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Report No. 01

Chapter II

Existing Law in India

3. At the present moment, the liability of the Union and the States to be sued is regulated by Article 300 of the Constitution. It provides:

"The Government of India may sue or be sued by the name of the Union of India and the Government of a State may sue or be sued by the name of the State and may, subject to any provisions which may be made by Act of Parliament or of the Legislature of such State enacted by virtue of powers conferred by this Constitution, sue or be sued in relation to their respective affairs in the like cases as the Dominion of India and the corresponding Provinces or the corresponding Indian States might have sued or been sued if this Constitution had not been enacted."

It would be noticed that under this Article, the liability of the Union and the States is the same as that of the Dominion and the Provinces of India before the Constitution came into force. But this, however, is subject to legislation by the Parliament or the Legislatures of the States. What then was the liability of the Dominion and the Provinces before the Constitution? To answer this question we are driven back to the provisions of the Government of India Act, 1858, by which the Crown assumed sovereignty over the territories in India which till then were under the Administration of the East India Company. Section 65 of that Act enacted:

"All persons and bodies politic shall and may have and take the same suits, remedies and proceedings, legal and equitable against the Secretary of State of India as they could have done against the said Company."

This, it would be seen, preserves against the Secretary of State for India the same suits, remedies and proceedings which were till then available against the East India Company. East India Company. This provision was continued under the Government of India Acts, 1915 and 1935.1 The liability of the Dominion and the Provinces before the Constitution was thus the same as that of the East India Company before 1858. It is, therefore, incumbent on us to consider the question to what extent the East India Company was liable before 1858.

1. Vide Section 32 of the Government of India Act, 1915 and section 176(I) fo the Government of India Act, 1935.

4. The East India Company came into existence under a Charter of Queen Elizabeth of the year 1600. It started merely as a trading concern with a monopoly to carry on trade within certain geographical limits. Under various subsequent Charters it acquired certain judicial and legislative functions. It acquired territories. The sovereignty of the Crown in respect of acquisitions of territories made by the East India Company was reserved in the Charter of 1698.

It was not, however, till 1833 that the sovereignty over the territories was directly assumed by the Crown. It was the Charter Act of 1833 that reduced the Company to the position of a trustee for the Crown in respect of the territorial possessions acquired by the Company. Under this Charter the Company was allowed to remain in possession of the territories for a further period but its monopoly of even the China trade and the tea trade was finally taken away.

It was directed to close its commercial operations but retain its administrative and political power under the system of double Government instituted under the Charter. The Charter Act of 1833 contained elaborate provisions in respect of various matters. Section 9 of that Act continued the liability of the Company-liability then existing as well as to be incurred thereafter-which was charged upon the revenues. Section 10 of the Act which was similar in language to section 65 of the Government of India Act, 1858 provided:

"that so long as the Possession and Government of the Territories shall be continued to the said Company all persons and bodies politic shall and may have and take the same suits, remedies and proceedings legal and equitable, against the said Company, in respect of such debts and liabilities as aforesaid, and the property vested in the said Company in Trust as aforesaid shall be subject and liable to the same Judgments and Executions in the same manner and form respectively as if the said property were hereby continued to the said Company to their own use".

Under these provisions not only the contractual obligations but all liabilities then existing and all liabilities to be incurred thereafter by the Company were chargeable on the revenues and could be enforced by suit as if the assets belonged to the Company. There is no provision in any of the Charter Acts extending the immunity which the Crown in England enjoyed in respect of torts to the Company as it was a corporation having an independent existence and bearing no relationship of servant or agent to the Crown.

It is clear from a judgment of Sir Erskine Perry in Dhackjee Dadajee v. East India Company, Morley's Digest, 307, 329-30, that before the Charter Act, 1833, no distinction was made between acts committed by the Company in its political capacity and acts done by it in the exercise of its commercial activities. The learned Judge referred to the prior statutes at page 330 and observed that those statutes clearly provided for actions to be brought against the Company for torts and trespass of their servants committed in India and that the Charter of the Supreme Court established at Calcutta in 1774 expressly referred to the action of trespass against the Company without the slightest reference to any distinction between the political and commercial activities of the corporation.

If that was the true legal position, it is clear that before 1833, section 10 of the Charter Act of 1833 made available and preserved the right to institute a suit against the Company, not only in respect of the then existing liabilities but also in respect of future liabilities. There is, therefore, no justification for drawing a distinction, as was done in later decisions, between sovereign and non-sovereign powers of the East India Company while interpreting section 65 of the Act of 1858.

In the case decided by Sir Erskine Perry1, the trespass was committed by a Superintendent of Police under a warrant issued by the Governor-in-Council. Under various Acts, the Governors┬Čin-Council of Calcutta, Madras and Bombay enjoyed immunity from suit in courts. The claim was, therefore, made for damages for trespass against the East India Company. While it was agreed that a corporation could be liable for trespass committed by its servants or agents, Perry J., dismissed the suit on the ground that the Company could not be made liable for acts not authorised by it or ratified by it or for acts over which the Company had no control.

Further, the act complained of was done under the authority of the Governor and was one unconnected with the business of the company. Under section 10 of the Charter Act, 1833, the Company could be made liable only in respect of liabilities incurred by it and not by a superior authority like the Governor over whose acts it had no control. It is, however, significant that throughout the judgment no reference is made to the question of immunity of the Crown in England being extended to the Company. Notwithstanding the changes introduced by the Charter Act, 1833, the Company still remained an independent corporation having no sovereign character. The decision in the above case is important because it was given before the Act of 1856 and under the law then obtaining.

1. Morley's Digest, 307, 329-30.

5. After the Act of 1858, there came the decision of Sir Barnes Peacock, C.J., and Jackson and Wells JJ., in the P. & 0. case1 and much of the conflict of judicial opinion in later decisions has arisen from certain expressions used in the judgment in that case. The actual decision in the case was that the Secretary of State for India in Council was liable for damages occasioned by the negligence of servants of the Government if the negligence was such as would render an ordinary employer liable.

The learned Judges pointed out that the East India Company was not sovereign though it exercised Sovereign functions and, therefore, was not entitled to the immunity of the Sovereign. Though certain sovereign powers were delegated to the Company, the servants of the Company were not public servants. The learned Chief Justice stated as follows:

"But where an act is done or a contract is entered into, in the exercise of powers usually called sovereign powers by which we mean powers which cannot be lawfully exercised except by a sovereign or private individual delegated by a sovereign to exercise them, no action will lie."2

1. 5 Bom HCR App I.

2. 5 Bom HCR App 1 (44).

The meaning of the expression "lawfully exercised except by a sovereign" was elucidated by the learned Chief Justice by a reference to certain decided cases. All these cases dealt with "Acts of State", which were not subject to municipal jurisdiction. The judgment considered all the relevant provisions of the Charter Acts and the Government of India Act, 1858.

It reached the conclusion that the Company was not sovereign and did not enjoy the immunity of the Crown and that prior to the Charter Act of 1833 no such immunity was allowed or recognised in respect of any acts done in the exercise of its powers except in respect of "Acts of State". Nor did the Charter Act draw a distinction between sovereign and non-sovereign functions of the Company.



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