State of Madhya Pradesh vs Shri Mouia Bux and Others

Rewritten Version Notice: This is a rewritten version of the original judgment.

Court: Supreme Court of India

Case Number: Civil Appeal No. 127 of 1959

Decision Date: 5 May 1961

Coram: M. Hidayatullah, J.L. Kapur, J.C. Shah, Raghubar Dayal

In this case the Court recorded that the matter involved a petition titled “The State of Madhya Pradesh versus Shri Mouia Bux and Others” which had been decided on 5 May 1961. The judgment was authored by Justice M. Hidayatullah and was pronounced by a bench comprising Justice M. Hidayatullah, Justice J. L. Kapur, Justice J. C. Shah, Justice Raghubar Dayal and, as later listed, Justice K. Shah and Justice J. C. Dayal. The parties were the State of Madhya Pradesh as petitioner and Shri Mouia Bux together with other respondents. The official citation of the decision appeared as 1962 AIR 145 and 1962 SCR (2) 794, with a later citator reference of R 1985 SC 357 (15). The legal provisions mentioned included the Code of Civil Procedure 1908 (specifically Section 8 79), the General Clauses Act 1897 (Sections 3(8), 3(58) and 3(60)), and the Government of Part C States Act 1951 (Section 38 (2)). The headnote summarized that the respondents had initially obtained a lease from the Government of Vindhya Pradesh for the purpose of plucking tendu leaves, that the lease was subsequently cancelled, and that the Government then sought recovery of the balance of lease monies. In response the respondents instituted a suit seeking damages and a permanent injunction to restrain the Government from recovering the balance, and they also impleaded the State of Vindhya Pradesh as the defendant. The respondents argued that the suit was incompetent because the proper defendant should have been the Union of India rather than the State of Vindhya Pradesh. The Court held that the State of Vindhya Pradesh was indeed the correct defendant and that the suit had been properly instituted. It explained that under Section 3(58) of the General Clauses Act the term “State” included a Part C State, and that under Article 239(1) of the Constitution a Part C State could be administered by a Lieutenant Governor if the President so ordered, thereby giving the Part C State a separate legal existence not merged with the Central Government. Although the definition of “State Government” in Section 3(60) of the same Act, when applied to a Part C State, identified the Central Government, the definition of “Central Government” for purposes of administering a Part C State referred to the Lieutenant Governor, who functioned as the State Government. Consequently Clause (b) of Section 79 of the Code of Civil Procedure applied rather than Clause (a). The Court also referred to the earlier decision in Satya Deo v. Padam Deo (1955) 1 S.C.R. 549. Following this substantive discussion the Court noted the procedural posture: the case was a civil appeal numbered 127 of 1959, filed against a judgment and decree dated 2 February 1956 issued by the Court of the Judicial Commissioner of Vindhya Pradesh in Review Application No. 15 of 1955. The appellant’s counsel comprised B. Sen, B. K. B. Naidu and I. N. Shroff, while G. C. Mathur represented the respondents. The appeal, filed on 5 May 1961, was brought forward by the State of Madhya Pradesh, which had replaced the State of Vindhya Pradesh under the States Reorganisation Act 1956, and challenged an order of the Judicial Commissioner, Rewa, by which that officer, on review, had modified his earlier judgment and decree.

In this appeal, the court examined a civil suit that had been instituted by the respondents against the State of Vindhya Pradesh. The appeal itself had been filed on a certificate that had been issued by the Judicial Commissioner at Rewa. The sole point raised by the respondents in the appeal was that the suit filed against the State of Vindhya Pradesh was legally defective because, according to them, the proper defendant should have been the Union of India. Since this issue concerned only a question of law, the court stated that it was not required to set out the full factual background in detail. Nevertheless, the court summarized the essential facts: the suit sought damages amounting to one lakh rupees and also sought a permanent injunction against the State of Vindhya Pradesh. The respondents, who were traders in bidi, had obtained on 18 October 1951, from the Divisional Forest Officer of Rewa, a lease permitting them to pluck and appropriate tendu leaves from the Makundpur Range for a period of three years, the lease requiring a payment of one lakh sixty‑three thousand rupees per year (exhibit P‑85). For reasons not material to the present proceedings, that lease was cancelled and the leasehold right was offered for auction; however, no bidder emerged. Consequently, the Government demanded the annual instalments, asserting a claim for the amount that represented the difference between the original lease price and the amount that could have been realised by a fresh auction, which in fact was zero. The respondents therefore instituted the suit to obtain a perpetual injunction restraining the Government from pursuing that claim and also claimed damages on the ground that the State of Vindhya Pradesh had breached the contractual arrangement. The trial judge awarded both reliefs, fixing the damages at thirty‑six thousand five hundred and seventy rupees. Both parties then appealed before the Judicial Commissioner. The State Government’s appeal was allowed while the plaintiffs’ appeal was dismissed, resulting in the dismissal of the entire suit. The Judicial Commissioner initially held that the State of Vindhya Pradesh was not a juristic entity and that the suit should have been filed against the Union of India. Upon a subsequent application for review, the Commissioner observed that an apparent error existed in his earlier judgment and concluded that the State of Vindhya Pradesh could indeed be sued. He consequently granted the review, amended his judgment and decree, upheld the claim for a perpetual injunction, and dismissed the claim for damages on its merits. The present appeal was filed against that modified order, and a certificate was issued for its consideration. The court also recounted the historical evolution of the State: before the formation of the State of Vindhya Pradesh, a union of thirty‑five princely states in the Baghelkhand and Bundelkhand regions had been created by the rulers in March 1948; this union merged with India on 26 December 1949; on 22 January 1950, the United State of Vindhya Pradesh became a Chief Commissioner’s Province under the Government of India Act, 1935; when the Constitution came into force, the Chief Commissioner’s Province was designated as a Part C State administered by the President; and in September 1951, Parliament enacted the Government of Part C States Act, 1951, under which the subsequent administrative arrangements were made.

In this case the Lieutenant‑Governor was appointed to administer Vindhya Pradesh, and the States Reorganisation Act of 1956 later merged that Part C State into Madhya Pradesh. The suit under discussion had been instituted on 11 May 1953 after notices issued under section 80 of the Code of Civil Procedure were served, among others, on the Secretary of the Forests and Industries Department of Vindhya Pradesh and on the Collector of Rewa. The defendants, for the first time on appeal before the Judicial Commissioner, contended that the suit was directed against an improper party and that the correct defendant should have been the Union of India.

The Judicial Commissioner initially relied upon article 300 of the Constitution together with the definition of “State” in article 264, concluding that Part C States were not included in that definition and therefore Vindhya Pradesh could not be treated as a juristic entity capable of being sued. On a subsequent application for review the Commissioner reconsidered his earlier view, holding that article 300 did not govern suits involving Part C States. He then examined the matter in the light of section 79 of the Code of Civil Procedure. A notification issued by the President, which appointed the Lieutenant‑Governor as a person authorised under Order 27 of the Code, was produced at that stage; the Commissioner had not previously taken this notice into account. In view of the provisions of section 79 and the definition of “State Government” contained in section 3(60) of the General Clauses Act, he concluded that the proper defendant was indeed the State of Vindhya Pradesh. He observed that his earlier judgment had rested on the mistaken assumption that Vindhya Pradesh was not a legal entity capable of holding property and entering into contracts, and accordingly he modified his earlier order.

The provisions that are material to the discussion are set out as follows. Section 79 of the Code of Civil Procedure states: “In a suit by or against the Government, the authority to be named as plaintiff or defendant, as the case may be, shall be—(a) in the case of a suit by or against the Central Government, the Union of India; and (b) in the case of a suit by or against a State Government, the State.” Relevant definitions in the General Clauses Act, 1897, as they stood at the time, are also quoted. Section 3(8) provides that “Central Government” shall, with respect to acts done after the commencement of the Constitution, mean the President and shall include, in relation to the administration of a Part C State, the Chief Commissioner or Lieutenant‑Governor acting within the authority conferred by article 239 or article 243 of the Constitution, as the case may be. Section 3(58) defines “State” to mean a Part A …

In this case the Court observed that the definition of “State Government” in section 3 (60) of the General Clauses Act states that, with respect to any act done after the commencement of the Constitution, the term means the Governor in a Part A State, the Rajpramukh in a Part B State and the Central Government in a Part C State. The parties argued that section 79 of the Code of Civil Procedure, which prescribes the procedure for suits by or against the Government and the name of the authority to be made plaintiff or defendant, provides that (a) in a suit against the Central Government the Union of India must be named, and (b) in a suit against a State Government the State itself must be named. They further contended that, under the General Clauses Act, section 3 (8) defines “Central Government” after the Constitution’s commencement as the President, and that section 3 (60) defines “State Government” in a Part C State as the Central Government. From this they inferred that if a State Government in a Part C State is the Central Government, then, applying clause (a) of section 79, the proper party to be sued would be the Union of India. The Judicial Commissioner rejected this line of reasoning, a view that the Court endorsed. The Court explained that the term “State” itself, as defined in section 3 (58), includes Part A, Part B and Part C States, so whenever the word “State” appears it embraces Part C States as well. The Court referred to the earlier decision in Satya Deo v. Padam Deo, where it was held that Part C States possessed a separate legal existence and were not merged with the Central Government. Consequently, “State Government” in a Part C State is defined in section 3 (60) as the Central Government, while “Central Government” under section 3 (8)(ii) includes the Lieutenant‑Governor who exercises authority conferred by Article 239 of the Constitution. Article 239 provides that a State listed in Part C of the First Schedule shall be administered by the President through a Chief Commissioner or a Lieutenant‑Governor appointed by him, subject to other provisions of the Constitution. Thus, the administration of a Part C State was conducted under Article 239 and, as correctly noted by the Judicial Commissioner, was not altered by Article 300. The Court further noted that on 8 April 1953 the President issued notification S.R.O. 699, made under clause (1) of Article 239 and clause (1) of Article 243, superseding earlier notifications, and directing that the functions assigned to the Central Government under Order XXVII of the First Schedule be discharged by the Lieutenant‑Governor or Chief Commissioner, as appropriate, for each Part C State except Manipur, thereby confirming that the Lieutenant‑Governor was the appropriate authority to be sued under Order XXVII of the Code of Civil Procedure.

In the notification issued by the President, the Government of India, through the Home Department in the judicial numbered correspondence dated 5 May 1938 and partially modifying an earlier notification of the Ministry of States dated 24 August 1950, directed that the functions assigned to the Central Government by Order XXVII of the First Schedule of the Code of Civil Procedure were to be performed by the Lieutenant‑Governor or the Chief Commissioner, as appropriate, of every Part C State except the State of Manipur, and by the Chief Commissioner of the Andaman and Nicobar Islands for those islands. Consequently, the Lieutenant‑Governor became the proper authority under Order 27 of the Code of Civil Procedure. By reading the definitions of “State”, “Central Government” and “State Government” together, the Court held that the Lieutenant‑Governor of a Part C State was the correct party to be sued. The amendment made in 1954 to the Vindhya Pradesh General Clauses Act meant that the term “Government of Vindhya Pradesh” referred only to the Lieutenant‑Governor. Because the contract at issue had been entered into by the Government of Vindhya Pradesh and could not be interpreted as a contract with the Central Government (see Staye Deo v. Padam Deo), the suit had to be filed against the State of Vindhya Pradesh, and the State was the proper defendant under section 79(b) of the Code. In addition, the Government of Part C States Act, under section 38(2), provided that all executive actions of a Part C State were to be taken in the name of the Lieutenant‑Governor, who exercised the executive power of the Government, including the grant, sale, disposition or mortgage of any property held for the purposes of the State. The combined effect of these provisions was to treat the Part C State of Vindhya Pradesh as a separate State, whose administration, under article 239, was carried out by the President through the person he notified. Under the notification, the Lieutenant‑Governor was appointed to discharge the functions under Order 27 and, by virtue of section 38(2), exercised the executive power of the Government. The Government of Vindhya Pradesh entered into the contract with the plaintiffs concerning State property. The definitions previously discussed made the State the proper authority to be sued, even though the General Clauses Act defined the State Government as the Central Government, because the definition of “Central Government” led to the Lieutenant‑Governor, and from the Lieutenant‑Governor the identity of the State followed. In this view, section 79(a) of the Code, which provides that in a suit by or against the Central Government the proper plaintiff or defendant is the Union of India, did not apply to a Part C State.

In this case the Court observed that the rule which provides that, in any suit brought by or against the Central Government, the proper plaintiff or defendant is the Union of India, as reported in (1) (1955) 1 S.C.R. 549, did not apply to a Part C State. The Court explained that for a Part C State only the definition contained in sub‑paragraph (b) of the relevant statutory section was to be applied, even though the State was classified as a Part C State. Based on that interpretation the Court held that the earlier decision of the Judicial Commissioner was correct. Because the appellants raised no further point or argument in the present appeal, the Court concluded that the appeal could not succeed and therefore ordered that the appeal be dismissed and that costs be awarded against the appellants. The Court further noted that there was no need to pass any additional order in respect of Criminal Miscellaneous Petition No. 40 of 1960, wherein the respondents had sought to amend the plaint by adding the Union Government as a party. The Court explained that, given the earlier reasoning that excluded the Union as a proper party in suits involving a Part C State, the requested amendment was unnecessary at this stage. Consequently, the Court directed that the application related to that petition be filed and then formally recorded that the appeal was dismissed.