Successor State liability and customs concessions: earlier contractual rights failed without recognition or express preservation.

A claimed concession in reduced customs duty under the Bharatpur notification was not shown to be an enforceable term of sale, and the Court proceeded only on the assumption most favourable to the appellant. A successor State is bound by pre-existing contractual liabilities only where it has recognised them expressly or by necessary implication; here, Rajasthan did not recognise the alleged liability, and the later customs regime was treated as operating under a new legal basis. The Rajasthan customs ordinance superseded the earlier arrangement, no saving clause preserved the concession, and Article 306 did not create an independent entitlement to continue it. The alleged contractual right was therefore unenforceable.

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Issues: (i) Whether the concession of reduced customs duty contained in the Bharatpur notification formed a term of the contract of sale of the plots; (ii) whether the successor State of Rajasthan recognised and became bound by that contractual liability; (iii) whether the contractual concession survived the Rajasthan customs legislation and Article 306 of the Constitution.

Issue (i): Whether the concession of reduced customs duty contained in the Bharatpur notification formed a term of the contract of sale of the plots.

Analysis: The notification offering plots for sale also contained a concession in customs duty, but the concession was capable of benefiting not merely the plot purchasers but also traders, tenants, and other persons carrying on business in the mandi. On that footing, the contractual character of the concession was not free from doubt, and the Court proceeded on the assumption most favourable to the appellant.

Conclusion: The point was assumed in favour of the appellant, without a final finding that the concession was an enforceable term of the sale contract.

Issue (ii): Whether the successor State of Rajasthan recognised and became bound by that contractual liability.

Analysis: A succeeding sovereign does not automatically inherit all contractual obligations of the merged State. The legal position is that municipal courts can enforce only such pre-existing rights as the new sovereign has recognised, expressly or by necessary implication. The continued collection of customs on the basis of the later customs arrangements was treated as referable to the new legal regime rather than to any recognition of the earlier contract. No express saving of the alleged contractual right was found in the post-merger customs ordinances.

Conclusion: The contractual liability was not recognised by the successor State and therefore was not enforceable against Rajasthan.

Issue (iii): Whether the contractual concession survived the Rajasthan customs legislation and Article 306 of the Constitution.

Analysis: The Rajasthan (Regulation of Customs Duties) Ordinance introduced a new customs law for the merged territory and repealed the earlier customs arrangements to the extent they regulated levy and collection. In the absence of an express provision preserving the alleged concession, the earlier contract stood superseded. The challenge based on Article 306 also failed, because the appellant's claim rested on an alleged contractual liability of Bharatpur and not on a constitutional entitlement to continue the concession.

Conclusion: The prior contractual concession was superseded by the later ordinance, and Article 306 did not assist the appellant.

Final Conclusion: The appeal failed because the appellant could not enforce the Bharatpur concession against the successor State, and the later customs law displaced any alleged prior contractual right.

Ratio Decidendi: A contractual liability of a former sovereign State is enforceable against the successor State only to the extent that the successor recognises it, and such a right may be superseded by valid later legislation unless expressly preserved.

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