastly, the point which may broadly be described as the defence or the plea of act of State raised by the learned Counsel Mr. Munshi may be considered. It must be stated in fairness to the learned Counsel that this point was put in the forefront of his arguments; but for the reasons to be presently stated, I have thought it convenient and proper to consider it last.
54. On March 21, 1949, the Baroda Merger Agreement was made between the Governor General of India and His Highness the Maharaja of Baroda where-under His Highness the Maharaja of Baroda ceded to the Dominion Government full and exclusive authority, jurisdiction and powers for and in relation to the governance of the State and agreed to transfer the administration of the State to the Dominion. Government on May 1, 1949. Mr. Munshi contends that the process of acquisition of the territory of Baroda by the Government of India started with this Merger Agreement and was one continuous act of State which ended only when by the passing of the States Merger (Governor's Provinces) Order, 1949, on August 1, 1949, there was assumption of sovereign powers de jure accompanied by 'tradition' by the Government of India (the new sovereign) of the newly acquired territory. The argument proceeds that the orders that were passed by the Executive Council on April 22, 1949, and April 30, 1949, and the recoveries of the amounts that were made from Dr. Chandrachud and Mr. Sudhalkar during this interregnum must be all characterised as several acts of State the propriety or the validity of which could not be challenged in the municipal Courts of the land.
55. This plea of act of State had not at all been taken in any of the written statements filed in the three suits. There was no issue sought for on this point at the trial. The learned trial Judge, however, allowed this point to be argued as in his opinion the contention involved was purely one of law. The contention raised in Dr. Chandrachud's suit was that his suit for refund against the Bombay Government was not tenable inasmuch as the latter had not recognised his right to his claim. It was submitted that any claim against former Government which had subsequently ceded either by cession or by conquest or by treaty shall not be available against successor Government unless that claim had been recognised by the successor Government either by legislation or by conduct. The same contention was taken in Mr. Sudhalkar's suit (para. 54 of the trial Court's judgment). While in Mr. Gaekwad's suit some contention regarding the order dated April 22, 1949, of the Executive Council being an act of State appears to have been taken in the trial Court (para. 15 of the judgment) but not certainly in the form in which it was formulated in the other suits. But that contention also was not pressed in appeal before the learned Assistant Judge who in para. 8 of his judgment observes:
He (pleader for the State of Bombay) did not reagitate the question of the Court having no jurisdiction and the act being an act of State nor did he contend that the suit was bad for want of proper notice.
56. I do not think that the learned trial Judge was right in considering this question as purely one of law and allowing parties to advance their arguments on it. I do not see how a question of this nature could be fully and adequately dealt with in the absence of appropriate and specific pleas and issues in that behalf and relevant evidence from either side bearing on such pleas and issues. That the difficulty which I am experiencing is real can he at once seen by how the point was formulated and argued in the trial Court and how the arguments progressed before us in appeal. In the trial Court all what was contended was that the present Government had not recognised plaintiff's right to the claims made in the suit. In other words, it was implicit in the contention that the orders of April 22, 1949, and April 30, 1949, had been passed by the former Government of the State of Baroda while, before us it was contended that these orders themselves were acts of State passed after the process of acquisition of the new territory started with the agreement of Merger. Further the contention such as was raised in the trial Court would itself show that it should be open to the plaintiff to plead and to prove that the new sovereign-the present Government-had chosen to waive his rights and recognise his titles and rights as they existed at the date of cession. Such recognition could be given either by legislation or by proclamation and it could even be inferred from the mode of dealing with the property of plaintiff and his rights therein, after the cession. It is true that the Baroda Merger Agreement was expressly referred to in the plaint (para. 14) and it was further stated that from May 1, 1949, the Dominion Government of India became competent to exercise ail the powers, authorities and jurisdiction till then vested in His Highness the Maharaja of Baroda in such manner as it might think fit. It was also pleaded that the rights, liabilities and obligations of the State of Baroda had devolved upon and become vested in the defendant-the State of Bombay. But these averments in the context in which they were made could not be construed to mean that the plaintiff himself had recognised the effect of the Merger Agreement as amounting to an act of State. It was nowhere admitted that the Merger Agreement was a cession by which the acquisition of a new, foreign territory was brought about. In fact, the argument was, as will be shown a little later, that situated as the State of Baroda and the Dominion Government of India were in relation to each other on the date of the Merger Agreement, the Merger Agreement could not amount to an act of State as between two independent, sovereign States. On the other hand, if it is the contention of the present Government that the right which had been conferred upon the plaintiff by the former Baroda Government was taken away by an act of State, then it was necessary for the defendant specifically to plead what act and what order in particular amounted to such an act of State. Not only was no such case made in the written statement, but the case that was made expressly goes counter to the present contentions of the Government. In the written statement (filed in Dr. Chandrachud's suit) it was expressly pleaded that the order dated April 22, 1949, was the order of the Government of Bapoda as then constituted by law. The entire executive authority of the Crown had been transferred to the Executive Government under the Proclamation of August 25, 1948, As the order dated April 22, 1949, passed by the Government of Baroda was legal, proper and effective, the Government of Bombay had a right to claim back Rs. 12,416 from the plaintiff (Dr. Chandrachud). In Mr, Sudhalkar's suit also the same plea was taken by the Government that the Executive Council which constituted the Government of Baroda had the authority to pass the orders dated April 22, 1949, and April 30, 1949, although it was mentioned that a municipal Court had no jurisdiction to interpret or enforce the Merger Agreement between two sovereign powers under Article 363 of the Constitution of India,
57. In Sir Anthony Musgrave v. Jose Ignacio Pulido (1879) 5 A.C. 102 , their Lordships of the Privy Council observed (p. 107) :
It is enough here to say that it appears to them that if the Governor cannot claim exemption from being sued in the Courts of the Colony in which he holds that office, as a personal privilege, simply from his being Governor, and is obliged to go further, his plea must then show by proper and sufficient averments that the acts complained of were acts of State policy within the limits of his commission and were done by him as the servant of the Crown so as to be, as they are some times shortly termed, acts of State.
58. The learned trial Judge, however, as stated above proceeded to consider the point as though it was only a point of law which could be decided without reference to pleadings or evidence. As the lower Court has considered and has made its findings on it and in deference to the learned and elaborate arguments advanced by both the sides before us it is only proper and necessary that it should be considered also in appeals before us,-but only to the extent that it is capable of being considered as a pure point of law. It is necessary to state this limitation here as attempts were made on behalf of plaintiffs-by Mr. Kotwal to raise a new point of fact for showing that Dr. Chandrachud was at no time an alien and, therefore, no question of act of State could arise against him, and by Mr. Gupte to show that the present Government had chosen to waive its rights and recognise plaintiff's title as it existed at the date of cession. It is impossible to consider these questions for the first time in appeals when no evidence was adduced at the trial directly bearing on those questions. We have, therefore, not allowed Messrs. Kotwal and Gupte to raise these questions of facts for the first time before us. It may also be noted that neither party asked for amendments of their pleadings or for permission to lead appropriate evidence on the plea of act of State.
59. Then the question arises, can the State of Bombay, the appellant in these appeals, at all take up this plea of act of State on the facts and in the circumstances proved admitted in these cases I have given my anxious thought to this question and I am definitely of the view that it does not at all arise in the present eases.
60. As stated already, Mr. D. V. Gaekwad instituted his suit on April 30, 1949, against the Government of Baroda itself for a declaration that the order of the Executive Council dated April 22, 1949, was illegal and unauthorised and for a permanent injunction restraining the Government of Baroda from executing the said order. Thereafter the plaint was got amended and the 'Province of Bombay' was impleaded in place of the original defendant, the Government of Baroda. The reliefs, however, remained the same. To this amended plaint, the written statement (exh. 12) was filed on December 6, 1950. It was contended that plaintiff ought to be called upon to amend the plaint so as to describe the defendant as the State of Bombay. It was further pleaded that the order dated February 8, 1948, passed by the Maharaja on which the plaintiff relied was unjust, improper and illegal and that passed by the Baroda Executive Council was perfectly just, legal and valid and was, therefore, not liable to be set aside. By application, exh. 20, the plaint was further got amended and the defendant, 'the Province of Bombay' came to be described as the 'State of Bombay'. In the additional written statement (exh. 32) filed on behalf of the State of Bombay it was contended that all actions taken and orders passed for implementing the order dated April 22, 1949, were legal and their legality was not affected by the repeal of the Baroda Laud Revenue Code. I have already stated that the pleader for the State of Bombay did not press the point of the act of State in the appeal before the District Court. But, even apart from what the pleader stated, it is clear from the contentions in the written statements and the consistent stand taken by the State of Bombay in the trial Court and in the District Court, that the only defence which the State of Bombay took up in resisting the suit was the validity and the enforceability of the order dated April 22, 1949, In other words, the attitude of the Government as disclosed from their pleadings and from the fact that the suit for declaration and injunction is being resisted necessarily shows that the State of Bombay wants to enforce against Mr. D. V. Gaekwad its own citizen, even today the order dated April 22, 1949, as if it were its own order, though as we know it was the order of the Executive Council of the former State of Baroda. On May '21, 1949 (see p. 8 of exh. 16), i.e. to say after the transfer of the administration of the State of Baroda, the Accountant General sent a letter to the Senior Assistant to the Special Commissioner, Baroda. It was as follows:
Subject:-Recovery from Mr. D. V. Gaekwad.
Reference:- Govt. Order No. (R) 87/18 dated 22-4-1949.
I send herewith a detailed statement for the amount to be recovered from Mr. D. V. Gaekwad, Ex-Naib Dewan. The amount to be recovered from him comes to Rs. 43,166-6-3 instead of Rs. 43,196-13-0 as shown in para. 3 of the order referred to above. The details are worked out in the statement.
You will please, therefore, take necessary action in the matter.
61. The Accountant General forwarded a copy of this letter to Mr. D. V. Gaekwad for information and action. This letter is a clear indication of how the present Government, the State of Bombay, wants to enforce the order of April 22, 1949.
62. The position is in no way different in the suits of Dr. Chandrachud and Mr. Sudhalkar also. It is true that Dr. Chandrachud paid in all Rs. 65,000 before April 30, 1949. But the Government in their written statement justified the recovery of this amount on the strength of the order of April 22, 1949. They stated that the order was quite legal and effective and the plaintiff (Dr. Chandrachud) was bound to refund Rs. 77,416 under the same. On March 14 1952 the Collector of Baroda sent the following notice exh. 93 to the plaintiff:
Dr. R. B. Chandrachud,
Bombay No. 6.
Subject: Recovery of Government Dues.
As per former Baroda Government Order No. (R) 87/18 dated 22nd April 1949, you were ordered to pay Rs. 77,416-0-0 and the same amount was to be recovered from you according to Section 148 of Baroda Land Revenue Code as Government dues.
2. After this order, you have paid certain amounts, but still the amount that has remained unpaid amounts to Rs. 12,416-0-0.
3. You are, therefore, informed that you should pay up the amount within seven days on receipt of this notice, in default legal steps will be taken against you.
63. This letter admittedly of the present Government in terms refers to the former Baroda Government order dated April 22, 1949, acknowledges the receipt of certain amounts (Rs. 65,000) already paid in pursuance of the said order and seeks to enforce it for the balance. In the written statement it was admitted that the Collector of Baroda did call upon the plaintiff to pay up the remaining-amount of Rs. 1.2,416 by his letter dated March 14, 1952, and it was further stated that as the order dated April 22, 1949, passed by the Government of Baroda was legal, proper and effective, the Government of Bombay had a right to claim back Rs. 12,416 from the plaintiff. The learned Counsel Mr. Munshi contended that what this letter could mean under the circumstances was that the present Government partially recognised the validity of the order of April 22, 1949, only in so far as it related to the payment of the balance of Rs. 12,416. It did not mean that the Government recognised plaintiff's right to challenge the order in so far as it related to the amounts already recovered. I do not think that this contention can be accepted. Apart from the fact that this contention is inconsistent with the stand that the Government have taken in relation to the self-same order against Mr. D. V. Gaekwad, the contents of the letter exh. 93 make it clear that, the Government have in effect adopted this entire order as if it were their own order and have purported to acknowledge the receipt of Rs. 65,000 already paid in pursuance of that order. In the written statement the recovery of Its. 65,000 has been justified by relying only upon the said order.
64. So far as the amounts paid by Mr. Sudhalkar were concerned, it is admitted that they wore collected and received by the present Government. What according to them was the justification for collecting and receiving these amounts from Mr. Sudhalkar? They rely upon the order of April 22, 1949, and the subsequent order of April 30, 1949, which according to them was a consent order. Thus, they rely upon an agreement alleged to have been entered into between the former Government of Baroda and Mr. Sudhalkar for resisting plaintiff's claim for refund of the amounts recovered from him. What principle of law can prevent plaintiff from showing that there was no such agreement and that the order pleaded by the Government in justification of their collection of the amounts was illegal and ultra vires and, therefore, not binding on him? Mr. Munshi conceded and stated that only the rights and liabilities of plaintiff under the order (exh. 106) are recognised by the succeeding i.e. by present Government. Such recognition under the circumstances must only mean that the order is as good as passed by the present Government itself and it must, therefore, lay itself open to be challenged by the citizen in the municipal Court of the land. Thus, if the Government relies upon an order of the former Government either for enforcing it as in the case of Mr. D. V, Gaekwad, or for justifying the recoveries already made as in the case of Mr. Sudhalkar or for both as in the case of Dr. Chandrachud, the Government must assume the responsibility of making good its claim and proving that the order relied upon by it was valid and in accordance with law. It is immaterial that the order was one not passed by the present Government; the moment when it picks it up as a weapon (indeed both of offence and defence) from the armoury of the old Government against its own citizen, the citizen would have the undoubted right of defending himself and showing that such order could not affect the earlier Hazur order of February 8, 1948, which it purported to cancel. It then becomes the order of the executive authority of the present Government itself; and it is in the determination of the legality of such order that the consideration of the validity of the Hazur order becomes relevant and necessary. In Eshugbayi v. Govt. of Nigeria A.I.R. P.C. 248, their Lordships of the Privy Council held that as the executive he (the Governor) can only act in pursuance of the powers given to him by law. They observed (p. 252) :.In accordance with British jurisprudence no member of the executive can interfere with the liberty or property of a British subject except on the condition that he can support the legality of his action before a Court of justice. And it is the tradition of British justice that Judges should not shrink from deciding such issues in the face of the executive.
Their Lordships also explained what was meant by an act of State (p. 252) :.As applied to an act of the sovereign power directed against another sovereign power or the subjects of another sovereign power not owing temporary allegiance, in pursuance of sovereign rights of waging war or maintaining peace on the high seas or abroad, it may give rise to no legal remedy. But as applied to acts of the executive directed to subjects within territorial jurisdiction it has no special meaning and can give no immunity from the jurisdiction of the Court to inquire into the legality of the act.
65. If, however, my view is not correct and the question of the act of State does arise in the present cases, I would proceed to consider it in the light of the arguments made before us but subject to the limitation, I have mentioned above, and indicate my views upon it. The arguments of the learned Counsel on either side covered a large field on this subject of act of State and referred to the several aspects thereof. The learned Counsel Mr. Munshi, at the outset, raised the contention that the municipal Courts of the land are not competent to entertain suits in respect of reliefs claimed by the present plaintiffs. He developed his argument by stating what I may call several explanatory points and by classifying them into different sub-heads. The points thus formulated by him may be summarised as follows:
A(1) Acquisition of Baroda State was one continuous process and it began on March 21, 1949, and was completed on August 1, 1949.
A(2) The order dated April 22, 1949, and the recovery of the amounts in pursuance thereof were, therefore, acts of State and their validity or otherwise could not be canvassed in municipal Courts (In this view, the order dated April 30, 1949, and the recoveries from Mr. Sudhalkar were also acts of State).
A(3) The Dominion Government of India recognised only the order (ex. 106) of the Executive Council dated April 22, 1949. Plaintiff's right and liabilities can arise only under that order. Plaintiff, however, has not claimed any reliefs under that order.
A(4) Plaintiff has not alleged, nor proved that the Dominion Government recognised the Hazur order dated February 8, 1948, or plaintiff's rights thereunder.
B. Agreement of Merger does not confer upon the plaintiffs the rights claimed by them in the present suits. Even if it did so, the rights claimed being private rights cannot be enforced in the municipal Courts of the acquiring State in view of
(i) Article 363 of the Constitution.
(ii) Plaintiff being not a party to the agreement.
If it were held that the present suits could be entertained by the municipal Courts, it was contended by Mr. Munshi, in the alternative, that
C(1) the Hazur orders dated February 8, 1948, and July 22, 1948, were either executive orders or orders having the force of law.
(2) If they were executive orders they were properly modified by the order of the Executive Council dated April 22, 1949.
(3) If they were orders having the force of law, then the only right which survived to the plaintiff after May 1, 1949, was to receive pension as awarded to him under the Hazur orders.
(4) In either case, plaintiff had no right to claim compensation under the Hazur order dated February 8, 1948.
66. Before considering these points, it is necessary to know what is an act of State. Hood Phillips in his Constitutional Law (Second ed.) says (at pp. 219-220) that there is no technical definition of 'act of State' but the expression as ordinarily used in British Constitutional law may be denned for general purposes as an act done by the Crown as a matter of policy in relation to a foreign State or in relation to an individual who is not within the allegiance to the Crown. Acts of States in relation to foreign States include the making of treaties which are as it were contracts between States; the annexation and cession of territory. The learned author says that such acts are outside the jurisdiction of British Courts in the sense that they cannot be questioned; nor can a citizen claim to enforce directly any rights to which he may be entitled under them. According to him acts of State in relation to individuals are those acts which are done under the authority of the Crown in relation to individuals who are not within the allegiance of the Crown. Such acts are held to be acts of State so as to prevent the aggrieved person from obtaining redress for damage done to him.
67. In Nabob of the Carnatic v. East India Company (1793) 2 Ves. Jun. 56, it was held that Political Treaties between a foreign State and subjects of the Crown of Great Britain acting as an independent State under powers granted by Charter and Act of Parliament are not a subject of municipal jurisdiction; therefore, a bill founded on such treaties by the Nabob of Arcot against the Bast India Company was dismissed. The Court of Chancery before which the case came up for decision observed (p. 60) :.It is a case of mutual treaty between persons acting in that instance as states independent of each other; and the circumstance that the East India Company are mere subjects with relation to this country, has nothing to do with that. That treaty was entered into with them, not as subjects, but as a neighbouring independent state, and is the same as if it was a treaty between two sovereigns and consequently is not a subject of private municipal jurisdiction.
In the Secretary of State for India in Council v. Kamachee Boye Sahaha (1859) 7 M.I.A. 476, their Lordships of the Privy Council held that transactions of independent sovereign states between each other are governed by other laws than those which municipal Courts administer; such Courts have neither the means of deciding of what is right nor the power of enforcing any decision which they may make. In the course of the judgment, they expressed their view on the States of the Rajah (p. 532) :.The Rajah was an independent Sovereign of territories undoubtedly small, and bound by Treaties to a powerful neighbour (East India Company), which left him, practically, little power of free action; but he did not hold his territory, such as it was, as a fief to the British Crown or of the East India Company;...
68. In Forester v. Secretary of State for India in Council (1871) I.A. 10, the facts were as follows :-Originally the Doab and the territories to the west of the Jumna were under the sovereignty of Scindia. The territory of Doab was then actually in possession of a Begum whose status in respect thereof was that of a Jahagirdar holding a Jaidad tenure, i.e. upon a grant of a certain district on the condition of keeping up a body of troops to be employed when called upon in the service of the sovereign (Scindia) of whom the Jaghire was held. Practically the whole administration of the territory of Doab included in her Jaghire, whether civil or criminal, was vested in the Begum who exercised a sort of delegated sovereignty therein.
69. By the Treaty of Peace concluded with Scindia on December 30, 1803, the sovereignty over the Doab passed to the Bast India Company subject to the rights of the Begum with whom a separate Treaty or agreement was made in August, 1805. The substance of that agreement was that the territory of the Doab included in her Jaghire would remain to her (as before) from the East India Company as long as she might live.
70. The Begum died in 1836. The plaintiffs who claimed under the Begum's will filed a suit against the Secretary of State for India in Council to recover possession of the estate.
71. The defence of the Government of India was that on the death of the Begum the resumption was an act of State having regard to the status of the Begum as an independent or quasi-independent sovereign and, therefore, the propriety and validity of such act of State were not cognizable by any municipal Court.
72. On construing the agreement with the Begum, their Lordships of the Privy Council held that her status continued to be that of a mere Jaidadar even under the Company and, therefore, the act of Government was not the seizure, by arbitrary power, of territories which upto that time belonged to another sovereign State but it was only a resumption of lands previously held from the Government (Scindia) under a particular tenure upon the alleged determination of that tenure. The possession was taken by the Government under a colour of legal title, that title being the undoubted right of the sovereign power to resume-which right the Government of India had got under the Treaty of December 30, 1803, by which the sovereignty had passed from the Scindia to the East India Company.
73. Their Lordships distinguished in Secretary of State for India in Council v. Kamachee Boye Sahaba, by pointing out that the Rajah of Tanjore had 'retained at least the shadow of original and independent sovereignty' while the Begum was not in any sense an independent sovereign at all. They also considered another circumstance against the act of resumption being an act of State. Immediately after the resumption on the death of the Begum, an Act of the Legislature was passed in order to legalise the introduction of regulation law into these territories by order of the Governor General.
That this was done by legislation, and not by proclamation affords perhaps, another argument against treating annexation of these territories as an act of conquest or arbitrary power, or as in the exercise of an original right of conquest which had remained in suspense.
Resumption was thus not an arbitrary act of sovereign power against an independent State.
74. Their Lordships of the Supreme Court have in State of Saurasktra v. Memon Haji Ismail : 1SCR537 , referred to a passage in the judgment reported in Salaman v. Secretary of State for India  1 K. B. 613, where Fletcher Moulton L.J. described the act of State as 'a catastrophic change constituting a new departure'. In the same judgment (pp. 639-640) Fletcher Moulton L.J. observed:.Acts of State are not all of one kind, their nature and consequences may differ in an infinite variety of ways, and these differences may profoundly affect the position of municipal Courts with regard to them. For instance, an act of State may fix the relations between two States, each of which continues to possess an independent existence. The consequences of such an act of State are entirely beyond the cognizance of municipal Courts, because they do not administer treaty obligations between independent States. An example of such an act of State may be found in the case of Nabob of Carnatic v. 'East India Company (referred to above). But the object and effect of an act of State are not necessarily of this kind. Its intention and effect may be to modify and create rights as between the Government and individuals, who are, or who are about to become, subjects of the Government. In such cases the rights accruing therefrom may have to be adjudicated upon by municipal Courts. Let me take a simple example. Let me suppose that a Government by an act of State annexes a neighbouring country, and formally takes over all the property and the liabilities of the former ruler, and that part of such property consists of debts due to him. The Government is not compelled to collect such debts vi et armis; it may avail itself of the assistance of its Courts of law for the purpose, in the same way as though the debts had accrued due to it otherwise than by an act of State. But in deciding on such a claim the Courts must loyally accept the act of State as effective. Evidence that the debt was due to the former ruler would thereby become evidence of its being due to the existing Government; and I see no reason why in such a case a claim of a converse character might not equally be entertained by municipal Courts, and a subject recover from the existing Government by the process of law applicable to such a case, any debts due from the former ruler. The judgments in the case of Frith v. Reg. (1872) L.R. 7 Ex. 365 seem to me to give support to this view.
75. In Secretary of State for India v. Bai Rajbai (1915) L.R. 42 IndAp 229 their Lordships of the Privy Council held that the relation in which the inhabitants of a territory stood to their native sovereigns before the cession and the legal rights they enjoyed under them were, save in one respect, entirely irrelevant matters. They could not carry in under the new regime the legal rights if any 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, express or implied, or by legislation chose to confer upon them. Such implied agreement might be proved by circumstantial evidence, such as the mode of dealing with the inhabitants which the new sovereign adopted, his recognition of their old rights, and express or implied election to respect them and be bound by them. Their Lordships further observed that it is only for the purpose of determining whether and to what extent the new sovereign has recognised the ante-cession rights of the inhabitants and has elected or agreed to be bound by them that the consideration of the existence, nature, or extent of these rights becomes a relevant subject for inquiry.
76. Almost the entire case law on the subject was reviewed by their Lordships of the Supreme Court in their recent decision reported in The State of Saurashtra v. Memon Eaji Ismail Haji Vali Mahomed : 34ITR514(SC) . Their Lordships quoted from the judgment of Venkatarama Aiyer J. in the case reported in I). D. Cement Co. Ltd, v. I. T. Commr., the following passage which summarises the law on the subject (p. 823) :. When the sovereign of a State-meaning by that expression, the authority in which the sovereignty of the State is vested, enacts a law which creates, declares, or recognises rights in the subjects, any infraction of those rights would be actionable in the Courts of that State even when the infraction is by the State acting through its officers. It would be no defence to that action that the act complained of is an act of State, because as between the sovereign and his subjects there is nothing as an act of State, and it is incumbent on his officers to show that their action which is under challenge is within the authority conferred on them by law. Altogether different considerations arise when the act of the sovereign has reference not to the rights of his subjects but to acquisition of territories belonging to another sovereign. That is a matter between independent sovereigns, and any dispute arising therefrom must be settled by recourse not to municipal law of either States but to diplomatic action, and that failing, to force. That is an act of State pure and simple, and that is its character until the process of acquisition is completed by conquest or cession. Now, the status of the residents of the territories which are thus acquired is that until it is completed as aforesaid they are the subjects of the ex-sovereign of those territories and thereafter they become the subjects of the new sovereign. It is also well established that in the new set up these residents do not carry with them the rights which they possessed as subjects of the ex-sovereign, and that as subjects of the new sovereign, they have only such rights as are granted or recognised by him...In law, therefore, the process of acquisition of new territories is one continuous act of State terminating on the assumption of sovereign power de jure over them by the new sovereign and it is only thereafter that rights accrue to the residents of those territories as subjects of that sovereign. In other words, as regards the residents of territories which come under the dominion of a new sovereign, the right of citizenship commences when the act of State terminates and the two, therefore, cannot co-exist.
It follows from this that no act done or declaration made by the new sovereign prior to his assumption of sovereign powers over acquired territories can quoad the residents of those territories be regarded as having the character of a law conferring on them rights such as could be agitated in his Courts.
Their Lordships then observed:
From these cases (which they considered) it is manifest that an act of State is an exercise of sovereign power against an alien and neither intended nor purporting to be legally founded.
In another place of their judgment they stated:
The essence of an act of State is the exercise of sovereign power and that is done arbitrarily, on principles either outside or paramount to the municipal law.
77. From the discussion of these authorities, the following propositions may be deduced:-
(1) Acts of State are either in relation to foreign States or in relation to individuals. The former are transactions of independent States between each other, while the latter are acts done in the exercise of sovereign power against an alien neither intended nor purporting to be legally founded.
(2) There would not be any act of State if it were done under colour of legal title.
(3) Any inhabitant of the territory can make good in the municipal Courts established by a new sovereign only such rights as that sovereign has through his officers recognised. Such rights as he had. under the rule of predecessors avail him nothing.
(4) The new sovereign can choose to waive his rights and recognise titles and rights of any inhabitant as they existed at the date of cession. Such recognition can be given either by legislation or under an agreement and it can even be inferred from the mode of dealing with the property after the cession.
(5) According to the view of Fletcher Moulton, L.J., in Salaman's case although an act of State cannot be challenged, controlled, or interfered with by municipal Courts, its intention and effect may sometimes be to modify and create rights as between the Government and individuals who are, or who are about to become, subjects of the Government and in such cases the rights arising, therefrom, may be capable of being adjudicated upon by the municipal Courts. Thus debts due to and from the former ruler may be enforced by and against the existing Government in its municipal Courts.
78. To proceed with the arguments of Mr. Munshi, I shall, however, assume that the Merger Agreement amounted to an act of State in that it was a transaction between two independent sovereign States, brought about for the acquisition of the territory of Baroda State by the Dominion Government of India. Mr. Munshi says that the process of acquisition of the territory of Baroda started on March 21, 1949, when the Merger Agreement was executed and was completed only on August 1, 1949, when the States' Merger (Governors' Provinces) Order, 1949, came into force. He has called our attention to certain passages in Oppenheim's International Law (Vol. I, Eighth edn.), on page 548 (Paras. 215, 216). The learned author says that the object of cession is sovereignty over such territory as has hitherto already belonged to another State and that the only form in which a cession can be effected is an agreement embodied in a treaty between the ceding and the acquiring State. In para. 217 it is stated that the treaty must be followed by tradition of the territory to the new owner State, unless such territory is already occupied by the new owner as in the ease where the cession is the outcome of war and the ceded territory has been during such war in the military occupation of the State to which it is now ceded. Relying on these passages, the learned Counsel contends there was such tradition (occupation) of the territory of the State of Baroda by the acquiring State ( the Government of India) only when the States' Merger (Governor's Provinces) Order, 1949, came into force.
79. It does not seem to me that tradition is essential for the cession being completed. The same author has further stated that the validity of the cession does not depend upon tradition and that the point whether the treaty of cession must be followed by actual tradition is controversial, many writers opposing the opinion presented by him in his treatise. In the decision of the Supreme Court mentioned above, it was stated that the process of acquisition of the new territory would be complete on the assumption of sovereign powers de jure over such territory by the new sovereign. Tradition of the territory by the acquiring State was not considered necessary for completing the act of cession. In the case of United States v. Ushi, Shiroma International Law Reports, year, 1954, p. 82 (Lauterpacht), the question arose whether the United States acquired the traditional 'de jure sovereignty' over Okinawa under the Treaty of Peace of 1951, and it was held that Japan and not the United States had 'de jure sovereignty' over Okinawa. In the course of the judgment it was observed:
Our concern is solely with 'de jure sovereignty' because only this time-tested yardstick of international law should be applied in determining the status of a geographical area and its inhabitants.
80. When was such acquisition, in the present case, complete? Mr. Kotwal says that it was complete on March 21, 1949, on which date, according to him, His Highness the Maharaja of Baroda ceded to the Dominion Government full and exclusive authority, jurisdiction and powers for and in relation to the governance of the State. He emphasises the words 'hereby cedes' in Article 1 of the Merger Agreement and says that the Maharaja ceded all his powers on the date of the agreement only, though the transfer of the administration of the State was deferred to a future date, namely, May 1, 1949. He has also referred us to Article IV of the agreement. He has further argued that the orders dated April 22, 1949, and April 30, 1949 of the Executive Council must, in view of the completion of the cession on March 21, 1949, be construed to be orders passed by the Council as the delegate of the Dominion Government of India, and, therefore, they could not amount to acts of State when plaintiffs against whom they were passed had become the subjects of the Dominion Government of India itself. Mr. Munshi also has advanced a similar argument, though obviously for different reasons. He says that the orders were passed in the course of the process of acquisition and under the authority of the acquiring State. These arguments cannot be considered in the absence of appropriate pleadings and evidence and when they are entirely contrary to the averments in the pleadings of the parties. Both sides have stated in their pleadings that the orders were the orders of the Executive Council of the Government of Baroda.
81. Further, on a proper construction of Article I and other Articles of the Agreement it seems to me that the ceding of powers by the Maharaja of Baroda and the assumption thereof by the acquiring State took place on one and the same day, i.e. on May 1, 1949. What is more important is-when did the acquiring State start the process of assuming sovereign powers over the new territory Paragraph 2 of Article I of the Agreement says:
As from the said day (1-5-1949) the Dominion Government will be competent to exercise the said powers, authority and jurisdiction in such manner and through such agency as it may think fit.
The Articles of Agreement are also repugnant to any arbitrary powers having been exercised by the Dominion Government during the intervening period from March 21, 1949, to May 1, 1949. The Dominion Government had solemnly stated in the Agreement that their right to exercise the sovereign powers would accrue to them only from May 1, 1949. Could the Dominion Government, in the face of this agreement, have conceivably exercised any arbitrary powers in the exercise of which powers alone the orders of April 22, 1949, and April 30, 1949, could have been issued as acts of State? This would be doing violence to the spirit of the agreement and would completely ignore the historical background in which it was brought about. Therefore, it is not possible to hold that the process of acquiring such powers commenced before May 1, 1949. Besides, if the Merger Agreement had been entered into between the sovereigns of the two States with a view to acquire new territory (State of Baroda), I do not see how the orders of April 22, 1949, and April 30, 1949, passed against the individual inhabitants of the former regime-even assuming that such orders had been passed tinder the delegated authority of the Dominion Government-could have anything to do with the process of acquisition of new territory which in this case had taken the form of Merger Agreement-a bilateral transaction only between the ceding and the acquiring State with which the subjects of the former State were in no way concerned. It is true that in the Supreme Court decision cited above, the resumption by the Administrator of lands granted to a person (individual) in the Junagad State by the former Nawab was held to be an act of State. The facts of that case were entirely different. The Administrator of Junagad State had been appointed by the Dominion Government and the process of acquisition of the territory had not started with the Merger Agreement in the manner as in the present case. I am, therefore, of the view that the Merger Agreement, if an act of State, came into effect and the Dominion Government assumed the sovereign powers only on May 1, 1949, and not before. The process of acquisition, such as it was, could, on the facts and under the circumstances of this case, be regarded only as one single act of State starting and terminating on the same day, i.e. on May 1, 1949.
82. After the Dominion Government thus acquired the State of Baroda by the Merger Agreement, the Government of India lost no time in introducing its own laws in the new territory as they did in the case of the Begum's estate, the decision of the Privy Council in regard to which has been cited above. At this time there was on the statute book of the Central Government of India an Act called the Extra-Provincial Jurisdiction Act. 1947 (Act No. XLVII of 1947). The preamble of the Act is important and may be set out here:-
Whereas by treaty, agreement, grant, usage, sufferance and other lawful means, the Central Government has, and may hereafter acquire, jurisdiction in and in relation to areas outside the Provinces of India;
The preamble mentions the acquisition of 'extra-provincial jurisdiction' both before and after the Act, and what is emphasised is that such acquisition whether before or after the Act must have been by lawful means. In other words, it may be said that the Central Government was deemed to be empowered to acquire 'extra-provincial jurisdiction' by lawful means. If, therefore, the Central Government in the exercise of such lawful means as are envisaged in the preamble of a municipal Act were to enter into 'an agreement with His Highness the Maharaja of Baroda, could it not be said that they purported to do so under colour of legal title, almost in the same way as the Government of India did when resuming the Begum's estate in Forester's case (P.C.) If that were so, the act of the Central Government-the Merger Agreement-would be anything but an act of State, not referrable to the exercise of arbitrary powers which are either outside or paramount to the municipal law.
83. From May 1,1949, the Extra-Provincial Jurisdiction Act, 1947, conferred upon the Central Government the authority for exercising powers of administration and legislation in the State of Baroda. tinder Section 3(2) of the Act the Central Government could delegate its extra-provincial jurisdiction to any officer or authority in such manner and to such extent as it thought fit. By Notification No. 101P which was issued on the same day (May 1, 1949), the Central Government delegated its extra provincial jurisdiction to the Government of Bombay. The Notification stated:-
WHEREAS the Central Government has full and exclusive extra-provincial jurisdiction for and in relation to the governance of the State of Baroda.
Now, Therefore, in exercise of the powers conferred by Sub-section (2) of Section 3 of Extra-Provincial Jurisdiction Act (XLVII of 1947) and of all other powers enabling it in this behalf, the Central Government is pleased to delegate to the Provincial Government of Bombay the extra-provincial jurisdiction aforesaid conferred by Section 4 of the said Act to make orders for the exercise of that jurisdiction.
(1) the exercise of the jurisdiction hereby delegated shall be subject to the control of the Central Government; and
(2) the delegation shall not preclude the Central Government from exercising the jurisdiction hereby delegated.
84. In the exercise of the powers thus delegated the first thing that the Government of Bombay did was to order that the provisions of the Government of Baroda Act (Act No. IV of 1940) except Sections 1, 2, and 36 to 45 (both inclusive) be repealed with effect from May 1, 1949; (see Bombay Rules and Orders under Central Acts Vol. 11, p. 1869). On the same day the Government of Bombay also made another order called the Administration of the Baroda State Order (supra p. 1870) which came into force at once. Paragraph 4 of the Order stated:-
(i) Subject to the provisions of this Order, such provisions, or such parts of provision-
(a) of any law, or
(b) of any notification, order, scheme, rule, form or bye-law issued, made or prescribed under any law,
as were in force immediately before the appointed day (1-5-1949) in the Baroda State shall continue in force until altered, repealed or amended by an order under the Extra-Provincial Jurisdiction Act, 1947 (XLVII of 1947).
Thus, to the extent mentioned in this paragraph, the old laws, orders etc. of Baroda State were recognised and carried forward by the Government of India. I have already held the Hazur order of February 8, 1948, to be in the nature of a private Act. Even assuming it to be an executive order, I have further held that it was unaffected and could not have been annulled by the order of the Executive Council dated April 22, 1949. Therefore, the Hazur order, whether as a legislative enactment or an executive order, was in force before May 1, 1949, and was, consequently, recognised and continued to be in force by the Government of India under the Administration of the Baroda State Order. This was a recognition by legislation of the new Government of the ante-cession laws and orders.
85. Mr. Munshi attempted to show that the Hazur order of February 8. 1943, particularly in so far as it related to the awarding of compensation, was not in force immediately before May 1, 1949. He referred to the Proclamation (Adna Patrak) of August 29, 1948, by which part of Section 3 and the whole of Section 4 of the Government of Baroda Act had been deleted. He contended that such deletion amounted to the repealing of Section 4 and a part of Section 3 of the Act, and that the effect of such repeal was that the sections thus affected never existed on the statute book; and the further argument was that the Hazur order of February 8, 1948, which had been passed by the Ruler in the exercise of his prerogative powers mentioned in Section 4 of the Act must also be regarded as having never existed. It is not possible to accept this contention. If a particular Act or order had been passed by the Ruler in the exercise of his prerogative powers, and if such prerogative powers are subsequently taken away by legislation, I do not see how such subsequent repeal of prerogative powers could affect the existence and the enforceability of that Act or order which had been validly passed when the Ruler was in full enjoyment of his prerogative powers.
86. Another argument was suggested by Mr. Munshi in this connection. He stated that compensation money had been paid under the Hazur order on or before June 1, 1948, and, therefore, after such payment the Haxur order exhausted itself and ceased to be in force to that extent. If so, it was not in force immediately before the appointed day mentioned in the Administration of the Baroda State Order; and, therefore, was not recognised by the present Government. I confess, I have not been able fully to appreciate this argument also. I do not see how the payment of compensation under the Hazur order would cause the Hazur order to cease to exist and to be in force any more than payment under a Civil Court decree would put an end to the rights of a decree-holder to such payment. If plaintiff is called upon by the present Government to refund the compensation money, he can still point out to and rely upon the Hazur order as the root of his title for justifying the retention of the compensation money. It is in this sense that the Hazur order must be regarded as still having been in force and recognised by the present Government.
87. Under the same delegated powers derived from the Government of India under the Extra-Provincial Jurisdiction Act, 1947, the Government of Bombay made another order on July 30, 1949, called the Baroda State (Application of Laws) Order, 1949. By this Order the laws in force in the Province of Bombay were extended to and brought into force in the Baroda State. Paragraph 5 of the Order stated:-
The following enactments (including the rules) are hereby repealed:-
(a) All the enactments specified in Schedule III in force in the Baroda State immediately before the coming into force of the Order,
(b) Sections 1, 2 and 36 to 45 (both inclusive) of the Government of Baroda Act (IV of 1940), and
(c) All other enactments in force in the Baroda State and corresponding to the enactments in force in the Province of Bombay, and extended to the Baroda State under paragraph 3...
(iii) The repeal by this Order of any such enactment.. .order shall not- (a) affect the validity... effect or consequence of anything done...or any right, title already acquired...
88. If the Hazur order dated February 8, 1948, was in the nature of a private enactment and if there was no enactment corresponding to such Hazur order in force in the Province of Bombay, it was not repealed by para. 5 of the Order; but continued to be in force as before; if, however, it were contended that the Hazur order was repealed, the validity, effect or consequence of any thing already done or any right, title already acquired under the said Hazur order remained unaffected in view of sub-para. (iii).
89. From these two Orders of the Government of Bombay, it will be seen that immediately after the Merger Agreement, the Government of India assumed the responsibility of administering the territory of the State of Baroda, through its delegate, the Government of Bombay. These orders could not be said to have been passed during the process of acquisition so that as contended by Mr. Munshi they could themselves be termed as acts of State. The acquisition was complete on the Merger Agreement coming into force. Then started the process of integration of the acquired territory, first, with the Dominion of India, and then with the Province of Bombay. First, the Government of India carried on the administration of the territory of Baroda State, through its delegate, the Government of Bombay. The second stage in the process of integration was reached when the Government of India (again through its delegate) extended the laws of the Province of Bombay to the new territory . At this time, the Government of India had no power under the Government of India Act, 1935, to increase the area of any existing Province by absorbing the newly acquired territory which was originally outside 'British India' as denned under that Act. With a view to bring about an organic integration of the newly acquired territory with the neighbouring Province the Government of India Act, 3935, was suitably amended by introducing two new Sections 290A and 290B. Under Section 290A, the Governor General was given power to make an order directing that an Indian State over which the Dominion Government had already acquired 'extra-Provincial jurisdiction' (under Act No. XLVII of 1947), shall be administered in all respects as if that State formed part of the Governor's Province specified in the Order. It was in the exercise of such power that the Governor-General made the order known as the States' Merger (Governors' Provinces) Order, 1949, which came into force on August 1, 1949. In view of para. 3 of the said Order as from August 1, 1949, the State of Baroda came to be administered in all respects as if it formed part of the Province of Bombay. From the provisions of this Order it will be seen that it had nothing to do with the process or the final phase of acquisition. The White Paper on Indian States (1950) which is judicially recognised as a Constitutional document describes the integration of States as follows (Part V, pp. 33, 30) :
The accession of the Indian States to the Dominion of India was the first phase of the process of fitting them into the constitutional structure of India, The second phase which rapidly followed, involved a process of two-fold integration, the consolidation of States into sizeable administrative units, and their democratization...
The integration of States did not follow a uniform pattern in all cases. Merger of States in the Provinces geographically contiguous to them was one form of integration; (the absorption of the State of Baroda by the neighbouring Province of Bombay was in this form of integration as shown above); the second was the conversion of States into Centrally administered areas; and the third the integration of their territories to create new viable units known as Union of States. Each of these forms has been adopted according to size, geography and other factors relating to each State or group of States.
90. The learned Counsel Mr. Gupte then raised what seems to me a fundamental objection to the Merger Agreement being treated as an act of State. He also contended-this was in reply to Mr. Munshi's argument-that the order dated April 22, 1949, of the Executive Council could under no circumstances be regarded as an act of State because it was riot an act done by the new sovereign nor against an alien. He argued that the Merger Agreement had not, been arrived at between two independent sovereign States so as to amount to an act of State, His Highness the Maharaja of Baroda who was a party to the Agreement having already ceased to be an alien in the Dominion of India.
91. In order to test the sufficiency and the validity of the defence of act of State based as it is upon the Merger Agreement, it is necessary to come to a clear conclusion touching the status of His Highness the Maharaja of Baroda both before and after the establishment of the Dominion of India under Indian Independence Act, 1947.
92. Before India attained independence in 1947, the State of Baroda was an Indian State within the meaning of the definition of 'Indian State' in Sub-section (1) of Section 311 of the Government of India Act, 1935. Under that definition, Indian State was defined as including any territory, whether described as a State, an Estate, a Jagir or otherwise, belonging to or under the suzerainty of a Ruler who was under the suzerainty of His Majesty and not being a part of British India. It, was only 'British India' which meant, all territories for the time being comprised within the Governors' Provinces and the Chief Commissioners' Provinces that were governed by the British Crown according to the statutes of British Parliament and the enactments of the Indian Legislature, while the Ruler of an Indian State enjoyed or exercised all the functions and attributes of internal sovereignty duly recognised by the Paramount Power.
93. Oppenheim in his International Law (Eighth Edn., Vol. I) describes the three aspects of sovereignty as follows (para. 123, p. 286) :
Sovereignty as supreme authority, which is independent of any other earthly authority, may be said to have different aspects. Inasmuch as it excludes dependence upon any other authority, and in particular from the authority of another State, sovereignty is independence. It is external independence, with regard to the liberty of action outside its borders in the intercourse with other States which a State enjoys. It is internal independence with regard to the liberty of action of a State inside its borders. As comprising the power of a State to exercise supreme authority over all persons and things within its territory, sovereignty is territorial supremacy... As comprising the power of a State to exercise supreme authority over its citizens at home and abroad, sovereignty is personal supremacy.
For these reasons, a State as an International Person possesses independence and territorial and personal supremacy.
94. The same author describes the position of an Indian State of the British regime as that of a Vassal State.
The vassal State has no relations with other States since suzerian absorbs these relations entirely; yet the vassal remains nevertheless a half-sovereign State on account of its internal independence. This was the position of Indian vassal States of Great Britain, which had no international relations whatever either between themselves or with foreign States, (p. 190).
95. Sir Courtenay Ilbert in his 'Government of India' (III Edn.) after considering the limitations on the powers of the Native Indian States observes (p. 169) :
The result of all these limitations on the powers of the Native Indian States is that, for purposes of international law, they occupy a very special and exceptional position. 'The principles of international law' declared a resolution of the Government of India in 1891, 'have no bearing upon the relations between the Government of India as representing the Queen Empress on the one hand, and the Native States under the sovereignty of Her Majesty on the other. The paramount supremacy of the former presupposes and implies the subordination of the latter'.
The same author has tried to explain what is meant by 'suzerainty':
It is a term which is perhaps incapable of precise definition but which is usefully employed to indicate the political authority exercised by one State over another and approximating more or less to complete sovereignty (p. 292).
96. On India attaining independence and becoming an independent Dominion on August 15, 1947, by reason of the Indian Independence Act, 1947, the suzerainty of the British Crown over the Indian States lapsed because of Section 7 of the Act. Indian States were released from all their obligations to the British Crown and they enjoyed the status of truly independent sovereign States possessing even what Oppenheim calls 'external independence'. But this position did not last long and was of no practical value whatever except for knowing what was their real status at the time when they acceded to the new Dominion of India by executing instruments of accession. The Rulers of Indian States soon realised the necessity and importance of linking up with the Dominion of India on a basis which left unaffected their internal autonomy and which at the same time relieved them of their worries and cares over External affairs, Defence and Communications. Accordingly they acceded to the new Dominion of India by executing instruments of accession. The Dominion of India was empowered to accept these accessions by a suitable amendment in the Government of India Act, 1935. Section 6 of the Government of India Act empowered the Governor-General of the Dominion of India to signify his acceptance of such instruments of accession.
97. The Ruler of Baroda soon fell in line with this policy of accession. He executed the Instrument of Accession which was in the form set out in Appendix VII of the White Paper on Indian States (p. 165). The material portion of the same may be mentioned here:-
WHEREAS, the Indian Independence Act, 1947, provides that as from the fifteenth day of August, 1947, there shall be set up an independent Dominion known as INDIA, and that the Government of India Act, 1935, shall with such... adaptations... as the Governor-General may by order specify be applicable to the Dominion of India;
AND WHEREAS the Government of India Act, 1935, as so adapted by the Governor-General provides that an Indian State may accede to the Dominion of India by an Instrument of Accession executed by the Ruler thereof:
Now therefore I...Ruler of (Baroda)... in the exercise of my sovereignty in and over my said State Do hereby execute this my Instrument of Accession, and
(1) I hereby declare that I accede to the Dominion of India with the intent that the Governor-General of India, the Dominion Legislature, the Federal Court and any other Dominion authority established for the purposes of the Dominion shall, by virtue of this my Instrument of Accession but subject always to the terms thereof, and for the purposes only of the Dominion, exercise in relation to the State of (Baroda) such functions as may be vested in them by or under the Government of India Act, 1935, as in force in the Dominion of India on the 15th day of August 1947...
(3) I accept the matters specified in the Schedule hereto as the matters with respect to which the Dominion Legislature may make laws...
(8) Nothing in this Instrument affects the continuance of my sovereignty in and over this State, or save as provided by or under this Instrument, the exercise of any powers, authority and rights now enjoyed by me as Ruler of this State or the validity of any law at present in force in this State.
The matters with respect to which the Dominion Legislature may make laws for this State.
B. External affairs.
1. External affairs; the implementing of treaties and agreements with other countries; ...
2. Admission into, and emigration and expulsion from, India, including in relation thereto the regulation of the movements in India of persons who are not British subjects domiciled in India or subjects of any acceding State;...
98. When the Governor-General accepted this Instrument of Accession, the State of Baroda was, in view of Section 6 of the Government of India Act, 1935, deemed to have acceded to the Dominion of India. What was the effect of such accession on the acceding State?
99. Under the Indian Independence Act, 1947, two independent Dominions were set up in India to be known respectively as India and Pakistan. The territories of the new Dominion of India were defined under Section 2 of the Indian Independence Act, 1947. It provided:
(1) Subject to the provisions of Sub-sections (3) and (4) of this section, the territories of India shall be the territories under the sovereignty of His Majesty which, immediately before the appointed day, (15-8-1947) were included in British India except the territories which, under Sub-section (2) of this section, are to be the territories of Pakistan...
(3) Nothing in this section shall prevent any area being at any time included in or excluded from either of the new Dominions so, however, that-
(a) no area not forming part of the territories specified in Sub-section (1) or, as the case may be, Sub-section (2) of this section shall be included in either Dominion without the consent of that Dominion;...(4) Without prejudice to the generality of the provisions of Sub-section (3) of this section, nothing in this section shall be construed as preventing the accession of Indian States to either of the new Dominions.
100. Thus, under Section 2 of the Indian Independence Act, 1947, the Dominion of India could include in its territory any area which was outside and did not form part of the territory which had been defined as 'British India' under the Government of India Act, 1935. It could also in particular include in its territory any Indian State if such Indian State acceded to it. It should be noted that Section 3 of the Indian Independence Act only defines the territory of the new Dominion. It comprises what was originally a part of British India and any area which could be included in that part, under Sub-section (5) and territory of any Indian State which could also be thus included under Sub-section (4). The definition of 'Indian State' as it stood at this time in the Government of India Act meant any territory not being part of British India which His Majesty recognised as being such a State, whether described as a State, an Estate, a Jagir or otherwise. Section 5 of the Government of India Act, 1935, stated that the Dominion of India established by the Independence Act, 1947, shall be a Union comprising:-
(a) the Provinces called Governors' Provinces,
(b) the Provinces called Chief-Commissioners' Provinces,
(c) the Indian States acceding to the Dominion in the manner provided in the Act,
(d) any other areas that may with the consent of the Dominion be included in the Dominion.
101. Even from the provisions of this section, it is clear that the Union is to comprise the same territories which shall be the territories of Indian Dominion under Section 2 of the Indian Independence Act., 1947. Clauses (a) and (b) of Section 5(1) of the Government of India Act, 1935, refer to the territories mentioned in Section 2(1) and Clauses (c) and (d) thereof refer to the territories respectively mentioned in Sub-sections (4) and (3) of Section 2 of the Indian Independence Act, 1947. It may be, as contended by Mr. Munshi, the word 'Union' used in Section 5 connotes the political union of the several units of territories mentioned in the section. But even a political union must necessarily consist of only territorial units, as such political union is constituted for the governance of its entire territory and its subjects. There can indeed be no State without a territory. The Union that was envisaged in Section 5 of the Government of India, 1935, was to be the union of Provinces and States which, broadly speaking, in all matters of purely local and provincial interest were to become self governing units but which were to be held together by the Central Government which was to deal solely with matters of common concern to all such units. It was to be the fusion of several States into a single State in regard to matters affecting common interests while each component State was to enjoy autonomy in regard to other matters.
102. The State of Baroda, by acceding to the Dominion of India in the manner provided in the Government of India Act, 1935, became a part of the territories of India as defined in Section 2 of the Indian Independence Act, 1947, and for the purposes of Section 5 of the Government of India Act, 1935, one of the units of which the Union was to consist.
103. In State v. Faizullabhai Abdulhussain (1952) 55 Bom. L.R. 185, a Division Bench of this Court considered the effect of Section 5(1) of the Government of India Act, 1935, by reference to the Instrument of Accession executed by the Ruler of Baroda, After referring to Section 5(1) Mr. Justice Rajadhyaksha, who delivered the judgment of the Bench observed (p. 190):.from the moment of accession, the Indian State according to the Dominion of India becomes a part of that Dominion. It must, therefore, follow that the Ordinance extends to the State of Baroda which, on August 15, 1947, became a part of the Union of India with respect to matters covered by the Instrument of Accession. Therefore, from the day on which the Ordinance No. 34 of 1948 became law of the land, it also became the law of the territory which formerly formed part of the State of Baroda...
104. The Instrument of Accession executed by the Ruler of Baroda was also considered in the case of In re Raab (1948) 51 Bom. L.R. 852. Mr. Justice Bavdekar, who delivered the judgment of the Bench, observed (p. 865) : .Baroda is now an Acceding State, It is a part of the Indian Dominion. Every person who is a subject of the Baroda State is, therefore, now a subject of the Indian Dominion, and this Court could not possibly say that the subject of the Indian Dominion is a foreign person for the purpose of the principle which is relied upon on behalf of the Crown.
105. Therefore, it seems to me that the orders of the Executive Council dated April 22, 1949, and April 30, 1949, even, if assumed to be the orders of the acquiring State-the present Government (as contended by Mr. Munshi), could not amount to acts of State against the plaintiffs who were no longer aliens but had become the citizens of the present Government. If so, the defence of act of State is not available to Government.
106. It may be made clear that the plaintiffs have not, in the present appeals, sought to support their claims by reference to the terms embodied in the Merger Agreement.
107. It may be noted that at the time of the Merger Agreement His Highness the Maharaja of Baroda had by reason of the accession of his State to the Indian Dominion ceased to be an alien but was a subject of the Indian Dominion itself. In this position of affairs, it is difficult to hold that the Merger Agreement was in the nature of a Treaty or an Agreement between two 'high contracting parties', two independent sovereigns of different States.
108. It is true under the Instrument of Accession, the internal sovereignty of the Ruler of Baroda over his State was not, at all affected. In Virendra Singh v. State of Uttar Pradesh : 1SCR415 , their Lordships of the Supreme Court considered the effect of the accession and observed (p. 449) :
Broadly speaking, the effect of the accession was to retain to the Rulers their full autonomy and sovereignty except on three subjects: Defence, External Affairs and Communications. These were transferred to the Central Government of the new Dominion.
I must respectfully say that these observations are binding on this Court.
109. In Duff Development Co. v. Kelantan Government  A.C. 797 it was held that a Government recognised as sovereign by His Majesty's Government was not the less exempt from the jurisdiction of British Court because it had agreed to restrictions on the exercise of its sovereign rights. In that ease, the British Government had recognised the Sultan of Kelantan as a sovereign and independent ruler and this fact was regarded as conclusive on the point. But there are observations in the speeches of the noble Lords to which reference may be made. Viscount Cave referred to the definition of a Sovereign State by Vattel.
Vattel defines a sovereign State as a nation which governs itself by its own authority and laws without dependence on any foreign power; but he also lays it down that a State may without ceasing to be a sovereign be bound to another more powerful State by an unequal alliance.. .No doubt the engagements entered by a State may be of such a character as to limit and qualify, or even to destroy the attributes of sovereignty and independence; and the precise point at which sovereignty disappears and dependence begins may sometimes be difficult to determine.
Viscount Finlay observed:
It is obvious that for sovereignty there must be a certain amount of independence, but it is not in the least necessary that for sovereignty there should be complete independence. It is quite consistent with sovereignty that the sovereign may in certain respects be dependent upon another Power; the control for instance of foreign affairs may be completely in the hands of a protecting Power.
110. Thus, in view of the high authorities referred to above, it is clear that sovereignty may continue in a Ruler despite restrictions that may be imposed upon it. In the present case, as observed by their Lordships of the Supreme Court in the case referred to above, the sovereignty of the acceding State was expressly recognised and safeguarded. But in the present case we are not concerned so much with whether any sovereignty is left in the Ruler after the accession as: whether the Ruler in the exercise of such sovereign powers which still belonged to him could enter into a transaction as between two independent sovereigns. The precise question which calls for determination in the present ease is, could the Ruler of Baroda in the exercise of his residuary sovereign powers have entered into the Merger Agreement and could such Merger Agreement be placed on the level of an act of State between two independent sovereign states, when the Ruler had been divested of the very power-external independence-in the exercise of which power alone he could have entered into such agreement as a high contracting party. Oppenheim in para. 124 (p. 286) says that it is in consequence of its external independence a State can, unless restricted by treaty, manage its international affairs according to discretion; in particular it can enter into alliances and conclude other treaties, send and receive diplomatic envoys, acquire and cede territory, make war and peace. It is this important; attribute of sovereignty that had been lost to the Ruler of Baroda under the Instrument of Accession; nay more it had been expressly surrendered in favour of the Dominion Government. The Ruler could not have thereafter entered into any treaties or agreements with any foreign, independent State. The Merger Agreement, therefore, could not be considered as a transaction, a treaty of cession between two independent sovereigns. For a treaty of cession which might amount to an act of State both the high contracting parties should have at least the necessary sovereign power, namely, 'external independence'. Further, as I have already stated, what is more important for determining whether a particular act amounts to an act of State is to see how the acquiring State (and not so much the ceding State) has acted in such transactions. On its part, it could not be said that it was acting arbitrarily, on principles either outside or paramount to the municipal law. It could be stated that the Government of India purported to act in the exercise of the power legally surrendered to it under the Instrument of Accession.
111. If it is assumed that the territory of the State of Baroda was transferred for the first time under the Merger Agreement, such transfer could be considered to have been made under Sub-section (3) of Section 2 of the Indian Independence Act.
112. Therefore, looked at in the context of the provisions of the Indian Independence Act, 1947, Government of India Act, 1935, and the Instrument of Accession, I am inclined to think that the Merger Agreement could not be regarded as an act of State. The territory to which it related was already the Indian territory and the contracting party, the subject of the Indian Dominion. The authority for both the contracting parties for entering into such agreement could be found in the legislative enactments already in force. Every step in the process of accession and integration of Indian States appears to have been taken in the exercise of the authority derived from legislative enactments already in force and throughout this long process arbitrary power was never intended and was scrupulously avoided.
113. Even if my view on this point is not correct, for the reasons already stated, on the other points discussed above, I would pass the following orders:-
114. Second Appeal No. 218 of 1955 is dismissed with costs. First Appeal No. 172 of 1956 is partly allowed and the decree of the trial Court is modified only to the extent mentioned herein:-
A. For the figures 'Rs. 77,300' and 'Rs. 65,000' mentioned in para. 2 of the final order of the judgment of the trial Court, the figure Rs. 47,750 is substituted.
B. Defendant shall pay all costs of the plaintiff in the trial Court only on the amount of Rs. 65,000 and bear its own.
C. The rest of the decree of the trial Court is hereby confirmed.
D. The appellant to pay the costs of the respondent in appeal on Rs. 65,000.
115. First Appeal No. 407 of 1957 is partly allowed and the decree of the trial Court is modified only to the extent mentioned herein:-
A. The declaration granted by the trial Court in so far as the orders of the Baroda Executive Council Nos. (R) 87/18 and 99A dated April 22, 1949, and April 30, 1949, are concerned is hereby confirmed; the rest of the declaration and injunction as granted by the trial Court will be suitably modified as stated in this judgment.
B. For the figure 'Rs. 83,632-3-2' mentioned in the second paragraph of the final order of the trial Court's judgment, the figure Rs. 71,034-3-2 is substituted.
C. For the figure 'Rs. 15,996-0-6' mentioned in the third paragraph of the final order of the trial Court's judgment, the figure Rs. 12,189-1-0 is substituted.
D. Plaintiff to recover his costs of suit from defendant No. 2 only on Rs. 71,034-3-2.
E. Subject to these modifications the rest of the trial Court's decree is confirmed,
F. Cross objections filed in this Court are dismissed. The appellant to get costs of the cross objections from the respondent only on the amount of Rs. 12,189-1-0. The respondent to bear his own costs of the cross objections.
G. The appellant to pay the costs of the appeal to the respondent.
116. No order on C. R. A. 1329 of 1955.