1. This appeal is directed against a judgment and decree of the District Judge, Bharatpur, dated the 19th November, 1964, by which he dismissed the plaintiff's suit with costs.
2. The appellant Hamra Radio and General Industries Limited being a public limited Company incorporatedunder the Indian Companies Act, 1913, was the plaintiffin the Court below. It has its registered office in Delhi.For facility of reference, we shall refer to it hereafter asthe plaintiff. This suit was originally brought againstthe State of Rajasthan only, which is defendant No. 1 inthe suit. The Union of India was also impleaded as defendant No. 2 later.
The plaintiff's case, briefly put, was that on the 4th October, 1947, the 2nd October, 1947, mentioned in paragraph No. 2 of the plaint seems to be a mistake for the 4th October, 1947) it had entered into an agreement (Ex. 12) with the State of Bharatpur as it then was. Among other terms It was stipulated in the agreement that the Government of the Bharatpur State had granted permission to the plaintiff to set up a factory for the manufacture and assembly of radio receivers and transmitters and also to instal a radio transmitter at Bharatpur, that the agreement was to enure for a period of 20 years during which the plaintiff was to have the sole and exclusive right to manufacture radios, gramophones, radiograms, transmitters, loud-speakers, and 'other electronic apparatuses and also to have sole and exclusive monopoly 'for broadcasting or transmitting commercials or programmes within the territorial limits of the State.' that the Government would not charge any import duty on any raw materials, semimanufactured articles, manufactured articles and stores, including toots, plants, machinery, etc. imported by the plaintiff into the State for the manufacture, assembly, repairs and reconditioning of radios, transmitters and other electronic apparatuses and electric equipments, nor levy any excise or export duty on articles manufactured or es-sembled by the plaintiff for sale in the State or for export, and that the Government would advance a loan of Rs. 1,00,000/- to the plaintiff for a period of ten years bearing interest at four per cent. per annum payable at the end of each year, the Government having a paramount charge on all assets of the plaintiff wherever situated and whether fixed or moveable until the entire amount of the loan together with interest was repaid.
It was further agreed between the parties that In consideration of the abovementioned facilities and advantages granted by the Bharatpur State, the plaintiff would set up a transmitter at Bharatpur, at its own cost, of sufficient strength to broadcast waves that could be received clearly by ordinary domestic radio receivers in the city of Bharatpur, that it would start a factory within the State to progressively manufacture cheap radio receiver sets and other electronic apparatuses and equipment, that it would train about ten persons who were the subjects of the Bharatpur State and were capable of reading and writing in any of the vernaculars current in the State and that it would endeavour to use, with the object of helping the prosperity of the State, as much of the resources of the state in men and material as might be practicable both In its factory and for the transmitter, but it was made clear that the plaintiff would not be required to arrange for the programme of news, music and other Items to be broadcast on the transmitter, which would be the responsibility of the State, nor to pay any salary or allowance to persons who were to be admitted as trainees In this factory.
It was also agreed between the parties, and that is the most important part of the matter, so far as the present case is concerned, that the plaintiff was to receive from the State a consolidated sum of Rs. 20,0007- per annum payable in two equal half yearly instalments commencing from August 20, 1947, as its charges for maintaining the transmitter and for its depreciation, each half-yearly instalment being payable on the 20th February and 20th August in any particular year. There is one more clause in the agreement to which attention might specifically bel drawn and that is that it was also agreed between the parties that notwithstanding the liability of the plaintiff to pay income-tax or any other tax at the instance of the Government of Bharatpur or the Indian Union at that time or thereafter, the plaintiff shall not pay any income-tax upto the 31st December, 1949, and that it shall pay incomer-tax on the profits earned by it at the rate of 5 per cent, of the profits upto 31st Decem-ber, 1954, and thereafter it shall pay the said tax equal to ten per cent of its profits.
3. The execution of this agreement is admitted bet-ween the parties. It is also not disputed that the plaintiff had set up a transmitter and also a factory and that the transmitting station began to function from November, 1947. It is further not disputed that the Bharatpur Government had paid a sum of Rs. 10,000/- to the plaintiff on or about the 23rd November, 1947, as the first instalment towards the maintenance charges of the transmitter in pursuance of the aforesaid agreement. The grievance of the plaintiff was that further instalments falling due during the three years 1948, 1949 and 1950 on the 20th February and 20th August of each year amounting to Rs. 60,000/- in all had fallen into arrears. Conseouently, it brought the present suit after giving the usual notice under Section 80 C. P. C. to the Rajasthan State on the 18th February, 1951. The plaintiff also claimed a sum of Rs. 45,00/-, by way of interest on the principal sum of Rs. 60,000/-, and thus claimed a decree for Rs. 64,500/-with costs and interest at six per cent. per annum from the date of the suit until realisation.
4. The defendant State of Rajasthan resisted the suit on a number of grounds all of which it is not neces-sary to se;t out for the purposes of this appeal for the only paints on which it relies for its defence out of those raised in its written statement are (1) that the Bharatpur State was not competent to enter into an agreement relating to the setting up of a transmitter for purposes of broadcasting as it had executed an instrument of Accession with the Dominion of India on the 3rd August, 1947, which had been accepted by the Governor General of India on the 16th August, 1947, and thereafter broadcasting became a central subject and the responsibility of the Government of India, and that being so, it was not within the conmpetenca of the Bharatpur State or its Ruler to enter into an agreement like the one with which we are can-cerned, and, therefore, the said agreement was null and void and was entirely unenforceable In a court of law; (2) that after the Bharatpur State had integrated first with the Matsya Union in March, 1948, and the Matsya Union had in its turn integrated with the United State of Rajasthan in May, 1949, the entire agreement stood frustrated and (3) that the plaintiff itself had stopped working the transmitter in early 1948 when the Matsya Union with which the erstwhile State of Bharatpur integrated had come into existence and that the plaintiff never manufactured radio receiver sets and other electronic apparatuses, nor did it train any subject of the Bharatpur State and consequently had itself committed a default in acting up to the agreement
This defendant also pleaded that the Union of India was a necessary party to the suit, and, therefore, the suit was bad in its absence. The State, however, raised a counter claim on the footing that a sum of Rs. 1,00,000/- was advanced to the plaintiff in certain instalments which were paid in 1947 and 1949 in accordance with the terms of the agreement dated the 4th October, 1947, but the plaintiff had failed to pay interest on this sum, which amounted to Rs. 9000/- as per particulars mentioned paragraph seven of the written statement. This defendant, therefore, prayed that the plaintiff's suit be dismissed and a decrea for Rs. 9000/- with costs be awarded in its favour against the plaintiff on the counter claim as set gut above.
5. Defendant No. 2, the Union of India, which was impleaded as a party defendant in the suit on the 18th March, 1952, adopted more or less the same line of defence as defendant No. 1, and in so far as their defences are common, we do not consider it necessary to repeat them. The other defences raised by this defendant and which are material are (1) that the suit against it was bad and untenable without a notice under Section 80 C. P. C. and is liable to be dismissed on that ground alone, (2) that the suit was barred by limitation, at any rate, so far as the instalments that accrued due three years prior to 18th March, 1952, were concerned though no particular article of the Limitation Act was mentioned in this connection and (3) that in accordance with the Schedule attached to the Instrument of Accession executed by the Ruler of the Bharatpur State in favour of the Dominion of India, the subject of 'Wireless and Broadcasting' became a central subject on which the Dominion Legislature alone could legislate, and by virtue of this right and in exercise of its powers under Section 8 of the Government of India Act, 1935 as amended, the Indian Telegraph Act of 1885 was extended to the whole of India including the territory of the erstwhile Bharatpur State by Act No. 45 of 1948, and the plaintiff did not take any licence from the competent authority in the Dominion of India, and if in such circumstances the plaintiff had maintained or continued a transmitter without such licence, he had committed an offence punishable under the Indian Telegraph Act and such a contract could not be allowed to be performed.
6. The plaintiff filed two replications in reply to each of the written statements filed by the two defendants and reiterated the stand taken by it in its plaint.
7. The trial Court after framing the issues and trying them dismissed the suit by its judgment dated the 19th November, 1954, but decreed the defendant State's counter claim for a sum of Rs. 9000/- against the plaintiff with costs. The plaintiff has now come up in appeal against the dismissal of the suit only, and, therefore, we are not concerned in this appeal with the counter-claim of the defendant State.
8. At this stage, we may briefly summarise the findings of the trial Court. That Court took up issues Nos. 2, 4, 13 and 14 together which mainly related to the competence of the Bharatpur State after its accession in August, 1947, to the Dominion of India to enter into a contract like Ex. 12 and its validity and held that the Ruler of the Bharatpur State was not at all competent to make any such contract after the date of accession, and, therefore, the contract was ab initio void and a nullify. On the question of frustration, issue No. 5, it did not thinkfit to give any finding in view of the opinion it had formedon the validity of the agreement. On issue No. 10 rela-ting to the alleged failure of the plaintiff to perform itspart of the contract and the burden of which issue wasplaced on the defendants, the latter had led no evidencewhatever, and, therefore, the plaintiff led no rebuttal, andyet the trial Court entertained the view that as the plaintiff had failed to lead any evidence on the question ofthe starting of the factory or the training of any personnelin the factory, and as these things were in its specialknowledge, this issue deserved to be decided against theplaintiff.
As to issue No. 12 which related to the giving of a notice under S, 80 C. P. C. to the defendant No. 2 it was held that as no official of the Union Government had come into the witness-box to depose that no notice had been received, a proper notice was given to it Issue No. 1 relating to limitation was also decided against, both the defendants. The remaining six issues do not call for any special mention except that mention may be made of issue No. 3 which related to the question whether the Union of India was a necessary party to the suit, and, on that issue, the trial Court simply held that it did not arise, 'in view of the fact that the Union of India had been imp leaded as defendant'
9. When the appeal first came up for hearing before a bench of this Court consisting of Ranawat J. As he then was and C. B. Bhargava J. on the 30th March, 1960, it was contended on behalf of the defendants that the burden of issue No. 10 referred to above was wrongly placed on them. The learned Judges were of the view that the court below was in error in placing the burden of proof of issue No. 10 on the defendants and that the plaintiffs had come to court for enforcement of Clause 9 of the agreement and it was for them to show that they had performed their part of the same. The learned Judges aiso seem to have been of the opinion that the parties were further at issue as regards the point whether the State of Rajasthan or the Union of India had affirmed or recognised the agreement which was the basis of the suit and that the trial Court should have framed an issue on that point also.
In these circumstances, the learned judges framed the following additional issues and remitted them to the trial Court for report under Order 41 Rule 25 C. P. C. For facility of reference, we shall re-number these issues as Nos. 15 and 16 (the trial Court having framed 14 issues in all) and read them at this place :-
15. Whether the plaintiff performed its part of the contract as stated in Clauses 7 and 10 of the agreement Ex. 12.?
16. Whether the State of Rajasthan affirmed or re-cognised expressly or by implication the agreement Ex. 12.'
10. The finding of the trial Court on issue No. 15 is that the plaintiff did set up a transmitter of the required strength at Bharatpur under Clause 7 (a) of the agreement, that it had also started a factory but it did not perform part of the contract as stated in Clauses 7 (b) and (e) and 10 of Ex. 12 as no radio receiver set or other electronic apparatuses and equipments were manufactured at the factory and no local persons were trained and no local resources used or employed. On issue No. 16, its finding is that a sum of Rs. 45,000/- had already been advanced by the erstwhile Bharatpur State to the plaintiffin pursuance of the agreement Ex. 12 and that the re-maining amount of Rs. 55,000/- was advanced by chequedated the 29th June, 1949, after the Matsya Union, where-in the State of Bharatpur had integrated in May, 1948,had in its turn integrated with the State of Rajasthanin May, 1949.
According to the learned trial Judge, the payment of this amount could not have been made by the Raja-sthan State unless it had affirmed or ratified the agreement Ex. 12, and that the State Government had not produced an iota of evidence to show that the amount had been ordered to be paid by an unauthorised person, and that in the absence of such evidence, the only reasonable 'presumption must be that orders regarding payment of this loan under the terms of the agreement must have been passed on Government level.' This issue was, therefore, decided in favour of the plaintiff.
11. The case then came up for hearing before the present bench and for the reasons mentioned in our order dated the 10th July, 1963, which may be read as a part of this judgment, we framed a further issue which we propose to re-number, as issue No. 17 and ordered its trial here. This issue reads as follows :-
'17 (a) Whether it was not necessary for the plaintiff to obtain a licence for establishing and/or maintaining a wireless transmitting apparatus at Bharatpur, at all material, times as after the Bharatpur State had acceded to the Indian Union, the Indian Telegraph Act of 18S5 as amended by Act No. 45 of 1948 and/or the Indian Wireless Telegraphy Act, 1933, as amended by Act No. 31 of 1949 had been made applicable to that area?
(b) If the answer to the above question is in the affirmative, whether such licence had been obtained by the plaintiff?
(c) If not, whether the suit contract thereby became null and void or impossible of performance, or it was still capable of being enforced?
The parties produced their evidence on the 9th and 10th December, 1963, which we examined and arguments were then heard and this is how the case has again come up for arguments before us.
12. We shall first take up the appeal so far as tha Union of India is concerned as, in our opinion, it stands concluded on a narrow point relating to want of notice under Section 80, C. P. C. It is admitted be/fore us that the only intimation of the suit so far as the Union of India is concerned was given in the shape of a copy of the notice dated the 21st August, 1950, addressed by the plaintiff's advocate Shri Harnamdass to the Secretary, Government of Rajasthan Union, Jaipur. This notice appears at pages 37 to 39 of the Paper Book and is signed by the said Shri Harnamdass and thereafter there is an endorsement showing that copies of this were forwarded to (1) the Secretary, Ministry of Communications, Government of India, New Delhi and (2) the Secretary, Department of Industries and Commerce, Government of Rajasthan, Jaipur. The question is whether this can be considered to be a sufficient notice to the Union of India within the meaning of Section 80 of the Code of Civil Procedure.
13. We have no hesitation in saying that our answer to this question is in the negative. The mere forwarding of the copy of a notice of suit given by the plaintiff's advocate to the Rajasthan Government to the Secretary, Ministry of Communications, Government of India, New Delhi, cannot by any means be considered to be such an intimation of the suit that it constitutes notice under Section 80 C. P. C. so far as the latter Government is concerned, ft is settled law that the requirements of Section 80 C. P. C. are express, explicit and mandatory and must be properly complied with. As we look at this communication, we do not think that it is at all a notice for or to the Government of India. All that it indicates is that a notice under Section 80 had been given by the plaintiff's counsel to the Government of Rajasthan and that a copy of the same was forwarded to the Secretary to the Government in the Ministry of Communications, New Delhi. We are altogether unable to hold that by receiving a copy like this, the Government of India could at all reasonably think that the plaintiff intended to sue it also, and, therefore, it need not have taken any notice of it save in a most casual manner.
14. We should also like to point out here that It is an absolute requirement of Section 80 C. P. C. that the notice given thereunder must state, among other things, the cause of action and the relief which the plaintiff claims, which necessarily implies that he must state what cause of action he has against the defendant to whom the notice is being given and what is the relief he claims from the said defendant. The notice a copy of which was sent to the Secretary, Ministry of Communications, Government of India, and the original of which, as already stated, was sent to the Secretary to the Government of Rajasthan, ended up as follows:
'I am now instructed to notify to you which I hereby do that you should within a period of 2 months from the receipt of this notice make the necessary payment of Rs. 64,500/- to my clients, failing which my clients will have no other alternative but to seek their remedy in a Court of law, in which case you shall be liable for all costs of litigation as well, which please note.'
We have no manner of doubt that the pronoun 'you' as used in the extract from the notice was intended to apply to the Government of Rajasthan and no other person or authority. Even the endorsement by which a copy of the notice given to the Secretary of the Rajasthan State was forwarded to the Secretary Ministry of Communications, Government of India, New Delhi, was an absolutely routine endorsement without containing any indication therein that the suit was intended or contemplated to be brought against the Indian Union also. It is admitted by learned counsel for the plaintiff that apart from this copy having been forwarded to a Secretary of the Government of India, no other notice was given to that Government. In these circumstances, we are afraid that this Is a case of a complete absence of notice to the Indian Union as regards the subject-matter of the present suit, and, there-fore, the suit must fail against the Indian Union on this ground alone, and it is unnecessary to go into the merits of the case so far as this defendant is concerned. We hold accordingly.
15. This brings us to the case against the other defendant, namely, the Rajasthan State. It has been strenuously contended before us on behalf of learned counsel for the plaintiff that even if we came to the conclusion adverse to it so far as the liability of the Union of India is concerned, we should stilt set aside the trial court's dismissal and decree the plaintiff's suit against this defendant.
16. Now we should like to point out at the very outset that the only points on which controversy has been raised before us between these parties are as follows :
(1) Whether the Ruler of the Bharatpur State, as he then was, was incompetent to enter into a contract like Ex. 12 at the time it was entered into, that is, after the accession of that State to the Indian Union, and whether such a contract was null and void?
(2) Whether the contract was not frustrated after the Bharatpur State was integrated with the Matsya Union and when the latter in its turn was integrated with the United State of Rajasthan, and, in any case, after the Constitution came into force?
(3) Whether the plaintiff was entitled to maintain the transmitter without obtaining a licence from the authority concerned after the Indian Telegraph Act of 1885 was made applicable to the whole of India including the Bharatpur State by the amending Act No. 45 of 1948, and whether the enforcement of such a contract would be an offence in law, and, therefore, not enforceable? and
(4) Whether, in any case, after the Constitution came into force, the pre-existing liabilities of the Bharatpur State or for that matter the pre-Constitution State of Rajasthan, in a case like the present became the liabilities of the Government of India within the meaning of Article 295 of the Constitution on the footing that the purposes for which such liabilities were incurred before the commencement of the Constitution became thereafter the purposes of the Government of India relating to a matter in the Union List (List No. 1 of the Seventh Schedule) as the subject of wireless and broadcasting and other like forms of communications fell within item No. 31 of that List.
17. We may state at once that it was conceded before us that findings on other points arising in the case which had been partly or wholly decided by the Court below against the plaintiff would properly fall to be decided in its favour and that the defendant State had no objection if they were so decided. We hold accordingly.
18. We shall now address ourselves to the points formulated by us above ad seriatim.
19. Re: 1. -- As to the first question, namely, whether the Ruler of the Bharatpur State was incompetent to enter into the contract Ex. 12 with the plaintiff after he had acceded to the Indian Dominion and whether the contract was, therefore, null and void, it has been decided by the trial Court against the plaintiff and in fact it is on that fundamental issue having been so decided that the plaintiff's suit has been thrown out.
20. Having heard learned counsel for the parties at some length and carefully considered the law bearing on the point, we have come to the conclusion that this finding cannot be maintained. The principal reason which seems to have prevailed with the learned trial Judge in coming to the conclusion to which he did was that the Ruler of the State of Bharatpur had undoubtedly executed an Instrument of Accession in favour of the Government of India and that Instrument of Accession had been accepted by the Governor General of India on the 16th August, 1947 whereby the said Ruler had accepted the matters specified in the Schedule thereto as the matter with respect to which the Dominion Legislature could make laws for this State and the subject of communications which includes, among other things, wireless, broadcasting and other like forms of communications has been mentioned as item No. C in this Schedule.
The learned trial Judge has observed that the effect of this Instrument of Accession was that the Ruler divested himself of the powers to make jews and administer them in respect of the various items given in the Sche-dule attached to the Instrument of Accession and entrusted those powers to the Dominion of India, and to this extent his sovereignty was extinguished, and the Dominion of India stepped in his shoes apd assumed the powers of the Ruler with respect to these, items in the State of Bharatpur, and it is on this reasoning that the conclusion was come to that the contract was ab initio void and a sheer nullity.
21. As we look at the matter, the position is not so simple. Here we cannot do better than to invite attention to Clause (1) of the Instrument of Accession in which it is clearly stated 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 Bharatpur 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 dav of August, 1947.' ' [The underlining (here into ' ' ) is ours)
These underlined (here in ' ') words require to be specially noted. In the first place, the exercise of the authority by the Dominion authorities has to be (1) subject to the Instrument of Accession, (2) for the purposes only of the Dominion and (3) the Dominion authorities named in the Clause shall exercise such functions as may be vested in them by the Government of India Act, 1935, as in force on the 15th August, 1947.
22. Reference may as well be made here to the Standstill Agreement which was admittedly executed between the State of Bharatpur and the Dominion wherein it was stipulated that the existing arrangements and particularly the administrative arrangements in matters of common concern existing between the Crown and any Indian- State shall, in so far as they may be appropriate, continue as between the Dominion of India or any part thereof and the State. It was further specifically provided that the matters enumerated in the Schedule to this agreement shall be covered by this agreement and be it noted that 'wireless' is one of the matters mentioned in tha Schedule.
23. Reference may here be made to the Indian Independence Act, 1947, the object of which was to make provisions for the setting up in what was India then two independent Dominions, namely, India and Pakistan with effect from the 15th August, 1947. By Section 2 of this Act, the territories of India were stated to be the territories under the sovereignty of His Majesty which immediately before the appointed day, were included in British India except the territories which were to be the territories of Pakistan and by sub-section (4) of this section, nothing in this section was to be construed so as to prevent the accession of Indian States to either of the new Dominions. By Section 9 of this Act, the Governor-General was authorised to make such provisions by order as appeared to him to be necessary or expedient among other matters generally for bringing the provisions of this Act into effective operation and in particular for making omissions from and additions to and adaptations and modifications of, the Government of India Act in their application to the two new Dominions.
Section 5 of the Government of India Act, 1935 as amended and as in force at the relevant time laid down that the Dominion of India established by the Indian in dependence Act, 1947, shall as from the fifteenth day of August, 1947, be a Union comprising:
(c) the Indian States acceding to the Dominion in the manner hereinafter provided, and (d) .....
Section 6 then provided for accession of Indian States and its material portion reads as follows:
'6. Accession of Indian States:
(1) An Indian State shall be deemed to have acceded to the Dominion 'if the Governor-Genera! has signified his acceptance of an Instrument of Accession executed by the Ruler thereof whereby the Ruler on behalf of the State --
(a) declares that he accedes to the Dominion with the intent that the Governor-General, the Dominion Legislature, the Federal Court and any other Dominion authority established for the purposes of the Dominion shall, by virtue of his Instrument of Accession, but, subject always to the terms thereof, and for the purposes only of the Dominion, exercise in relation to the State such functions as may be vested in them by order under this Act; and
(b) assumes the obligation of ensuring that due effect is given within the State to the provisions of this Act so far as they are applicable therein by virtue of the Instrument of Accession,
(2) An Instrument of Accession shall specify the matters which the Ruler accepts as matters with respect to which the Dominion Legislature may make laws for the State, and the limitations, if any, to which the power of the Dominion Legislature to make laws for the State, and, the exercise of the executive authority of the Dominion in the State are respectively to be subject.
(3) A Ruler may, by a supplementary Instrument executed by him and accepted by the Governor-General vary the Instrument of Accession of his State by extending the functions which by virtue of that Instrument are exercis-able by any Dominion authority in relation to his State.'
It will be noticed that the predominant note of this provision is that the accession is always to be subject to theInstrument of Accession or a supplementary Instrumentthereto executed by the Ruler on behalf of the State and that the Dominion authorities can exercise only such functions in relation to the State as may be vested in themby order under this Act or under the Instrument of Accession itself.
24. The next important provision is Section 8 whichdeals with the extent of the executive authority of theDominion. Among other matters with which we are notconcerned, it makes the following specific provision inrelation to the Ruler of an Acceding State and it readsas follows:
Section 8 (2) : 'The executive authority of the Ruler of an Acceding State shall, notwithstanding anything in this section, continue to be exercisable In that State with respect to matters with respect to which the Dominion Legislature has power to make laws for that State except in so far as the executive authority of the Dominion becomes exercisable in the State to the exclusion of the executive authority of the Ruler by virtue of a Dominion law.'
The court below seems to have completely missed this provision. The effect of Section 8 unmistakably is that although speaking generally the executive authority of the Dominion extends to the matters with respect to which the Dominion Legislature has power to make laws, in the first place, such authority in the case of acceding States is circumscribed by the Instrument of Accession and the limitations laid down therein to the exercise of such authority, and in the second place, the executive authority of the Ruler of an Acceding State should continue to be exercisable in that State even with respect to the matters to which the Dominion Legislature has power to make laws in that State unless a Dominion law makes a specific provision otherwise.
25. We may next refer to Section 101 of the Government of India Act, 1935, as amended which enacts that' --
'nothing in this Act shall be construed as empowering the Dominion Legislature to make laws for an Acceding State otherwise than in accordance with the Instrument of Accession of that State and any limitations contained therein.'
Section 125 then lays down, broadly speaking, that notwithstanding anything in the Act agreements may be made between the Governor-General and the Ruler of an Acceding State for the exercise by the Ruler or his officers of functions in relation to the administration in his State of any law of the Dominion Legislature which applies therein. Section 128 may also be referred to in this connection. It lays down that the executive authority of every Acceding State shall be so exercised as not to obstruct or prejudice the exercise of the authority of the Dominion in so far as it is exercisable in the State by virtue of a dominion law which applies to that territory.
26. There is one more section of the Government of India Act, and that is Section 129 to which reference may appropriately be made now. That section specifically deals with broadcasting and provides inter alia that --
'(1) The Dominion Government shall not unreasonably refuse to entrust to the Government of any Province or the Ruler of any Acceding State such functions with respect to broadcasting as may be necessary to enable that Government or Ruler --
(a) to construct and use transmitters in the Province or State;
(b) to regulate and impose fees in respect of the construction and use of transmitters and the use of receiving apparatus in the Province or State.'
Sub-section (2) of this section further lays down that:
'Any functions so entrusted to a Government or Ruler shall be exercised subject to such conditions as may be imposed by the Dominion Government, including, notwithstanding anything in this Act, any conditions with respect to finance, but it shall not be lawful for the Dominion Government so to Impose any conditions regulating the matter broadcast by, or by authority of, the Gov-ernment or Ruler.'
To safeguard the due observance of these provisions as between the Dominion Government and the Government of any Province or an Acceding State, it has also been laid down in its fourth sub-section that:
'If any question arises under this section whether any conditions imposed on any such Government or Ruler are lawfully imposed, or whether any refusal by the Dominion Government to entrust functions is unreasonable, the question shall be determined by an arbitrator appointed by the Chief Justice of India.'
27. The cumulative effect of these previsions in oar opinion is that although the Ruler of the Bharatpur State had accepted that the Dominion of India might make laws in certain subjects specified in the Schedule attached to the Instrument of Accession and which Schedule includes the subject of 'communications', that is wireless and broadcasting and like forms of communications, the Ruler could still exercise executive authority with respect to such a matter unless such executive authority became exercisable in the State to the exclusion of the executive authority of the Ruler by virtue of a law enacted by the Dominion. No law has been brought to our notice, nor, do we know of any, by which the executive authority of the Ruler of the Bharatpur State in relation to a contract for setting up a transmitter or a broadcasting station in his territory was circumscribed by any Dominion law at the time at which the contract which has given rise to the present suit came to be entered into on the 4th October, 1947.
When we faced the learned Advocate General with the position as emerging from the aforementioned provisions of the Government of India Act, 1935, as it was in force at the time, read together with the Instrument of Accession executed by the Ruler of the Bharatpur State to the Dominion of India and the Standstill Agreement executed between them, he frankly confessed his inability to support the finding of the trial Court on this point. Our conclusion, therefore, in disagreement with the finding of the Court below is that the Ruler of the Bharatpur State even after his accession to the Dominion of India, was perfectly competent to enter into a contract like Ex. 12 which was an executive matter with the plaintiff on the 4th October, 1947, in the absence of any limitation on his powers enacted by any law as laid down in the Government of India Act, 1935, or in the Instrument of Accession.
28. Re. 2 : The next question is whether the suit contract is hit by the principle of frustration? Now the doctrine of frustration is embodied in Section 56 of the Contract Act. The essential principle upon which it is based is the impossibility, or, rather, the impracticability in law or fact of the performance of a contract brought about by an unforeseen and unforseeabte sweeping change in the circumstances intervening after the contract was made. In other words, while the contract was properly entered into in the context of certain circumstances which existed at the time it fell to be made, the situation becomes so radically changed subsequently that the very foundation which subsisted underneath the contract as it were gets shaken, nay, the change of circumstances is so fundamental that it strikes at the very root of the contract, then the principle of frustration steps in and the parties are excused from or relieved of the responsibility of performing the contract which otherwise lay upon them.
29. The question is whether the supervening event is of a character that the Court cannot but hold in reason and justice that it would not be iust and reasonable to hold, the parties bound by the terms of the contract any longer. Thus in every case where then is a dispute between the parties as to the frustration of a contract, the Court must ascertain, the substance and marrow of the contract not merely from the language in which it is couched but if necessary from the surrounding circumstances and then examine whether the contract can be substantially performed notwithstanding the supervening event. If it can be, then there can be no frustration. But if it cannot be, the dissolution of the contract occurs at once at least so far as the future performance thereof is concerned irrespective of the desire or the volition of the parties. In cases where the performance of the contract gets so frustrated, neither party can get the relief it expects or claims because no party is really to blame for what has happened and therefore the law imputes blame or responsibility to neither of them. See Satyabrata v. Mugheeram Bangur and Co., AIR 1954 SC 44 and State of Rajasthan v. Madanswarup, ILR (1959) 9 Raj 1217 : (AIR 1960 Raj 138).
30. Now let us examiner the position in this case in the light of the principles to which we have adverted above. The substance of the contract between the parties, put in a nutshell, was that the plaintiff was to have a monopoly of manufacturing radios, radiograms, trans-mitters, loudspeakers and other electronic apparatuses and to have a further monopoly for providing the machinery for broadcasting or transmitting radio programmes in the territories of the erstwhile Bharatpur State and to have certain facilities as to the non-levy of income-tax upto a certain point of time or the levy thereof at a concessional rate thereafter whether payable to the State or to the Government of India or as to the non-levy of excise or import duties on the materials produced or imported in the State or of export duties on the manufactured goods sent out for sale outside the State, and the Government had also agreed to advance a loan to the plaintiff, and, in return thereof,--and that is important to note--the plaintiff had agreed to set up a transmitter at its own cost of the requisite strength and to start a factory within the State for the manufacture of cheap radio sets and other electronic apparatuses or equipment.
It was further agreed that with a view to enable the plaintiff to maintain the transmitter for purposes of broadcasting programmes as desired by the State, and, the formation and regulation of such programmes was to be the latter's sole responsibility, the State agreed to give it a sum of Rs. 20,000/- in two half-yearly instalments which sum was also to include the depreciation charges in respect of the transmitter. In its essence, therefore, the suit contract was a monopoly contract granted to the plaintiff to manufacture radios etc. in the State of Bharatpur for a period of 20 years for certain concessions to which we have adverted above, and the plaintiff in its turn was to establish and maintain a transmitter for the purposes and use of the State and fur which the latter agreed to pay certain maintenance and depreciation charges.
31. Having regard to the true nature of the contract as we have analysed it above, it clearly seems to us that this contract would be hit by Article 19(1)(g) of the Constitution ever since the commencement thereof as that Article does not favour the creation of monopoly rights for the benefit of a person or a body of persons. There are other clauses of this agreement e.g., that the plaintiff shall not be liable to pay any excise or export duty on articles manufactured or assembled by the plaintiff for sale in the State or for export or that it shall not be liable to pay income-tax upto a certain period or thereafter pay it at reduced rates either to the Stale cr to the Government of India and these clauses are also difficult to sustain in view of subsequent legislative developments. It is well established that the power to exempt from tax is sovereign legislative power and no State can fetter its own much less the future legislative authority of its successor. See Associated Stone Industries Kotah v. Union of India, ILR (1958) 8 Raj 700 and Maharaja Shree Umaid Mills Ltd. v. Union of India, ILR (1959) 9 Raj 984 : (AIR 1960 Raj 92).
32. In this view of the matter, we have no doubt that this contract cannot but be hit by the principle of frustration from the 26th January, 1950, being the day on which the Constitution came into force, and that being so, the performance of the contract beyond that date could not be enforced in law.
33. The question still remains, however, whether the contract in so far its enforcement prior to the 26th January 1950 is concerned should also be treated as having been frustrated. Now prior to this date, mono-polies were quite lawful. The Bharatpur State even after it had acceded to the Indian Union had the executive authority to give a contract for the establishment and maintenance of a transmitter within its own territorial limits and could grant certain tax and other concessions in that connection. It will be recollected that certain instalments fell due on the 20th February, 1948, 20th August, 1948, 20th February, 1949, and 20th August, 1949, in all amounting to Rs. 40,000/- as maintenance and deprecation charges for the transmitter. It may further be noted at this place that what the pro-Constitution State of Rajasthan including the Matsya Union was fully formed in May, 1949, all the laws in force in the various Covenanting States immediately before the 7th April, 1949, were continued intact within the respective territories of each of these States with effect from that date by the Rajasthan Administration Ordinance [No. 1) of 1949 read with the Amending Ordinance No. 5 of 1949 until they were repealed, altered or amended by a competent Legislature.
The contract in suit being valid (no argument has been addressed to us to the contrary) under the laws in force in the then Bharatpur State, or in the Matsya Union, in our opinion, therefore, would continue to be good and valid, unless it was adversely affected by any law made by the new State and it is nobody's case before us that it was so affected, and so we are unable to hold that the contract prior to the 26th January, 1950, stood frustrated. We may also add that we can see no practical impossibility, let alone an absolute one, why the suit contract would not be substantially performed upto the time when the instalment payable on the 20th August, 1949, or the arrears amounting in all to Rs. 40,000/-accrued due and became payable by the defendant State to the plaintiff. In coming to this conclusion, we have of course assumed that the liability to pay this money devolves on the successor Stale' of Rajasthan, but that is a question which would require further examination under point No. 4 which we have formulated above and with which we propose to deal in its proper place.
34. Re. 3:- The third question then is whether the plaintiff could lawfully maintain a transmitter after the Telegraph Act, 1885, was extended to the whole of India Including the Acceding States by Act No. 45 of 1948 on the 3rd September, 1948. By Section 3(1) of this Act, 'telegraph' is defined as follows:-
' 'telegraph' means an electric, galvanic or magnetic telegraph, and includes appliances and apparatus for making transmitting or receiving telegraphic, telephonic or other communications by means of electricity, galvanism or magnetism'
Section 4, them, omitting: its immaterial portion lays down as follows:-
'(1) Within India, the Central Government shall have the exclusive privilege of establishing, maintaining and working telegraphs:
Provided that the Central Government may grant a licence, on such conditions and in consideration of such payments as it thinks fit, to any person to establish, maintain or work a telegraph within any part of India, (2) The Central Government may by notification in the official gazette delegate to the telegraph authority all or any of its powers under the first proviso to Sub-section (1).
The exercise by the telegraph authority of any power so delegated shall be subject to such restrictions and conditions as the Central Government may, by the notification, think fit to impose.'
We may next refer to Section 20 in so far as it is material for our present purposes, which reads as follows :-
'20. (1) If any person establishes, maintains or works a telegraph within India in contravention of the provisions of Section 4 or otherwise than as permitted by rules made under that section, he shall be punished, if the telegraph is a wireless telegraph, with imprisonment which may extend to three years, or with fine, or with both, and, in any case, with a fine which may extend to one thousand rupees.
Now, the expression 'telegraph' as defined in Section 4 is indeed a comprehensive one and would include an apparatus for receiving or transmitting communications by means of electricity and clearly embraces a wireless transmitter within the meaning of this definition. Therefore, we are disposed to hold that with effect from the 3rd September, 1948, when the Telegraph Act was made applicable to India as a whole including the Slate of Bharatpur, the Central Government alone had the exclusive privilege not only of establishing a transmitter but maintaining and working it provided however that it might grant a licence on such conditions and in consideration of such payments as it might lay down by rules to any' person to do so in any part of India.
35. This raises the question whether the plaintiff had obtained such a licence, and, if not, what is its effect. It is not disputed before us that the plaintiff did not obtain such a licence; but it is contended that Section 4 did not make it obligatory for the State to obtain any licence or permission in view of the provisions of the Government of India Act to which we have referred already and it was not necessary for the plaintiff either to have applied for a licence and the old arrangements could continue intact notwithstanding the enforcement of the Act of 1885 and further that there was hardly any machinery to grant licences before the 1st April, 1950. As regards the last mentioned ground, our attention was drawn to a circular letter (Ex. PX-8) dated the 20th December, 1949, from the Director General, Posts and Telegraphs to all Post Masters General and Directors. It is also the case of the plaintiff that it did obtain, a licence in connection with the possession of the transmitter and the radios in stock with it in April, 1950, and got these renewed in 1951. See Exs. P-X2 and 3. R. P. Gupta, a partner of the managing agents and directors of the plaintiff maintained in his cross-examination that they did not consider themselves to be owners of the transmitting set as they had hired it out to the State for a period of 20 years and that it was to be operated and controlled by them, although he was naive enough to add that the legal position was for the courts to decide.
36. It does seem to us that when the Indian Telegraph Act, 1885, was extended to the whole of India so as to include Rajasthan, Sep. 4, which we have quoted above, at once came into play and the maintaining or working of any transmitter or similar other apparatus falling within the definition of the word 'telegraph' without obtaining a licence throughout the Dominion of India became an offence punishable under Section 20 of the Act. The question, however, is whether it was not for the plaintiff at all to have applied for such a licence. The position taken up by the partner and director P. W. R. P. Gupta in this connection that they did not consider themselves to be the owners of the transmitting set does not seem to us to be in consonance with the correct legal or factual positron, even if we were to accept that the transmitting set had been hired out to the State for a period of 20 years. Indeed the very agreement Ex. 12 seems to us to negative this stand because if the transmitter became the property of the Bharatpur State or of the States into which it was merged later, then how and why need the question of the maintenance and depreciation charges to be paid by them to the plaintiff should or need at all have arisen.
Indeed it was admitted before, us by the learned counsel for the plaintiff that his client eventually took away the transmitter and the same is in its possession. In this state of circumstances we have no doubt that the transmitter belonged throughout to, and was the property of, the plaintiff. Therefore, it was the duty of the plain-tiff primarily to have applied for a licence for maintaining and working the transmitter after the Telegraph Act became applicable to Rajasthan on the 2nd September, 1948. We are also inclined to think that likewise it was not incumbent on the State to have applied for the licence under the Act of 1885 or for permission under the Government of India Act 1935 because it was not the owner cf the transmitter and all it had bargained for with the plaintiff was the uninterrupted user of the transmitter for a certain period on payment of certain maintenance and depreciation charges.
37. That being so, we are unable to hold that the plaintiff could, in law, maintain a transmitter without obtaining a licence from the Central Government beyond the 2nd of September, 1948, and if it did maintain one, it amounted to an offence under the Act of 1885.
38. This legal position, in our opinion, is not affected by anything that has been brought to our notice on behalf of the plaintiff in the shape of Ex. PX-1 (extracts from the notes for the guidance of wireless inspectors) or Ex. PX-8 to which we have already referred above and which is a direction, from the Director-General of Posts and Telegraphs to all Postmasters-General and all Directors of Posts and Telegraphs to the effect that wireless licences of all kinds will have to be issued by the Indian Posts and Telegraphs Department from the 1st April, 1950. Again, from this letter, we are altogether unable to hold that such licences could not have been earlier obtained from appropriate authorities in the Indian State itself on behalf this Dominion of India after the Telegraph Act of 1885 had been brought into force in the whole of India. In fact, the existence of some alternative arrangement is clearly discernible from an observation occurring in this very letter which is to the following effect:
'You may kindly ascertain what arrangements now exist in the various States within your Circle for the issue of such licences and make arrangements for the new system. Staff employed by the States for these purposes may be taken over by the Indian Posts and Telegraphs Department from the 1st April, 1950.'
Surely this letter upon which great insistence was laid before us is not sufficient to persuade us to hold that there were no arrangements for the issue of licences earlier.
39. In these circumstances, it seems to us to be-difficult to hold that the plaintiff is entitled to obtain a decree for maintenance and depreciation charges for the transmitter in question for a period subsequent to the 3rd September, 1948 (this would leave us with only two instalments which were payable on the 20th February, 1948 and 20th August, 1948, amounting to Rs. 20,000/-only), the maintenance of which by the plaintiff had became an offence being in contravention of Section 4 read with Section 20 of the Telegraph Act of 1885 as amended by the Act of 1948.
40. The further question that remains to consider is whether on the finding at which we have arrived, the plaintiff is not entitled to a decree, for the amount of the two biennial instalments falling due during the year 1948 anterior to the enforcement of the Telegraph Act 1885. The answer to this question depends upon the decision of the next point to which we propose to address ourselves immediately.
41. Re. 4:-- This brings us to the last, but not the least, question whether in any view of the matter, after the Constitution having come into force, whatever liability might have fastened on the Bharatpur State or the Rajasthan State in connection with the maintenance of the Transmitter in question pertaining to the period prior to the coming into force of the Constitution, did not become the liability of the Indian Union by virtue of Article 295 of the Constitution, because the purpose in connection with which this liability fell to be incurred was a purpose which related to a matter falling within item No. 31 of the Union List of the Seventh Schedule-. This item reads as fallows:
'Posts and telegraphs; telephones, wireless, broadcasting and other like forms of communication'.
The material portion of this Article reads as follows:
'295 (1) As from the commencement of this Constitution :
(b) all rights, liabilities and obligations of the Government of any Indian State corresponding to a State) specified in Part B of the First Schedule, whether arising out of any contract or otherwise, shall be the rights, liabilities and obligations of the Government of India, If the purpose for which such rights were acquired or liabilities or obligations were incurred before such commencement will thereafter be purposes of the Government of India relating to any of the matters enumerated in the Union tist, subject to any agreement entered into in that belialf by the Government of India with the Government of that State.
(2) Subject as aforesaid, the Government of each State specified in Part B of the First Schedule shall, as from the commencement of this Constitution be the successor of the Government of the corresponding Indian State as regards all property and assets and all rights, liabilities and obligations, whether arising out of any contract or otherwise, other than those referred to in Clause (1).'
It is perhaps an anomaly that Article 295 still refers to an Indian State corresponding to a State specified in Part B of the First Schedule even though there are no Part B States in existence now and there is nothing like Part B in the first Schedule. But that apart, on a plain reading of this Article, it clearly seems to us that all the rights, liabilities and obligations of the Government, of an Indian State, whether contractual or otherwise, have become the rights and obligations of the Government of India where the purposes for which such rights were acquired or liabilities or obligations incurred before such commencement have become thereafter the purposes' of the Government of India relating to any of the matters numerated in the Union List. That the subject of broadcasting for which the transmitter in the present casa was sought to be maintained is a Central subject, admits of no doubt or dispute. This has, therefore, become a purpose of the Government of India after the commencement of the Constitution.
42. That being so, where any liability was incurred by the State before the Constitution came into force in connection with such a matter, then such a liability devolves on the Government of India by virtue of Article 295 of the Constitution. That is the clear effect of the main provision contained in Article 295(b) of the Constitution. There is a proviso to this however, and that is that a devolution of such liability would be subject to any agreement which may have been entered into in that behalf by the Government of India with the Government of that State.
43. The question, therefore, that remains to consider is whether in the agreement which was admittedly entered into between the State and the Government of India on the 25th January, 1950 (Ex. PX-7), this liability which devolves on the Government of India by virtue of Article 295 still remained the liability of the State of Rajas-than. An elaborate argument was addressed to us by teamed counsel for the plaintiff during the course of which he took us into the Report of the Indian States Finances Enquiry Committee 1948-49 Parts I and II as also the agreement dated the 25th February, 1950, entered into between the President of India and the Rajpramukh of Rajasthan. It may be permissible to point out that so far as the Report of the aforesaid Committee is concerned, its main purpose was to examine and report about the desirability and feasibility of integrating Federal finance in Indian States and the Unions of States with the rest of India so that a uniform system of Federal finance might be established throughout the Indian Dominion as it then was, and how and in what gradual stages this integration should be brought about, and to advise on the consequential financial adjustments and relations which should subsist between the Governments of the Indian States and the Unions on the one hand and the Government of India on the other.
Learned counsel for the plaintiff was at pains to show to us by a perusal of several portions of the report that some of the Indian States were maintaining their own broadcasting stations and transmitters and incurring expenditure thereon and appropriating revenue in that connection until the 1st April, 1950, and that being so the Bharatpur State or the successor State of Rajasthan was bound to pay for the maintenance charges of the transmitter in question until that date. It seems to us however that a report like this, without more, cannot be determinative of the legal liabilities of a federating State unless it has been adopted by the Constitution Act. The real question, therefore, is whether the agreement which was entered into between the President of India and the Rajpramukh of Rajasthan on the 25th February, 1950, and which has received recognition under Article 295 or 3 like article of the Constitution contains anything which fastens liability on the State in the matter of broadcasting with reference to pre-Constitution liabilities of the State of Rajasthan.
44. The preamble of this agreement reads as follows :
'Whereas provision is made by Articles 278, 291, 295 and 306 of the Constitution of India for certain, matters to be governed by agreements between the Government of India and the Government of a State specified in Part B of the First Schedule to the Constitution:
And whereas it is necessary to provide for certain other allied matters;
Now, therefore, the President of India and the Raj-pramukh of Rajasthan have entered into the following agreement, namely: The recommendations of the Indian States Finances Enquiry Committee, 194849 (hereafter referred to as the Committee) contained in Part I of its Report read with Chapters I, II and III of Part II of its Report, in so far as they apply to the State of Rajasthan (hereafter referred to as the State) together with the recommendations contained in Chapter VIII of Part II of its Report, are accepted by the Parties hereto, subject to the following modifications.'
It may be pointed out at this place that some of the main recommendations of the Committee which are relevant to mention are as follows:
(1) Financial integration was to be effective from the1st April, 1950.
(2) With effect from the prescribed date, the Centre will take over all 'federal' sources of Revenue and all 'federal' items of expenditure in States, together with the administration of the Departments concerned. The Centre must also take over all current outstandings (including pending assessments, refunds and arrears), liabilities, claims, etc., and all productive and unproductive capital Assets connected with these Departments.
(3) All running, or 'continuing' liabilities and out-standings, in each 'federal' Department should be taken over by the Centre. They will consist of all outstanding claims for and against Government, including refund claims, pending bills for supplies, stores, contracts, services and contingencies etc., and all uncollected 'federal' revenues, whether assessed or not.
(4) Legal basis for giving effect to the schemes propounded by the Committee was to be founded in the shape of agreements under an appropriate article of the draft Constitution as it then was.'
The third recommendation set out above clearly indicates, in our opinion, that all outstanding liabilities of an Indian State or Union of States in each federal department including outstanding claims for or against Government and by or against third parties as also uncollected revenues in respect of federal subjects shall be taken over by the Centre. That being so, we are altogether unable to hold that there is any recommendation in the Report in question by which the responsibility of the Indian Union to pay off pre-existing liabilities in connection with a federal subject such as broadcasting was placed on the shoulders of the Rajasthan State. We further wish to point out that there is nothing in the agreement of 25th February, 1950, itself by way of modifications of the recommendations made in the report which is germane to the point before us and which helps the plaintiff in any way. We are, therefore, Unable to hold that the operation of the main body of Article 295(b) is in any way affected by the recommendations made in the Report of the Indian States Finances Enquiry Committee 1948-49 or by the agreement executed between the President of India and the Raj-pramukh of Rajasthan on the 25th February, 1950.
45. The resultant position, therefore, is that anyliability of the erstwhile State of Bharatpur which hadlater devolved on the Rajasthan State became the liabilityof the Union of India under Article 295 of the Constitution as from the commencement thereof for the principalreason that the matter out of which the liability arisesis a Central subject falling within the Union List and theRajasthan State stands completely relieved of this responsibility under the Constitution. Unfortunately for theplaintiff, however, as we have already discussed, theplaintiff's suit against the Union of India is not maintain-able in law because of want of notice under Section 80,C. P. C. and, that being so, the plaintiff's suit has to bethrown out both against the State and the Union ofIndia. (46) In the result, this appeal fails and is herebydismissed with one set of costs to both the defendants.