TaxTMI 
TaxTMI 
1954 (4) TMI 64
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....own as the suzerain power and owed a modified allegiance to it, but none to the Government of India. In 1947 India obtained Independence and became a Dominion by reason of the Indian Independence Act of 1947. The suzerainty of the British Crown over the Indian States lapsed at the same time because of section 7 of that Act. Immediately after, all but three of the Indian States acceded to the new Dominion by executing Instruments of Accession. Among them were the two States with which we are concerned. The new Dominion of India was empowered to accept these accessions by a suitable amendment in the Government of India Act, 1935. The sovereignty of the acceding States was expressly recognised and safeguarded. The operative words of the Instrument of Accession which each Ruler signed were- " Now Therefore I............ Ruler of.................. in the exercise of my sovereignty in and over my said State do hereby execute this my Instrument of Accession." And clause 8 provided that- "Nothing in this Instrument affects the continuance of my sovereignty in and over this State, or, save as provided by or under this Instrument, the exercise of any powers, authority and ....
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....mber, 1948, to respect the impugned grants. The Revenue Minister's order of that date runs- "After considering over the whole question it has ,been decided that such grants made by the Rulers before signing the covenant should be respected, because constitutionally the V.P. Government should not refuse recognition to such grants unless they are directed otherwise by the State Ministry." Orders were accordingly issued to the Revenue Officers concerned to "abstain from interfering in such grants." This decision was communicated to the Rulers of Charkhari and Sarila on 13th March, 1949. They were told that their grants would be respected. The integration did not work satisfactorily, so, on 26th December, 1949, the same thirty five Rulers entered into another agreement abrogating their covenant and dissolving the newly created State as from 1ST January, 1950. By the same instrument each Ruler ceded to the Government of the Indian Dominion as from the same date "full and exclusive authority, jurisdiction and powers for, and in relation to, the governance of that State." Article II provided that "As from the aforesaid day, the United State of Vi....
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....h (called enclaves) were taken out of this Province on 25th January, 1950, and absorbed into the United Provinces (now Uttar Pradesh) by an Order of the Governor-General entitled the Provinces and States (Absorption of Enclaves) Order, 1950. This Order was made under sections 290, 290-A and 290-B of the Government of India Act, 1935. The portions of that Order relevant for the present purpose are these: " 3 (1) As from the appointed day, every enclave specified in the First Schedule. shall cease to form part of the surrendering unit, and shall be included in, and form part of, the absorbing unit................. " 6. All property and assets within an enclave which, immediately before the appointed day, vested in the Government of the surrendering unit shall, as from that day, vest in the Government of the absorbing unit. 7.All rights, liabilities and obligations, whether arising out of contract or otherwise, of the Government of a surrending unit in relation to an enclave shall, as from the appointed day, be the rights, liabilities and obligations, respectively, of the Government of the absorbing unit. 8.All laws in force in an enclave immediately before the appoi....
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....act of State, but in view of the fact that the revocation was made in consultation with the Government of India, we were I asked to treat the Uttar Pradesh Governor as a delegate of the sovereign authority whose act has been approved and ratified by that authority, along the lines of Buron v. Denman(1), The Secretary of State in Council of India v. Kamachee Boye Sahaba(7 M. I. A. 476 at 540) and Johnstone v. Pedlar([1921] 2 A. C. 262 at 279), and to decide on that basis whether the Union Government had the right and power to revoke these grants as an act of State. Jurists hold divergent views on this matter. Atone extreme is the view of the Privy Council in a series of cases. Their effect was summarised in Vajesingji Joravarsingji v. Secretary of State for India in Council(2 Exch. Rep. 167) and again in Secretary of State v. Sardar Rustam Khan(51 1. A. 357 at 36o) in the following words: "A summary of the matter is this : when a territory is acquired by a sovereign State for the first time that is an act of State. It matters not how the acquisition has been brought about. It may be by conquest, it may be by cession following on treaty, it may be by occupation of territory h....
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....overeign is dissolved; but their relations to 'each other, and their rights of property, remain undisturbed. If this be the modern rule even in cases of con-' quest, who can doubt its application to the case of an amicable cession of territory ?......... A cession of territory is never understood to be a cession of the property belonging to its inhabitants. The king cedes that only which belonged to him. Lands he had previously granted were not his to cede. Neither party could so understand the cession. Neither party could consider itself as attempting a wrong to individuals, condemned by the practice of the whole civilised world. The cession of a territory by its name from one sovereign to another; conveying the compound idea of surrendering at the same time the lands and the people who inhabit them, would be necessarily understood to pass the sovereignty only, and not to interfere with private property." This view was followed by Cardozo J. in 1937 in Shapleigh v. Mier (1). He said :- "Sovereignty was thus transferred, but private ownership remained the same To find the the title to the land today we must know where title stood while the land was yet in Mexic....
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....tes with regard to private property of private individuals, particularly land as to which the title had already been perfected before the conquest or annexation, are altogether different from the obligations which arise in respect of personal rights by contract. As is said in more cases than one, cession of territory does not mean the confiscation of the property of individuals in that territory. If a particular piece of property has been conveyed to a private owner or has been pledged, or a lien has been created upon it, considerations arise which are different from those which have to be considered when the question is whether the contractual obligation of the conquered State towards individuals is to be undertaken by the conquering State." Lord Alverstone also pointed out that in the American cases, on which the international jurists have based their views, the treaties of cession as well as the subsequent legislation of the United States protected the rights of owners of private property as they existed at the time of cession and so the only question for decision in each of those cases was whether any private rights of property actually existed at the relevant date. Now t....
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....he petitioners also relies on another limitation which the English Courts have placed on an act of State. He says that even if the right to con- fiscate be conceded it must be taken to have been waived if either the Crown or its officers purport to act under colour of a legal title and not arbitrarily. He contended that arbitrariness was of the essence in a', act of State. He relied on Secretary of State in Council of India v. Kamachee Boye Sehaba(7 M.I.A. 476 at 53I),Forester v. Secretary of State for India in Council (1872-73 I.A. Supplt. 10 at 17) and Johnstone v. Pedlar([1921] 2 A.C. 262). He pointed out that the affidavit of the respondent shows that Government decided to confirm all grants except those which were mala fide. Therefore, this was no arbitrary act of annexation but an attempt to exercise what was thought to be a legal right. We do not intend to discuss any of this because, in our opinion, none of these decisions has any bearing on the problem which confronts us, namely, the impact of the Constitution on the peoples and territories which joined the Indian Union and brought the Constitution into being. The flow of events up to the date of final accession, 1st ....
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....ue of an Order under clause (a) of sub-section (1) of this section, all the provisions of this Act applicable to the Chief Commissioner's Province of Delhi shall apply to the State or the group of States in respect of which the Order is made. The final Instrument of Accession complies with sub- section (1) above. The necessary Order was made and the Chief Commissioner's Province of Vindhya Pradesh, which at that date included the property in dispute, came into being on 23rd January. 1950. Now it is beyond dispute that there neither can, nor could, be confiscation of property, as an act of State in the Chief Commissioner's Province of Delhi. It is difficult to see how there could be in an area which was being administered by the Dominion Government in all respects as a Chief Commissioner's Province even if the person in possession was not, at the time, a national of the country, an assumption which is by no means indisputable; indeed that is the effect of the decision of the Privy Council in Mayor of Lyons v. East India Company(I M. I.A. 175 at 274, 275). There would appear to have been a clear election by the sovereign authority expressed in its own legislation to ....
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....nt sought to confiscate as an act of State, was only in de facto possession: see page 16. The Privy Council held that the Government had purported to act under colour of a legal title, so its attempt at resumption was not an act of State and consequently could be reviewed in the Courts. Their Lordships thereupon proceeded to investigate the Begum's title, not under the British Government, but as derived from the sovereign power which preceded it (page 18). So also in Mayor of Lyons v. East India Company(3), the title of a foreign alien to land was upheld, not under the English law (because if that had applied there would have been an escheat), but under the law in India derived from non- British sources, that is to say, under the laws of the land before cession. It was held that those laws continued until changed and for that reason a title which would have been bad under the English law was upheld. At page 274 their Lordships say:- "It follows from what has been observed, not only that Calcutta was a district acquired in a country peopled, and having a Government of its own, but that, for a long course of time no such law as that which incapacitates aliens, could be in....
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....ll that time they were neither resumed by the former rulers nor confiscated by the Dominion of India as an act of State. Therefore, up to the 25th of January, 1950, the right and title of the petitioners to continue in possession was good, at any rate, against all but the Rulers and the Dominion of India. Now what effect did the Constitution have on that? In our opinion, the Constitution, by reason of the authority derived from, and conferred by, the peoples of this land, blotted out in one magnificent sweep all vestiges of arbitrary and despotic power in the territories of India and over its citizens and lands and prohibited just such acts of arbitrary power as the State now seeks to uphold. Let it be conceded (without admitting or deciding the point) that the Dominion of India once had the powers for which the Union Government now contends. The self-same authorities which appear to concede that power also admit that it can be waived or relinquished. What then was the attitude of the Dominion towards those States which it sought to draw into the Republic of India which was yet to be free, sovereign, democratic, as its Constitution later proclaimed it to be? We quote from the mout....
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....tuent Assembly hammered out for themselves a new Constitution in which all were citizens in a new order having but one ie, and owing but one allegiance: devotion, loyalty, idelity, to the Sovereign Democratic Republic that is India. At one stroke all other territorial allegiances were wiped out and the past was obliterated except where expressly preserved; at one moment of time the new order was born with its new allegiance springing from the same source for all, grounded on the same basis: the sovereign will of the, peoples of India with no class, no caste, no race, no creed, no distinction, no reservation. The Preamble to the Constitution recites in its magnificient prelude- "We, The People of India, having solemnly resolved to constitute India into a Sovereign Democratic Republic and to secure to all its citizens: Justice, Liberty, Equality, Fraternity; In our Constituent Assembly this 26th day of November 1949, do hereby Adopt, Enact and Give to Ourselves This Constitution." Article 1(1) sets out that India shall be a Union of States and clauses (2) and (3) define the territories of which India shall be composed. They include the territories in which the dispu....
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....ly admit that conquest operates what they term a virtual naturalization." But however that may be, there is no question of conquest or cession here., The new Republic was born on 26th January, 1950, and all derived their rights of citizenship from the same source and from the same moment of time; so also, at the same instant and for the same reason, all territory within its boundaries became the territory of India. There is, as it were from the point of view of the new State, Unity of Possession, Unity of Interest, Unity of Title and Unity of Time. This was also quite clearly the will of the Union Government as expressed in its White Paper, so even if the case was still one of cession there is clear evidence of relinquishment and waiver. At page 115 it is said :- " With the inauguration of the new Constitution, the merged States have lost all vestiges of existence as separate entities "; and at page 130:- The new Constitution of India gives expression to the changed conception of Indian unity brought about by the 'unionisation' of states and at page 131 " Unlike the scheme of 1935 the new Constitution is not an alliance between democracies and dyna....