Jagat Narayan, C.J.
1. This is an appeal by the State of Rajasthan (defendant No. 2) against a decree of the District Judge, Kota, dated 25-9-58 decreeing a suit instituted against it and against the Union of India (defendant No. 1) by the Associated Stone Industries Kota (hereinafter referred to as the Company).
2. The relevant facts are that the Ruler of the erstwhile State of Kota entered into an agreement Ex. A on 2-5-45 with the Company for quarrying Kachcha stone from the Tehsils of Ramganj Mandi and Chechat. Monopoly rights for quarrying Kachcha stone in these two tehsils were granted to the Company for a period of 15 years from 1-10-44- The terms and conditions contained in Clause 18 (i) of the agreement ran as under :--
'In consideration of the concessions and privileges granted by the Grantor and in lieu of income-tax, super-tax and excess profits tax, the Grantee covenant to pay to the Grantor royalty on the stone excavated at the rate of rupee one per 100 sq. ft., subject to the minimum amount of Rs. 1,50,000/- per financial year. Provided that the aforesaid rate of Re. 1/- per 100 sq. ft. will be operative so long as the selling rate of unpolished slabs does not exceed Rs. 10/- per 100 sq. ft. In the event of the selling rate going above this figure, the royalty per 100 sq. ft. shall be increased by 25% of the excess over ten rupees.'
3. The agreement was acted upon by both the parties. The Rulers of Kota, Bundi, Banswara, Dungarpur, Jhalawar, Kishangarh, Partabgarh, Shahpura and Tonk formed the first United State of Rajasthan on 25-3-48. The Ruler of Mewar agreed to join this Union and the second United State of Rajasthan was formed on 18-4-48. Jaipur, Jodhpur, Bikaner and Jaisalmer later on joined in and the third United State of Rajasthan was formed on March 30, 1949. Matsya Union, which was inaugurated on 18-4-48, joined this Union and the fourth United State of Rajasthan came into being on May 15, 1949. On 23-11-49 the Rajpramukh of the United State of Rajasthan agreed to accept the Constitution of India which may be framed and on 26-1-50 the United State of Rajasthan became the Part B State of Rajasthan under theConstitution. On 1-11-56 the present State of Rajasthan was formed as a result of the reorganisation of States.
4. On 1-4-1950 the Union of India extended the Finance Act to Rajasthan with the result that the Indian Income-tax Act, 1922 was extended to it. The Government of India appointed a Commissioner of Income-tax for Rajasthan. An Income-tax Officer was also appointed at Kota, who served the Company with a notice under Section 22 (2) of the Indian Income-tax Act asking it to file return of income for the income-tax year 1950-51. The Company filed an application under Para. 16 of the Part B States (Taxation Concessions) Order 1950 on 2-4-51 (Ex. D), but the same was rejected by the Commissioner of Income-tax by his letter dated 24-10-51 (Ex. E). A representation was made to the Ministry of States, Government of India, on 17th December, 1952 (Ex. F). The Ministry of Finance (Revenue Division) advised the Company by its letter dated 29th April 1953 (Ex. G) to approach the Rajasthan Government for relief from the payment of royalty under the agreement entered into with the former Ruler of Kota.
5. The Company had already made a representation to the Minister for Industries and Commerce of Rajasthan on 3rd July 1950 (Ex. H) to the effect that part of the payment of royalty under agreement Ex. A was in lieu of income-tax etc. and that if income-tax is demanded from it and it is held liable to pay the same 'the payment which we are making to you is, without prejudice to right under Clause 18 of the agreement, against the Government of India for exemption on the basis of the agreement and therefore we are entitled from the Rajasthan Government for the refund to the extent to which we may be held liable to pay income-tax etc.' In reply to this letter the Government of Rajasthan wrote letter dated 2-11-50 (Ex. I) to the Company, which runs as follows;--
'I am directed to inform you that the contention made in your above noted letter is not tenable inasmuch as no undertaking to compensate the Company for levy of any income-tax, super-tax etc. under the authority of a valid statute to be promulgated in future was ever given in the agreement.
For the levy of income-tax or supertax etc. by the Central Government which was beyond the control of the Rajasthan Government, the Rajasthan Government cannot be made to pay the compensation.'
6. On 2nd June 1952 the Government of Rajasthan served notice Ex. A/1 on the Company cancelling the agreement dated 2nd May 1945 on the ground that it was 'prima facie against public interest' and the terms and concessionsobtained thereby were 'grossly unreasonable and extravagant' and requiring it to deliver possession over the quarries to the Director of Mines and Geology, Rajasthan, within 3 months from the date of the receipt of the notice.
7. The Company then filed suit No. 8/1952 for an injunction to restrain the State from taking possession over the quarries. On 2-9-52 an ex parte injunction was issued restraining the State from taking possession of the quarries or from taking any action whatsoever to the prejudice of the plaintiff Company in enforcing the memorandum or notice dated 2-6-52 or committing any breach of the terms and conditions of the grantee dated 2-5-45. This order was confirmed on 22-9-56 and remained in force throughout the pendency of the suit out of which the present appeal arises. On the expiry of the term of the agreement dated 2-5-45 on 30-9-59 the Suit No. 8/52 became infructuous and was dismissed. The State granted a fresh lease to the Company under the Rajasthan Minor Mineral Concession Rules for a period of 10 years.
8. On 15-12-53 the present suit was filed by the Company against the Union of India and the State of Rajasthan. With regard to income-tax the case of the Company was that in view of agreement Ex. A the Union of India is not entitled to recover it from the Company. In the alternative the case was that the Union of India should recover income-tax etc. from the State which should pay it out of royalty part of which was attributable to exemption from income-tax etc. Another alternative case was that the Court should decide what part of royalty is attributable to the consideration of exempting the Company from income-tax etc. under Clause 18 of the agreement and restrain the State from recovering it from the Company. Appropriate reliefs were prayed for on the basis of the above case. Both the Union of India and the State contested the suit. With regard to income-tax the following 3 issues were framed by the learned District Judge which were decided against the Company by the High Court and the decision was affirmed fay the Supreme Court in Associated Stone Industries (Kotah) Ltd. v. Union of India : 49ITR92(SC) :--
(2) Whether Clause 18 of the Grant created a legal obligation not to levy income-tax, etc. on the income of the plaintiff for the duration of the grant? (on plaintiff)
(3) Whether the obligation not to levy income-tax etc. devolved upon defendant No. 2 by virtue of Article 6 of the Covenant and upon defendant No. 1 by virtue of Article 295 of the Constitution? (on plaintiff)
(4) Is the Income-tax Act not applicable to the plaintiff in view of the Government Grants Act or any other reason (on plaintiff)
The remaining issues were decided by the learned District Judge and his findings were these. It was held that agreement Ex. A had the force of law which was binding on the State by virtue of the covenants entered into between the Rulers of the successive integrating States and laws enacted by them after the formation of various Unions of States. Next it was held that agreement Ex. A was recognised by the State of Rajasthan and was binding on it for that reason also. Lastly it was held that the amount of royalty above the sum of Rs. 1,50,000/-was in lieu of income-tax etc. The decree of the learned District Judge was based on these findings.
9. All the above findings were challenged by the learned Additional Government Advocate on behalf of the State. The learned counsel for the Company conceded that the first finding namely that the agreement dated 2-5-45 was law could not be supported in view of the decision of the Supreme Court in Maharaja Shree Umaid Mills Ltd. v. Union of India, : 48ITR186(SC) , in which it was held that an agreement between the Sovereign and the subject which rested solely on the consent of the parties and was entirely contractual in nature was not law. He supported the other two findings of the learned District Judge.
10-11. We shall first take up the question as to whether agreement Ex. A was binding on the State of Rajasthan when it was formed. In this connection we refer to the following decisions of this Court and of the Supreme Court which are fully applicable to the facts of this case:--
1. Full Bench decision of this Court in State of Rajasthan v. Shyamlal . This decision was affirmed by the Supreme Court in State of Raiasthan v. Shyamlal : 7SCR174 .
2. The State of Rajasthan v. The Bundi Electric Supply Co., Ltd., Bundi, Civil Regular First Appeal No. 33 of 1959, D/- 14-8-1969 (reported in ). (Certified copy placed on record).
The facts in , were these. In June 1947 Shyamlal, a resident of the former State of Dholpur applied for and was granted a permit for export of 15,000 mds. of chuni and in connection therewith deposited Rs. 30,000/- as export duty in advance. The permit remained in force upto 2-12-47 and was not extended further. During this period he could export only 4,572 mds. due to market conditions and as such was entitled to refund of Rs. 20,855/- out of the advance duty already paid by him. He filed a suit for refund of the excess amount against the State of Rajasthan in January1952. In defence it was contended that the liability of the former State of Dholpur to refund the amount of tax collected in advance did not devolve on the Part B State of Rajasthan as there was no recognition of this liability by the new State at any time. It was held after reviewing the process of merger of former Rajasthan States by different stages to form the Part B State of Rajasthan that there was recognition of liability by new State throughout this process and under the Constitution the suit was maintainable against the Part B State of Rajasthan.
12. In an agreement was executed between the Bundi Company and the former Bundi State on 9th October 1945 under which a sum of Rs. 6,000/- was payable annually by the State as rent for the electricity lines belonging to the Bundi Company. The State of Rajasthan refused to pay the agreed yearly amount and took the plea that it was not bound by the liability as it never recognised the agreement dated 9th October 1945. This contention was overruled by this Court on the basis of covenants executed and the laws enacted by the Rulers at successive stages of integration which ultimately resulted in the formation of the Part B State of Rajasthan and on the authority of the decision of the Supreme Court in : 7SCR174 . As we have pointed out above Bundi State like Kota State integrated along with seven other States to form the first United State of Rajasthan on 25th March 1948. Soon thereafter the Ruler of Mewar joined the Rajasthan Union and this second United State of Rajasthan was inaugurated on 18-4-48 by the covenant entered into by the Rulers of the various States. On 28th April 1948 the United State of Rajasthan Administration Ordinance No. 1 of 1948 was issued by the Rajpramukh. By Clause 2 of the Ordinance Clauses (a), (b) and (c) of paragraph (1) of Article VI of the Covenant were enforced as law. Under Clause (c) all the assets and liabilities of covenanting States became the assets and liabilities of the United State of Rajasthan.
13. The next union was integrated on 30-3-49. The Covenant entered into by the Rulers of the integrating States is given in the White Paper at page 274. On the formation of this new State of Rajasthan Ordinance No. 1 of 1949 was promulgated by the Rajpramukh on 7th April 1949. Clause 3 (1) of this Ordinance provided for the continuance of the existing laws and it ran as follows:--
'All the laws in force in any covenanting State immediately before the commencement of this Ordinance in that State shall, until altered or repealed or amended by a competent Legislature or other competent authority, continue inforce in that State subject to the modification that any reference therein to the Ruler or Government of that State shall be construed as a reference to the Rajpramukh, or, as the case may be, to the Government of Rajasthan.'
14. Thereafter Matsya Union also merged into the United State of Rajasthan. It was held by this Court that the Covenant entered in the year 1949 read with Ordinance No. 1 of 1949 must be taken to mean that the liability of the former State of Bundi devolved on the State of Rajasthan. It was observed--
'This is the view taken by their Lordships of the Supreme Court in State of Rajasthan v. Shyamlal : 7SCR174 . It was pointed out in that case that 'each time a merger took place the new State by a provision in the Covenant took over the assets and liabilities of the merging States. This provision in the Covenant could not be availed of by the subjects of the new State as in view of the decision in Dalmia Dadri Cement Company's case : 34ITR514(SC) , the Covenant in whole or in part was an act of State. But according to the same decision the presence of such a Clause in the Covenant throughout would be valuable evidence which would show that the new State assumed the liabilities of the merging State and further every tune when there was a merger and formation of a new State, the old laws were always to continue till they were repealed, amended or altered by the new State.' Under these circumstances their Lordships of the Supreme Court took the view that 'when the new State continued all the old laws till they were altered or repealed, and there was specific provision in each Covenant that the assets and liabilities of the Covenanting States were to be the assets and liabilities of the Union, the new State must have intended to respect all the rights flowing from laws so continued and assume all liabilities arising from the existence of those laws.' In the face of this authority we cannot accept the argument of the learned counsel for the defendant that the State of Rajasthan was not liable to honour the terms of the agreement.'
15. We have found it necessary to refer to the case of Bundi Electric Supply Company , because it was argued by the learned Additional Govt. Advocate that the decision in , is not applicable where the liabilities arise out of a contract entered into between the parties. In the Bundi Electric Supply Company's case , the liability arose out of a contract entered into by the Ruler with his subject as in the present case.
16. We may point out that the liability in Shyamlal's case , arose out of a quasi-contract. The former State of Dholpur was liable torefund the amount under Section 70 of the Contract Act, which was in force in that State. As the Contract Act continued to remain in force as existing law in the United State of Rajasthan under Ordinance No. 1 of 1949 the liability under Section 70 of the Contract Act would be deemed to have been recognised by the new State. We may in this connection refer to the following passage in the judgment of Sarjoo Prosad C. J. (in ) at p. 264 of the AIR report :--
'It follows, therefore, that where the new sovereign does not repudiate the laws prevailing in the acceding territory his conduct is equivocal, and the laws would be deemed to operate, and, therefore, in terms of Article VI of the Covenant those laws would continue to protect individual rights of the citizens. Here we find that under Section 3 of the Rajasthan Administration Ordinance 1949 (No. 1 of 1949) it was expressly provided that all the laws in force in any Covenanting State immediately before the commencement of the Ordinance in that State shall, until altered or repealed or amended by a competent Legislature or other competent authority, continue in force in that State and again by virtue of Article 372 of the Constitution these laws continued to operate as existing laws at the date of the commencement of the Constitution.
Therefore, under the law of contract, the liabilities of the Dholpur State devolved on the United State of Rajasthan, and then on the present State of Rajasthan when the Constitution came into force, because each of the successor States and their the then Sovereigns recognised those laws, and lent their authority tacitly or by express declaration to their continuance. Thus it was no longer open to the United State of Rajasthan so long as those laws continued to operate to repudiate the liability which arose under that law in favour of the individual concerned.'
Wanchoo J. (as he then was) while delivering the judgment of the Supreme Court in : 7SCR174 , observed as follows:--
'But where as in the present case the old laws were to continue till they were repealed or altered it follows in our opinion that the rights arising under the old laws in the subjects of the merging States would continue and these subjects would have the same rights against the new State as they would have under the old laws against the merging State. Thus by continuing the old laws, till they are repealed, altered or modified, the new State in effect undertook the liability which might arise against it by virtue of the continuance of the old laws. Even if there was some doubt about the new State undertaking the liabilities of theold State in view of the continuance of the old laws, we can in accordance with the decision in Dalmia Dadri Cement Company's case : 34ITR514(SC) , look to Article VI of the Covenant to come to the conclusion that on continuing the old laws, until they were altered, repealed or modified, the new State intended to affirm the rights of the subjects which they had against the merging State and to assume itself the liability if any arising against the merging State.
We are therefore of opinion that there was recognition of liability by the new State throughout this process and under the circumstances the suit was maintainable against the Part B State of Rajasthan in view of Article 295(2) of the Constitution.'
We accordingly hold that the Part B State of Rajasthan against whom the present suit was brought was bound by agreement Ex. A. In view of this finding it is not necessary to consider whether the conduct of the Government of Rajasthan amounted to express recognition of the contract or not.
17. We now come to the last finding of the learned District Judge that the amount of royalty payable under Clause 18 in excess of the minimum amount of Rs. 1,50,000/- is attributable to the consideration of exemption from income-tax etc. Under agreement Ex. A the Company agreed to pay the royalty specified in Clause 18 in lieu of the following considerations:--
(1) right to exploit the stone quarries in the two Tehsils,
(2) exclusive right to do so in these two Tehsils,
(3) the long term of the lease -- 15 years,
(4) exemption from income-tax etc. It was not specified in the agreement what portion of the royalty was payable in respect of each of the above considerations. In our opinion it is not possible to apportion any part of the royalty payable under Clause 18 as consideration for exemption from income-tax etc. At the time of the agreement there was no income-tax etc. in force in Kota State. We are unable to arrive at a finding on the basis of the material on record as to what amount of royalty would have been settled between the parties if exemption from income-tax etc. had not been granted. Income-tax had been imposed in the neighbouring State of Bundi. The agreement shows that the possibility of imposition of this tax in the near future was in the minds of the parties when the agreement was entered into.
18. We are however of the opinion that the effect of the Union of India extending the Finance Act to Rajasthan with effect from 1-4-50 was to make voidagreement Ex. A under Section 56 of the Contract Act.
19. In view of Article 295 of the Constitution both the Union of India and the State of Rajasthan succeeded to the assets and liabilities of the State of Kota and are to be substituted for the latter with effect from 26-1-50 to the extent of their spheres laid down in that Article. They became liable to meet the liabilities of the former State of Kota subject to this that if the new State passed any law which would affect the liability that law would prevail and the liability would disappear provided the new law is within the competence of the Legislature and does not transgress the constitutional limits after the Constitution came into force.
20. The Union of India extended the Finance Act to Rajasthan with effect from 1-4-50. In view of this law which was within the competence of the Union of India the Union of India was no longer bound by agreement Ex. A so far as it was concerned with it. In other words it was not bound to exempt the Company from the payment of income-tax etc. and that part of the agreement by which the Union of India would have otherwise been bound became void. If the part of the agreement which remained binding on the State could be separated from the whole of the agreement then it would continue to bind the State and the Company respectively. But as that part cannot be separated as held by us above the whole of the agreement became void with effect from 1-4-50. With effect from that date neither the State nor the Company are bound by the agreement.
21. The contention on behalf of the State is that, as pleaded by it in Para. 32 of its written statement, the agreement became void with effect from 26-1-50 when the Constitution came into farce as a monopoly contract was hit by Article 19(1)(g) of the Constitution. It is unnecessary for us to consider whether the agreement became void with effect from 26-1-50 because it would make no difference in the present case whether the agreement became void on that date or on 1-4-50. The suit was filed on 15-12-53 and the Company is not entitled to a refund of the payments made by it before 15-12-50, as they are barred by limitation.
22. The Company derived benefit in the shape of quarrying and removing stone from the mines after the agreement became void. Under Section 65 of the Contract Act the Company is bound to make compensation for it to the State. Similarly the Company continued to make payments due under the agreement under the impression that it continued to be valid and enforceable. The State is bound to refund these payments to the Company.
23. On the conclusion of the arguments in the appeal on 12-3-70 learned counsel for the parties agreed that in case this Court comes to the finding that the agreement dated 2-5-1945 became void on the coming into force of the Constitution or on 1-4-50 when the Finance Act was extended to Rajasthan Sections 65 and 70 of the Contract Act would apply. We then observed that in that case parties will have to produce material to enable us to pass an appropriate decree. Both parties wanted time to produce the necessary material in this behalf and we passed the following order:--
'The arguments of the parties have been concluded. It may be that the Court comes to a finding that the contract was frustrated and in that case it was not disputed that Sections 65 and 70 of the Contract Act shall apply. Parties should produce material before this Court to pass an appropriate decree in that case. Parties want some time. The next date of hearing is fixed for 27th April 1970.'
24. Parties thereafter filed affidavits and furnished other material to enable the Court to adjudicate upon the compensation payable to the State under Section 65 of the Contract Act. On 28-4-70 another opportunity was given to the State to file further documentary evidence by 18th May 1970. This date was extended to 22nd May 1970 at the request of the learned Additional Government Advocate and the case was fixed for hearing on 13-7-70. It actually came up for hearing on 3-8-70. In its application dated 22nd May 1970 the State took an objection that no relief could be granted to the Company under Section 65, Contract Act as the plaint had not been amended. In arguments the learned Additional Advocate General raised another objection that no relief could be granted under Section 65 of the Contract Act as the same was not claimed in the notice served by the plaintiff under Section 80, Civil P. C. We shall deal with these two legal objections first.
25. On behalf of the Company it was contended that the State is estopped from taking these pleas as it furnished material for determining compensation under Section 65, Contract Act, without raising any such objection and also took adjournments for the purpose. We are of the opinion that it is open to the State to put forward these legal pleas.
26. The learned Additional Advocate General relied on the decision of a Division Bench of the Calcutta High Court in New Churulia Coal Co. v. Union of India : AIR1959Cal585 . The plaintiff in that case being in need of Lancashire boilers, registered his requirement with the Department of Government which had been helping parties in India to obtain such boilers from abroad. It appears that a secondhand boiler had been allocated to the plaintiff for installation in his colliery. The plaintiff sent a cheque for Rs. 34,000/- on account of the price of the boiler and took delivery of the same. His case was that the boiler supplied to him remained unserviceable in spite of repeated repairs and he, therefore, wrote to the Department to take back the boiler and to refund the price, as also the freight and the handling charges. The Department refused to do that and, therefore, the plaintiff sued for recovery of the price and other incidental costs. The main defence taken on behalf of the Government was that the contract was void inasmuch as it did not fulfil the requirements of Section 175(3) of the Government of India Act, 1935. The plaintiff thereupon abandoned his claim on the basis of the contract and sought the Court's permission to raise a second issue as to whether he was entitled to recover the amount claimed in the plaint under Section 65, Contract Act, that is, for restitution. G. K. Mitter J. who tried the suit on the original side held (decision reported in : AIR1956Cal138 ) firstly, that the issue could not be raised without an amendment of the plaint, and secondly that in respect of the cause of action under Section 65, Contract Act, as against the Government a suit will not lie except after service of notice under Section 80, Civil P. C.
27. The case came up before a Division Bench consisting of K. C. Das Gupta C. J. and H. K. Bose J. Bose J. agreed with the decision of the trial Court on both the points. K, C. Das Gupta C. J. did not agree with the decision of the trial Court on the first point and held that the issue could be allowed to be raised without an amendment of the plaint subject to leave being granted to the defendant to make a claim for set-off in respect of the advantage to which it in its turn would be entitled to be restored. With all respect we are in agreement with this decision. The same view was taken by a Division Bench of this Court in Municipal Committee, Kishangarh v. Maharaj a Kishangarh Mills Ltd. .
28. In Mohan Manucha v. Manzoor Ahmad , the plaintiff had brought a suit to enforce a registered mortgage granted by one Iltifat Ahmad Khan, the defendant's father in favour of Motilal Manucha, the plaintiff's father. The deed contained also a personal covenant to pay the interest half yearly and to repay the principal at the end of 3 years. The plaintiff sought relief both by sale of the mortgaged property and by enforcement of the covenant. The defendant maintained, inter alia, that the mortgage sued upon was void having been made in circumstances which brought intooperation Para. 11 of the Third Schedule of the Code of Civil Procedure, by reason of which, it was stated, the defendant's father was not competent to mortgage the property. The trial Judge sustained the defendant's contention and also refused the plaintiffs a money decree on the covenant on the ground that the cause of action had become barred by limitation. Accordingly he dismissed the suit. Before the Chief' Court it was contended on behalf of the plaintiffs that they were at least entitled to relief under Section 65 of the Indian Contract Act. The Chief Court however refused to entertain that ground of claim because it had not been pleaded and was not taken in the memorandum of appeal. Accordingly they left the plaintiffs to seek that remedy by a separate suit. In their appeal to His Majesty in Council the plaintiffs contested the findings of the Courts in India both as regards the invalidity of the mortgage and as to their claim on the personal covenant being statute-barred, but they also insisted on their right to relief under Section 65, Contract Act. The appeal was heard ex parte. In spite of this, however, their Lordships came to the conclusion that the appellants ought not to be refused restitution in the suit under Section 65 even though that had not been pleaded as a separate ground on claim in the plaint. Dealing with this question their Lordships observed--
'With all due respect to the Chief Court, their Lordships think that their attitude towards the question of pleading was unduly rigid. A defendant who when sued for money lent pleads that the contract was void can hardly regard with surprise a demand that he restore what he received thereunder.'
29. In Firm Sriniwas Ram v. Mahabir Prasad : 2SCR277 , the plaintiff brought a suit for specific performance of a contract to sell a house on the allegation that the defendant had agreed to sell it for Rs. 34,000/- and out of this a sum of Rs. 30,000/- had been paid by the plaintiff on behalf of the vendors to a creditor of the latter. The defendants contended that they had never agreed to sell the house to the plaintiff and the story of a contract of sale as set up was false. They however admitted that they had approached the plaintiff for a loan and the plaintiff advanced to them a sum of Rs. 30,000/-. The trial Court came to the conclusion that the story of contract of sale was not established, that the defendants' story was true and that the plaintiff did advance a sum of Rs. 30,000/- by way of a loan to the defendants. In this view the trial Court dismissed the plaintiff's claim for specific performance and passed a money decree for a sum of Rs. 30,000/-against the defendants. On appeal the High Court agreed with the trial Judgethat the plaintiff was not entitled to a decree for specific performance of the contract. As regards the money decree granted against the defendants the High Court held that this was not warranted in law as no case as a loan was made by the plaintiff in the plaint and no relief was claimed on that basis. Accordingly the High Court dismissed the suit in its entirety. On appeal the Supreme Court held that the trial Court was right in giving a decree for money against the defendants. It was observed by the Supreme Court--
'The rule undoubtedly is that the Court cannot grant relief to the plaintiff on a case for which there was no foundation in the pleadings and which the other side was not called upon or had an opportunity to meet. But when the alternative case, which the plaintiff could have made was not only admitted by the defendant in his written statement but was expressly put forward as an answer to the claim which the plaintiff made in the suit, there would be nothing improper in giving the plaintiff a decree upon the case which the defendant himself makes. A demand of the plaintiff based on the defendant's own plea cannot possibly be regarded with surprise by the latter.'
30. Their Lordships relied on the decision of the Privy Council in Mohan Manucha's case .
31. In the present case the defendant pleaded that the agreement dated 2-5-45 became void on the coming into force of the Constitution. The plaintiff-Company can be granted relief under Section 65 of the Contract Act on the basis of this plea.
32. The learned Additional Advocate General next relied on the following observations made in :--
'Where further facts require to be Investigated, it may be necessary to insist upon an averment of a case under Section 65, Contract Act in the pleading so as not to take the defendant by surprise before granting relief under Section 65 of the Contract Act'
and contended that further investigation is necessary in this case to determine compensation payable to the State and therefore relief should not be granted without insisting upon an amendment of the plaint. We are of the opinion that so far as the plaintiff is concerned no further investigation is required as the amounts Paid by it under the contract which subsequently became void are already on record and no further investigation of Tacts is necessary in order to grant relief to the plaintiff under Section 65 of the Contract Act. Further investigation is only necessary to determine the compensation to which the defendant is entitled under Section 65. For determining that compensation this Court hasallowed ample opportunity to both parties to adduce the necessary evidence. It was observed by K. C. Das Gupta C. J. in : AIR1959Cal585 :--
'If there were nothing else to be considered, I would for these reasons be prepared to allow the appellant to raise the question of relief under Section 65 of the Contract Act, subject it may be to leave being given to the defendant respondent to make a claim for set off in respect of the advantage to which it in its turn would be entitled to be restored.'
33. Next we come to the question as to whether the plaintiff is debarred from, getting the relief under Section 65 of the Contract Act because in the notice under Section 80, Civil P. C. which was served on the State before the institution of the suit such an alternative claim was not made. Having heard the learned counsel for the parties and having considered the rulings cited before us we are unable to subscribe to the view taken by the learned Judges of the Calcutta High Court in : AIR1959Cal585 . In Bhagchand Dagdusa v. Secy. of State , no notice had been served on the Secretary of State before the institution of the suit.
34. As was observed by the Supreme Court in Raghunath Das v. Union of India : 1SCR450 , the object of the notice contemplated by Section 80, Civil P. C. is to give to the concerned Government opportunity to reconsider the legal position and make amends or settle the claim, if so advised, without litigation. The legislative intention behind that section is that public money and tune should not be wasted on unnecessary litigation and the Government should be given a reasonable opportunity to examine the claim made against them lest they should be drawn into avoidable litigations. We are of the opinion that if in the circumstances of a particular case it is open to the Court to grant relief to the plaintiff against an ordinary defendant on the basis of the pleading of the latter without requiring an amendment of the plaint, the Court is not debarred from granting such relief if the defendant happens to be a Government or a public officer on the ground that such an alternative relief was not claimed in the notice under Section 80, Civil P. C. For in such a case the Government will be deemed to have knowledge of the alternative case which could have been pleaded by the plaintiff, but was not so pleaded.
35. In Ezra v. Secy. of State ILR (1903) 30 Cal 36, it was held as follows :--
'We propose to deal first with the objections of the defendants relating to the notices under Section 424 of the Code of Civil Procedure and Section 52 ofAct I of 1894. It is contended by the learned Advocate-General that, although a notice of action had been given to the Secretary of State as provided for under the section of the Civil Procedure Code in respect of the allegations contained in the original plaint, the Secretary of State is entitled to a further notice with regard to the cause of action disclosed in the amendments made under the order of the 30th of June last; he contends that the amendments allege an entirely new cause of action, based upon an allegation of fraud and he refers to the case of the Secy. of State for India in Council v. Rajlucki Debi ILR (1898) 25 Cal 239, in support of his proposition that the provisions of Section 424 must be strictly complied with. Section 424 relates to the Institution of a suit against the Secretary of State for India in Council, There is nothing in the law to show that in case of any amendment necessitated by the alleged discovery of facts previously unknown to the plaintiff, the Secretary of State should have a further notice of two months. Although the Appellate Court has laid down that the section should be literally construed and strictly applied in favour of the necessity for notice, we are not disposed to extend its operation beyond the actual words used. In the case before us the relief asked for is not altered by the amendments, which only embody certain further materials in support of the plaintiff's contention. It was also urged by the learned Advocate-General that notice not having been served on Mohanundo Gupta, the suit against him is bad and ought to be dismissed. He is not sued for any act done by him independently of the Government, and no separate relief is asked for against him. He is joined in the action in order that he may be restrained by an order of this Court from giving effect to the instructions received by him. Under these circumstances we do not think notice of action is required in his case.'
This case went up in appeal before the Privy Council. It was not contended on behalf of the Secretary of State there that the decision of the learned Judges of the Calcutta High Court on the question of notice was erroneous. The decision of the Privy Council is reported in (1905) ILR 32 Cal 605 (PC).
36. We would like to make it clear that we do not regard the above decision as an authority for the broad proposition that Section 80, Civil P. C. has no application to the amendment of the plaint, once the suit has been instituted after such notice. We only regard it as an authority on the point that there can be cases where a fresh notice under Section 80, Civil P. C. is not required to be served after an amendment of the plaint. In other words, in appropriate cases the Court may grant relief to aplaintiff which he has not claimed in his notice under Section 80, Civil P. C,
37. The decision in (1903) ILR 30 Cal 36, was followed by a Division Bench of the Madras High Court in J. C. H. Fowler v. Secy. of State AIR 1921 Mad 363. Ezra's case was also followed by a learned single Judge of the Calcutta High Court in Lalchand v. Union of India : AIR1960Cal270 . In Dinbai v. Dominion of India : AIR1951Bom72 , Chagla C. J. and Bhagwati J. allowed a prayer for amendment of the plaint being of opinion that the amendment proposed did not introduce into the plaint a new or fresh cause of action and all that it did was that it gave further grounds in support of the contentions and allegations which went to constitute the plaintiff's cause of action. An order requisitioning land by the Central Government was challenged in that suit on various grounds. The plaintiffs were allowed to amend the plaint by adding the following ground of challenge:--
'The plaintiffs say that the Collector of Bombay made the said orders at the direction and under the orders from defendant 2. The plaintiffs say that in making the said orders the Collector of Bombay did not apply his own mind to the question whether the property was required by defendant 1 for the purposes mentioned in Rule 75-A, Defence of India Rules. Under the circumstances the plaintiffs submit that the said orders are mala fide, ultra vires and illegal.'
It was observed--
'Section 80 of the Code provides that no suit shall be instituted against the Crown or against a public officer in respect of any act purporting to be done by such public officer in his official capacity, until the expiration of two months next after notice in writing has been given, and the notice has to state the cause of action and other particulars which are set out in the section. It is clear that the object of the section is to give intimation to Government of the grievance that the subject has and to give to Government an opportunity to redress that grievance before it is brought to Court. The section is not intended to be an instrument of oppression against the subject. It is perfectly true that the Privy Council in , laid down that Section 80 was express, explicit and mandatory and admitted of no implications or exceptions. But even so as pointed out by Sir John Beaumont in Chandulal v. Govt. of Bombay : AIR1943Bom138 , the section should be construed with some regard to commonsense and to the object with which it appears to have been passed.'
The above Bombay case as well as Ezra's case (1903) ILR 30 Cal 36, were followedby a Division Bench of the Jammu & Kashmir High Court in Ghulam Mohi-ud-din v. State of Jammu & Kashmir, AIR 1961 J & K 6.
39. We are accordingly of the opinion that we are not debarred from granting relief to the plaintiff under Section 65, Contract Act, in the circumstances of the present case on the ground that no claim based on that section was made in the notice under Section 80, Civil P. C.
40. We next come to the question as to what should be the measure of compensation to which the State is entitled from the defendant under Section 65, Contract Act, on account of the fact that the Company excavated stone during the period in suit namely from 15-12-50 to 15-12-53. According to the Company the State is entitled to royalty at a reasonable rate which would have been payable by a person quarrying similar stone under the rules, if any, then in force, or under the prevailing practice in the absence of rules. According to the State it is entitled to the net profits made by the Company on the sale of the stone excavated by it during the above period.
41. The State is the owner of minerals and royalty is a payment made to the owner for the right to exploit the minerals.
42. The stone quarried by the Company is limestone which is used for flooring. The royalty payable depends on the area of the stone slabs quarried by the Company. Stone can only be quarried from the area leased to the Company. In respect of every lease there is a minimum royalty which is fixed. Under the Rajasthan Minor Mineral Concession Rules, 1955 this minimum royalty is termed as yearly dead rent which is payable whether or not stone is quarried. Under Rule 31 (3) the lessee is only liable to pay either dead rent or royalty calculated on the area of the stone slabs quarried, whichever is higher.
43. In Shanti Saroop Sharma v. State , it was held that royalty is in essence the consideration which the owner of a property may receive from those whom he allows the use of his property or entrusts his property for exploitation of the mineral resources contained therein, and that it is more akin to rent or compensation payable to an owner by the occupier or lessee of the land for its use or exploitation of the resources contained therein.
44. In Commissioner of Income-tax v. Kumar Kamaksha Narain Singh : 8ITR563(Patna) , a question arose whether for the income-tax purposes income from royalty in respect of coal mines was capital gain which was not taxable under the then law of income-tax. It was held that a mining lease must be regarded as a lease and not as asale of mineral. This decision was affirmed by the Privy Council in Kamakshya Narain Singh v. Commissioner of Income-tax .
45. Having regard to the nature of a mining lease in India we are of the opinion that the State is only entitled to recover reasonable royalty from the Company for the period of 3 years preceding the suit and not the profits earned by it as a result of its quarrying operations.
46. Next we come to the area which was under lease with the Company during the period in suit. Under Clause 3 of the agreement dated 2-5-45 the Company was entitled to carry on quarrying operations only in such area as may be allotted for the purpose from time to time although monopoly rights were granted to it to excavate floor stone from Chechat and Ramganjmandi Tehsils. The area of these two Tehsils over which monopoly rights were granted in favour of the Company was 306.5 sq. miles. It has been proved that an area of 3,378 acres was allotted to the Company under Clause 3 of the agreement and this area alone was in its possession for quarrying operations till 30-9-1959. The Company has filed plans and furnished other details about this area and the learned Additional Advocate General has admitted that this is the only area which was allotted to the Company for quarrying operations and was in its possession upto 30-9-59.
47. The trial Court passed a decree in favour of the Company on 25-9-58 holding that the agreement dated 2-5-45 was valid, but that the amount of royalty payable by the Company to the State was Rs. 1,50,000/- with effect from the date of imposition of income-tax etc. The plaintiff continued to pay royalty at Rs. 1,50,000/- per year till the expiration of the lease on 30-9-59.
48. Before the expiry of the lease the Company applied for the grant of a fresh lease. The application was first made on 4-3-59 under the Mineral Concession Rules. That application was in respect of 3,378 acres which was already in its possession. This application was rejected on the ground that an application should have been made under the Rajasthan Minor Mineral Concession Rules. Another application was then made on 6th July, 1959 under the Rajasthan Minor Mineral Concession Rules. This application was for an area of 4810.16 acres. This area included the 20 plots having an area of 3378 acres which was already in the possession of the Company. In this application the Company included certain areas contiguous to the old plots. This was done according to the suggestion of Shri A. K. Roy, the then Secretary, Department of Mines & Industries. Government of Rajasthan.
49. The Company was asked to pay dead-rent and royalty at a much higher rate. It made representations to the State Government to reduce the rate and in these representations a statement was made to the effect that, the Company was given possession of the entire area of two Tehsils of Chechat and Ramganjmandi namely 306.5 sq. miles. This assertion is obviously erroneous. The whole area of the two Tehsils does not contain limestone. This stone is found only in a belt having an area of approximately 92 sq. miles according to the Company and 126 sq. miles according to the State.
50. We accordingly hold that the area which had been leased out to the Company by the erstwhile State of Kota and which was in the possession of the Company during the period in suit was 3378 acres.
51. Next we come to the question of rate at which royalty should be assessed. Under the agreement dated 2-5-45 the rate of royalty was rupee one per 100 sq. feet.
52. The State filed an affidavit that the Ruler of Kota had leased out some of the mines which are now in the possession of the Company at rates varying between -/14/- and Rs. 1/6/- per 100 sq. feet. Three leases were filed on 4-8-70 in support of this assertion. In these leases it is provided that the lessees will pay excess royalty at 25% of the sale price above Rs. 7-8-0 per 100 sq. feet. These leases are for small areas the dead rents of which were Rs. 8,000/-, Rupees 11,050/- and Rs. 18,000/- respectively. One of the issues framed in the suit was whether the excess royalty was in lieu of income-tax, super-tax and excess profit tax. These leases should have been produced at the trial. The question which is to be decided now is the rate of royalty which was either payable under the rules for excavating similar stone or which was actually paid after income-tax was imposed with effect from 1-4-50. The three leases filed go to show that the mines were auctioned after inviting bids. If the mines could be leased out at more favourable rates to other persons there was no reason why the then Ruler of Kota should have entered into an agreement Ex. A with the Company on less favourable terms. It often happens that some persons offer very high bids at the auction, who later on incur losses. Compensation under Section 65 cannot be assessed on the basis of the 3 leases filed on behalf of the State for the years Section 2000 to Section 2002 (1943 to 1945).
53. In a booklet (Limestone deposits and lime industry in Rajasthan) published by Shri M. L. Sethi, Directorof Mines and Geology, Rajasthan, it is stated that Vindhyan limestone is extensively quarried near Ramganjmandi, Morak and Suket. The colour of the stone is light gray, yellowish brown and chocolate. It is fine grained and takes polish with ease. It is further mentioned that Chittorgarh limestone is also of Vindhyan age and belongs to Nimbahera stage. It is pale brown or green in colour with occasional shades of brown or chocolate colour. It is fine grained and crystalline in texture. Limestone at this place has been quarried for the last one century producing slabs and tiles.
54. We directed the learned Additional Advocate General to let us know on what terms the Government of Rajasthan leased quarries of this limestone in Chittorgarh District during the years 1950 to 1959. But this information was not furnished. An affidavit was filed stating that limestone found in Chittorgarh District was of poorer quality.
55. Under the agreement dated 2-5-45 monopoly rights of quarrying this stone were granted in favour of the Company. On 2-6-52 the State Government served a notice on the Company terminating the agreement. In September 1952 suit No. 8/52 was filed by the Company against the State and a temporary injunction was granted restraining the State from committing a breach of the agreement dated 2-5-45. On account of this injunction no mining lease was granted in Ramganjmandi and Chechat Tehsils by the State from 1950 to 1959, till the lease in favour of the plaintiff expired. We have already mentioned above that in its decree passed in September 1958 the trial Court upheld the validity of the monopoly agreement.
56. The Rajasthan Minor Mineral Concession Rules, 1955 came into force on 11-6-55. Before that there were no rules prescribing the rate of royalty and dead rent for quarrying limestone for flooring purposes.
57. Under the above rules the royalty on limestone was prescribed as follows:--
(a) For lime burning Lime stone l/-per md.
Lime ...... -/1/6 per md.
Kachra lime -/-/6 per md.
(b) For other purposes,
(i) Rs. 12/- per 100 cubic ft. Provided such other purpose falls within the definition of 'minor minerals.'
(ii) Rs. 1/2/- per 100 sq. ft.
or (iii) 10% of the sale value al pit's mouth at the option of the lessor.'
As limestone for flooring purposes is measured in square feet the rate of royalty prescribed under the above rules was Rs. 1-2-0 per 100 sq. ft.
58. The above rules were amended on 30-8-56 and the rate of royalty was increased to Rs. 1-8-0 per 100' sq. ft.
59. The Rajasthan Minor Mineral Concession Rules 1959 came into force on 25th January 1960. The rate of royalty under these rules was also Es. 1.50 per 100 sq. ft. Having regard to the rates of royalty fixed by the Rajasthan Government with effect from 11-6-55 and 30-8-56 respectively we are of the opinion that if royalty had been fixed by it during 1950 to 1953 it would not have exceeded Rs. 1-2-0 per 100 sq. feet. The following are the figures for the quantities of stone slabs excavated by the company in square feet and the royalty calculated at Rs. 1-2-0 per square feet for the period in suit:--
Stone in sq. ft.
@ Rs. 1-2-0 per 100 sq. ft.
15-12-50 to 30-9-51
1-10-51 to 30-9-52
1-10-52 to 30-9-53
1-10-53 to 14-12-53
60. The dead rent under the Rajasthan Minor Mineral Concession Rules, 1955 as they stood on 11-6-55 was as follows:--
'Not less than Rs. 2/- and not more than Rs. 20/- per acre of land granted under the lease, the actual rate to be determined within these limits by the authority granting the lease.'
On 3,378 acres the minimum dead rent comes to Rs. 6,756/- and the maximum comes to Rs. 67,560/-. As royalty exceeded the dead rent during this period the royalty was payable and not the dead rent.
61. From 30-8-56 the rate of royalty was also increased as follows :--
First 25 acres i. e. 10,89,000 sq. ft.
Rs.10/- per Sft.
Next 615 acres
Rs. 25/. per acre.
Rs. 200/-per acre
Next 2,738 acres
Rs. 8/-per acre
Rs. 15/-per acre
62. The above rates are however not applicable to the period 15-12-50 to 15-12-53. In 1959 the State Government granted a mining lease for 4810.16 acres to the Company. The dead rent fixed was Rs. 2,00,000/- and the rate of royalty was Rs. 2.50 per 100 sq. feet. These rates are being mentioned only for comparison. They are not applicable to the period in suit. On an area of 3,378 acres the proportionate royalty would come to about Rs. 1,34,000/- according to the lease granted in favour of the Company which was for a period of 10 years from 1-10-59 to 1-10-69.
63. As has been mentioned above the total royalty for the period 15-12-50 to 15-12-53 calculated at Rs. 1-2-0 per 100 sq. feet, which was the rate enforced from 11-6-55, comes to Rs. 2,73,484/-. The dead rent was only Rs. 2,02,680/- at the maximum rate. Under Rule 31 (3) a sum of Rs. 2,73,484/- was payable.
64. The next question which arises is as to how much should be allow ed to the State by reason of the fact that it could not grant leases to other persons upto 2-6-52 as it was under the impression that the lease dated 2-5-45 was valid and from September 1952 onwards on account of the order of injunction passed in suit No. 8/52.
65. Annexure IV to the affidavit filed on behalf of the State with its application dated 27-4-70 gives the production of lessees other than the Company from years 1959-60 onwards. It was as follows:--
15,57,223 sq. feet
40,59,093 sq. feet
67,82,450 sq. feet.
If the State had tried to lease mines in Ramganjmandi and Chechat areas after 26-1-50 the production of lessees could not have exceeded the above figures during the first 4 years. The royalty payable to the State Government by such lessees would not have therefore exceeded the following amounts worked out at Rs. 1-2-0 per 100 sq. feet:--
This represents the outside limit of the loss caused to the State on account of the monopoly rights de facto enjoyed by the Company during the period 15-12-50 to 15-12-53.
66. The royalty payable on the stone quarried by the Company came to Rs. 2,73,484/-. The total amount of compensation payable to the State Government under Section 65 thus comes to Rs. 2,73,484/- plus Rs. 1,39,486 = Rupees 4,12,970/-.
67. The case of the Company in the plaint however was that Rs. 1,50,000/-per year represented the minimum royalty payable by it on account of quarrying stone and the excess royalty was attributable to exemption from payment of income-tax etc. In view of this we are of the opinion that a sum of Rs. 1,50,000 should be allowed to the State as royalty under Section 65 of the Contract Act. As we have shown above, if the Company had not de facto enjoyed the monopoly rights over the two Tehsils the income to the State from the royalty would not have exceeded Rs. 4,12,970/- between 15-12-50 and 15-12-53.
68. The total payments made by the Company to the State during the period 15-12-50 to 15-12-53 are shown in Appendix III to the affidavit of Shri D. K. Parikh, Joint Secretary of the Company. These figures have not been ' disputed before us. The total amount paid was Rs. 12,34,539-9-3. The amount is refundable to the plaintiff-company as the agreement became void with effect from 26-1-50 or at any rate from 1-4-50. The State is entitled to a sum of Rs. 4,50,000/-from the Company as compensation under Section 65 of the Contract Act as held by us above.
69. We accordingly hold that the plaintiff is entitled to a decree for Rupees 7,84,539.60 against the State.
70. Under the orders of the District Judge Kota dated 18-12-53 during the pendency of the suit the plaintiff deposited Rs. 9,84,850.71 in Court between 15-1-54 and 18-1-56. These amounts were later paid to the State of Rajasthan under another order of the District Judge dated 18-2-56.
71. Under the order of the District Judge dated 18-2-56 the plaintiff-company paid to the State of Rajasthan between 17-5-56 and 14-5-58 a sum of Rs. 11,34,058.34. These were amounts which fell due under the agreement dated 2-5-45 which had already become void. They were made under the orders of the Court during the pendency of the suit.
72. Plaintiff-company is entitled to a refund of these amounts as we have held that the agreement dated 2-5-45 became void. The total comes to Rupees 21,18,909.05.
73. As these payments were made for the period subsequent to the institution of the suit in respect of which no relief was claimed in the suit we have no jurisdiction to determine the amount of compensation payable to the State under Section 65, Contract Act, for this period. It will be open to the State Government to institute a suit to recover compensation for this period.
74. After the decree was passed the plaintiff-company paid a sum of Rs. 1,50,000/- to the State as royalty in accordance with the finding of the learned District Judge incorporated in his decree. These payments were made after the decision of the suit and we cannot make any order in respect of these payments either.
75. It may be mentioned that the above figures have been taken from Annexure 4 appended to the affidavit of Shri D. K. Parikh dated 29th April 1970. They were not disputed before us on behalf of the State.
76. The trial Court dismissed the suit against the Union of India. It decreed it against the State of Rajasthan in the following terms:--
(1) The amount of royalty payable by the plaintiff to the defendant No. 2 is declared to be Rs. 1,50,000/- as royalty proper, attributable to concessions and privileges granted to the plaintiff.
(2) The amount of the royalty over and above the sum of Rs. 1,50,000/- and paid as excess royalty is declared to be in lieu of income-tax, super-tax and excess profits-tax.
(3) Since the plaintiff has paid full royalty and excess royalty to the defendant No. 2 upto 1956-57 and part payment has been made in respect of 1957-58 (as shown in the annexed schedule) the defendant No. 2 shall pay to the defendant No. 1 out of the excess royalty paid by the plaintiff (over and above Rs. 1,50,000) the amount of income-tax, super-tax, excess profits-tax, penal interest that has been assessed and demanded and which may hereafter be further assessed and demanded by the defendant No. 1 from the plaintiff, right from 1950-51 to 1958-59 (assessment years) according to the Schedule attached to this decree. With regard to the assessment year 1959-60 the defendant No. 2 shall retain a sum of Rs. 1,50,000/- out of the total royalty of Rs. 2,92,326/- paid upto 31-3-1958 and refund the balance Rs. 1,42,326/- to the defendant No. 1. If the demand of income-tax etc. be in some year or years more than the royalty paid in excess of Rs. 1,50,000/- the plaintiff would pay the balance to the defendant No. 1. In case the demand of tax from the I. T. O. is less than the excess royalty paid, the defendant No. 2 may retain the residue. The defendant No. 2 will thus pay to the defendant No. 1 according to the schedulea sum of Rs. 23,99,474.08 (amended on 14-10-58) for the time being and the plaintiff will pay a sum of Rs. 15,66,785.91 N.P. to the defendant No. 1 directly. These figures are provisional and subject to final assessment.
(4) The plaintiff shall in future pay to the defendant No. 1 directly the income-tax assessed or demanded in terms of Income-tax Act. But royalty will be assessed and computed according to the terms of the grant as heretofore. A sum of Rs. 1,50,000/- will continue to be paid to the defendant No. 2 as royalty proper and out of the excess royalty the income-tax will be paid to the defendant No. 1 and the balance, if any, to the defendant No. 2. If the demand of income-tax is more than the excess royalty determined the plaintiff shall make good the deficiency.
We set aside the above decree as we have held that the agreement dated 2-5-45 became void and the plaintiff is not entitled to any relief on the basis of that agreement. We however decree the suit in favour of the plaintiff against the State for Rs. 7,84,539.60. Under Section 82, Civil P. C. we fix a period of three months within which the decree shall be satisfied.
77. We pass an order for the refund of Rs. 21,18,909.05 in favour of the plaintiff-company against the State of Rajasthan. This order shall be executable as a decree. Under Section 82, Civil P. C. we direct that the State Government shall satisfy the decree within a period of 3 months. It will be open to the Union of India to recover the income-tax dues falling due against the Company from the latter. We amount shall be payable by the State Government to the Union of India.
78. Having regard to the circumstances of the case, we leave the parties to bear their own costs of the appeal.
79. We may mention here that a cross-objection was filed by the plaintiff-company because an appeal against the judgment of this Court in Civil Reference No. 7/57 arising out of this suit was pending before the Supreme Court. The appeal of the plaintiff was dismissed by their Lordships of the Supreme Court. The cross-objection was accordingly not pressed and was dismissed without any order as to costs.
80. The appeal is decided as indicated above.