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Report No. 01

6. In Moment's case,1 the decision in the Peninsular case,2 was accepted. That was a case of trespass and was concerned more with the question whether a local legislature had power to take away the right of action conferred by section 65 of the Act of 1858. The observations of their Lordships were, however, directed to the particular facts before them and the judgment did not in any manner approve the dictum of Sir Barnes Peacock, C.J., in the P. & 0. case,3.

In Venkatarao's case,4 their Lordships of the Judicial Committee considered section 32 of the Government of India Act, 1915, the language of which was similar to section 65 and expressed the view that the section related to parties and procedure and had not the effect of limiting or barring the right of action otherwise available to an individual against the Government. We do not, therefore, derive any clear guidance from these two decisions of the Judicial Committee.

1. I Cal II.

2. 5 Bom HCR App 1 (14).

3. 40 Cal 391 (PC).

4. 64 IA 55 on appeal from 57 Mad 85.

7. Two divergent views were expressed by the courts after the decision in the Peninsular case1. The most important decision is that of the Madras High Court in Hari Bhanji's case2 decided by two eminent Judges of that Court, Sir Charles Turner, C.J. and Muthuswami Aiyar, J. The facts of that case, shortly, were that during the course of transit of salt from Bombay to Madras ports, the rate of duty payable on salt was enhanced and the merchant was called upon to pay the difference at the port of destination.

The amount was paid under protest and the suit was instituted to recover the amount. The principal question which arose was the jurisdiction of the court to entertain the suit. The Calcutta High Court in an earlier decision in Nobinchandra's case3 had taken the view that in respect of acts done in the exercise of its sovereign functions by the East India Company, no suit could be entertained against the Company.

This position was examined by the learned Judges of the Madras High Court and two questions governing the maintainability of suits by a subject against the sovereign were considered. The first related to the personal status of the defendant i.e., whether the defendant was a sovereign, who could not be sued in his own courts. The second related to the character of the act in respect of which the relief was sought.

The first question did not present much difficulty as the immunity enjoyed by the Crown in England did not extend to the East India Company, all the Charter Acts having recognised the right and liability of the Company to sue and to be sued. The second question regarding the nature of the act complained of was more difficult. It was held that the immunity of the East India Company extended only to what are known as "Acts of State" strictly so-called, and the distinction based on sovereign and non-sovereign functions of the East India Company was not well-founded.

The cases before the Act of 1858 and the later cases were considered by the High Court.4 It was conceded that the immunity might also extend to certain acts done for the public safety though these acts would not be Acts of State. The decisions in the Tanjore case5 and Nabob of Arcot v. East India Company, 4 Brown's Chancery Cases 81 may be taken as instances of "Acts of State". It is significant that in neither of these cases was the decision, based upon a distinction between the exercise of sovereign and non-sovereign powers.

1. 5 Bom HCR App 1 (14)

2. 5 Mad 273.

3. I Cal II.

4. The decisions are summarised in Ilbert, Government of India, (196 & 202).

8. In the case of Forrester v. Secretary of State of India, IA Supp Vol., p. 55 where the act complained of could be done only in the exercise of sovereign power and not by a private citizen, the Privy Council upheld the jurisdiction of the court to entertain the suit. It was not an act done in relation to an independent sovereign but was a resumption of a jagir belonging to a private subject. It was, therefore, an act directed by the Executive against a subject within its territory and was not an "Act of State".

The importance of this decision is that the Judicial Committee did not consider that the exercise of sovereign power against a subject could not be questioned in a court of law. The levy of customs duty is undoubtedly a sovereign function; yet the Madras Judges in Hari Bhanji's cases1 held that as it was an act, the justification for which was sought under the municipal law, the municipal courts had undoubted jurisdiction. That decision is noteworthy as laying down a test which can be applied with certainty.

The question was recently considered in an exhaustive judgment by Chagla C.J., and Tendolkar J., who after reviewing all the decisions held that the Madras case laid down the law correctly.1 This view was approved by Mukherjea J. (as he then was), when the matter went up on appeal to the Supreme Court.2 Mukherjee J., accepted the definition of "Act of State" given in Eshugbay v. Government of Nigeria, 1931 AC 662 (671) The other learned Judges of the Supreme Court did not express any opinion on this point.

1. 5 Mad 273.

2. AIR 1949 Bom 277.

3. AIR 1950 SC 222: 1950 SCR 621 (696).

9. The other line of cases proceeded on the basis of a distinction between sovereign and non-sovereign functions. Seshagiri Iyer J., in Secretary of State v. Cockraft, 39 Mad 351 added a further test that if the State derived benefit from the exercise of sovereign powers, it would be liable. The decisions which have followed this line of reasoning are summarised in Appendix I. No attempt has, however, been made in these cases to draw a clear line of distinction between sovereign and non-sovereign functions.

10. In our view, the law was correctly laid down in Hari Bhanji's case.

11. We have not considered it necessary to examine the liability of Part B States with reference to the law obtaining in the former Indian States, as we are concerned with the proposals for legislation relating to the whole of the territory of India.

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