STATE OF KERALA

v. soum INDIA CORPORATION(P) LTD.

March 29, 1971

[S. M. SIICRI, C. J., G. K. MITTER, K. S. HEGDE, A. N. GROVER

AND P. JAGANMOHAN REDDY, JJ.) Constitution of India, 1950, Arts. 271 and 218-Repea/ and re-enact ment of tax laws: if affects continuity of levy-Agreement under Art. 278 by which State agrees with Union not to impose tax-If breaks continuity of levy.

The State of Travancore and Cochin, before 26th January 1950, bad plenary powers of legislation and under the Travancore General Sales Tax Act, 1948, and the Cochin General Sales Tax Act, 1945, as amended in 1948, they levied sales-tax on works contracts. As a result of the merger of the two states into a Part B State under the Constitution. the Travancore- Cochin General Sales Tax Act, 1950, was enacted, and, after the State of Kerala came into existence in 1956, the Act was called the Kerala General Sales Tax Act, arrd its operation was extended the whole of the State.

That Act enabled the imposition of sales tax on works contracts, but, on February, 25, 1950, an agreement was entered into between the Raj Pramukh and the Union of India, under Art. 278 of the Constitution, under which. the State had no power to impose sales-tax in respect of works contracts. That agreement, was to enure for ten years.

For the period 26th January 1960 to 3bt March, 1960, the State levied sales tax on works contracts. On the question whether the levy was saved by Art. 277 of the Constitution.

HELD: Under Art. 277, any taxes which, immediately before the commencement of"the Constitution, were being lawfully levied by a State, may, notwithstanding that the taxes are mentioned in the Union list in the Constitution continue to be levied by the State until provision to the contrary is made by Parliament. The impost of sales-tax on works contracls is, under the Constitution, beyond the competence of the States but would be within that of Parliament by virtue of item 97, List I, VII Schedule and Art. 248 of the Constitution. Therefore, sales-tax on works contracts which were being lawfully levied by the States of TravanCore and Cochin before 26th January 1950, could under Art. 277, be continued to be levied.

The fact that former Acts were repealed and re-enacted would not take the case out of Art. 277, because, all that the Article requires is a continuity in the levy of taxes without any change in their character. But this essential condition of continuity in the levy for the validity of the imposition of the tax was broken in the present case, by the agreement under Art. 278.

Articles 277 and 278 were engrafted in the Constitution with the object of maintaining financial stability of the new States. The agreement shows that there \\'as liberal financial assistance to make up for the los.s of revenue which the State was deriving from the sales-tax on works contracts.

Since the agreement broke the continuity of the levy of sales-tax on werks contracts, and there was nothing in Art. 277 to resuscitate it when the agreen1ent came to an end in 1960, no sales-tax on works conti::acts was leviablo by the State after 26th January 1960. [240AB, EA; 241A; 243A F] South India Corporation (P) Ltd. v. Secretary Board of Revenue, Trivandrum, [1964] 4 S.C.R. 280, referred to.

KERALA v. s. I. CORP. (Mitter, J.) .237

Civil Appellate Jurisdiction : Civil Appeals Nos. 175 to 178 A of 1969.

Appeals from the judgements and orders dated February 6, 1968 and September 5, 1967 of the Kerala High Court Writ Appeal.

No. 243 of 1967, T.R.C. Nos. 22 and 23 of 1966 and Original Petition No. 1046 of 1966.

M. C. Chaghla and A. G. Puddissery, for the appellants (in all the appeals.)

S. T. Desai A. S. Nambiar and K. R. Nambiar, for the respondent (in all the appeals). c

The Judgment of the Court was delivered by

Mitter, J.-All these four appeals are by certificate granted by the High Court of Kerala.

Three of them arise out of a common judgement in T.R.C. Nos. 22 and 23 of 1966 and Original Petition No. 1046 of 1966. Appeal No. 175 of 1969 is from the judgment in Writ Appeal No. 243 of 1967 arising out of original Petition No. 1723 of 1965.

The respondent, a private limited company having its principal place of business at Mattancherry originally in the State of Cochin but now in the S!aite of Kerala, was assessed by th~ State tax Officer, Special Circle, Mattancherry, to sales-tax for the years

1960-61 and 1961-62 on turnovers which included "works contracts" executed by the respondent.

Before the taxing authorities the contention raised by the respondent was that the turnover on these contracts could not be subject to sales tax. Tax Revision Cases 22 and 23 of 1966 were filed in the High Court under s. 41 of the Keralai General Sales Tax Act, 1963 to revise the decision of the Tribunal. These were heard by the High Court along with the Original Petition No. 1046 of 1966. Civil Appeal No. 175 of 1969 relates to the assessment for the year 1959-60 by which a turnover of Rs. 6,09,954.98 relating to works contracts was included.

The Tribunal upheld the levy of sa.tes tax on works contracts relating to the period 26th January 1960 to March 31. 1960 and remanded the case. The respondent thereupon filed

0. P. No. 1723 of 1965.

A single Judge of the High Court quashed the impugned order and this was conlinned in Writ Appeal No. 243 of 1967. The Sta.te, the Kerala Sales-tax Appellate Tribunal and the Inspecting Assistant Commissioner of Agricultural Income-tax and Sales-tax, Ernakulam have come up in appeals to this Court and the common respondent is the company.

SUPRBMB COURT REPORTS

(1971] SUPP. S.C.)..

The Central question in all these appeals is, whether the provisions of the General Sales Tax Act XI of Jl25 (correspon- <ling to Christian era 1950) imposing a tax on works contracts were enforceable in the State of Kerala subsequent to January 26, 1960.

The history behind the present Jaw of sales tax on this point in the State of Kerala is 36 follows. The territory of the said State

is composed inter alia of major parts of the erstwhile States of Trava.ncore and Cochin which were separate sovereign States ruwing plenary powers of taxation.. U oder the Sales Tax Act of both these States tax was exigible on works contracts. The Cochin Act was known as the Cochin General Sales Tax Act XV of 1121 (Christian era 1945) as amended by Act V of Jl24 (Christian era. 1948 AD).

The Travancore Act was known as the Travancore General Sales Tax Act XVIII of 1124 (correspon ding to 1948). As a result of the merger of the two States, the State of Travancore-Cochin with a common legislature emerged as ai part B State under the Constitution of India as originally in force. The said legislature enacted the Travancore Cochin General Sales Tax Act XI of 1125 (corresponding to 1949 A.O.) im posing sales tax on works contracts. The Act was published in the local ga.zette on January, 17, 1950 but under the provisions of s. 1(3) thereof it came into force on May 30, 1950 i.e., after the date of the promulgation of the Constitution. The last men tioned Act repealed the acts of the Tiavancore and Cochin States but enacted identicail provisions of taxation regarding works contracts. The State of Kerala came into existence as a result of the States Re-organisation Act as from 1st November 1956.

The Kerala Legisla.ture passed the Travancore Cochin General Sales Tax Amendment Act, 1957 amending the name of the Travancore Cochin Act XI of 1125 and extending its operation to the whole of the State of Kerala. This Act came into force on October 1, 1957. The sa.id Legisiature also passed (he Kerala Surcharge on Taxes Act, 1957 (12 of 1957) for levy surcharge on various taxes including those on sales or purchase of goods etc. This came into force on 1st September, 1957. The General Sales Tax Act (XI of 1125) was replaced by the Kerala General SaJes Tax Act (XV of 1963) which came into force on April !, 1963. There was no provision in this Act for imposition of tax on works contracts.

Even before the litigations giving rise to the present set of appeals, the respondent had challenged the imposition of sales tax on works contracts for the assessment years l 952...53 a~ also for the years 1956-57 and 1957-58 before the High Court of Kerala under Art. 226 and Art. 227 of the Constitution. The High Court's decision in favour of the taxing authorities ws~ upset in apeal to this Court in the year 1964, in South India Corporatio11

KBRALA v. s.1. CORP. (Mitter, J.)

(P) Ltd .. v. Secretary Board of Revenue, Trivandrum ('). Although the appellant in that ca6e raised various contentions before this Court to negative its liability to sales tax on works contracts, this Court held that during the period covered by the agreement (which was to enure for ten years) dated February 25, 1950 entered into between the Raij Pramukh of Tra vancore and the Union of India under Art. 278 of the Constitution the State had no power to impose sales tax in respect of works contracts but the Court expressed no opinion as to whether such tax would be leviable after the expiry of the period of the agreement as this point was not involved in the appeal.

In the insta.nt cases the points urged on behalf of the assessee before the High Court were :

(i) That the levy of the tax on works contracts under the provisions of the General Sales Tax Act XI of 1125 for the period 26th January 1960 to 30th March 1963 is not saved by Art. 277 of the Constitution; and

(ii) the levy is violative of Art. 14 of the Constitution.

Two learned Judges of the High Court Bench constituted to hear the first three ma.tiers came to the conclusion that the right to levy tax did not survive after the period covered by the agreement dated 25th February, 1950.

The third learned Judge took a different view. But all the three Judges were agreed that the levy if otherwise justified was not violative of Art. 14 of the Constitution.

There can be no doubt-and indeed there wa~ no suggestionthat after the Constitution came into force it was not open to the States to levy sales tax on works contracts under any Entry in List II of the Seventh Schedule to the Constitution. In The StaJe nf Madras v. Ganon Dunkerley & Co. (Madras) Ltd. (') it was held that Entry 48 in List II in Schedule VIII of the Government of India Act, 1935 did not extend to imposing a tax on the value of materials used in construction works, and that the provision introduced into the Madras General Sa-les Tax Act 1939 by the Amending Act of 1947 authorising the imposition of such tax was ultra vires.

Any such imposition -under Entry 54 of List II of the Seventh Schedule to the Constitution would meet the same fate.

At the same time it must be noted that in Mithan Lal v.

The State of Delhi and an; ither (') this Court held that Parliament was competent to impose a tax on the supply of materials in building contra.els and to impose it under the name of sales tax, as was done by Part C States (Laws) Act, 1950 by virtue of which the

(1) [1964] 4 S. C.R. 280

(2) [19591 S. C.R. 379

(3) [1959 S. C.R. 445]

24.0

S.UPREMB COURT REPORTS [1971] SUPP. s.c.R.

Chief Commissioner of Delhi issued a notification extending the operation of the Bengal Finance (Sales Tax) Act, 1941 to Delhi. 'I However, as the States of Travancore and Cochin had pleRary powers of legislation they could levy tax on works contracts describing the same as sales tax. The levy of such taxes after the 26th January 1950 would depend on the construction of the relevant provisions of the Constitution as applicable to the said territories. Apart from the provisions of Arts 277 and 278 (which now stands repealed by the Constitution (Seventh Amendment) Act,

1956) their validity would have to be determined under Art. 372 of the Constitution. This Court has held in a number of cases

tha~ "a pre-Constitution law made by a competent authority, though it has lost its legislative competency under the Constitution, shall continue in force, provided the law does not contravene' the 'other provisions' of the Constitution". It would be enough to refer to the above dictum based on a catena of decisions mentioned in the South India Corporation (P) Ltd. case (supra) at pp. 294-295.

Art. 372 is a. general provision meant to secure the continuance of existing laws in force in the territory of India on the advent of the Constitution. Art. 277 however engrafted a special provision for saving the impost of certain taxes, duties, cesses etc. which were being lawfully levied therefore In the following terms:-

"Any taxes, duties, cesses or fees which, immediately before the commencement of this Constitution, were being lawfully levied by the Government of any Sta.le or by any municipality or other local a.uthority or body for the purposes of the State, municipality, district or other local area may, notwithstanding that those taxes, duties, cesses or fees a.re mentioned in the Union List, continue to be levied and to be applied to the same purposes until provision to the contrary is made by Parliament by Jaw."

The impost of sales tax on works contracts though beyond the competence of the States would be within that of Parliament by virtue of item 97 of List I of Seventh Schedule a, nd Art. 248 of the Constitution. It would therefore follow that if there was no other law touching this point, sales taxes on works contracts which were being lawfully levied by the Governments of the States of Travancore and Cochin before 26th January 1950 would continue to be levied and to be applied to the sa.me purposes until provision to the contrary was made by Parliament by law. The fact that the Sales Ta.x Acts of the former States of Travancore and Cochin were repealed but identical provisions were re-enacted in the later Acts would not take the case out of Art. 277.

All

KBRALA v. s. (. CORP. (Mitter, J.)

that the said article requires is that there should be a continuity in the levy of ta.xes and so long as the character of the taxes did not change they would be saved by the said article.

We have however also to take note of Art. 278 which has now disappeared from the Constitution but held the field in 1950 when an agreement was entered into in terms thereof by and between the President of India ood the Raj Pramukh of Travancore.

Art. 278 run as follows:-

"(!) Notwithstanding anything in this Constitution, the Government of India may, subject to the ptovisions of clause (2), enter into an agreement with the Government of a State specified in Part B of the First Schedule with respect to--

(a) the levy and collection of any t&x or duty levi

able by the Government of India in such State and for the distribution of the proceeds thereof otherwise than in accordance with the provisions of this Chapter:

(b) the grant of any financial ai; sistance by the Government of India to such State in consequence of the loss of any revenue which that State used to derive from any tax or duty leviable under this Constitution by the Government of India or from any other sources;

(c) the contribution by such State in respect of a.ny

payment made by the Government of India under clause (!) of Article 291 a.nd when an agreement is so entered into. the provisions of this Chapter shall in relation to such State have effect subject to the terms of such agreement.

(2) An agreement entered into .under clause (1) shall continue in force for a period not exceeding ten years from the commencement of this Constitution : Provided that the President may at any time after the expiration of five years from such commencement terminate or modify a.ny such agreement if after consideration of the report of the Finance Commission he thinks it necessary to do so."

The decision of this Court in The South India Corporation (P) Ltd. (supra) elucidates the purpose of Art. 278 and the object with which the President of India entered into the agreement with the Raj Pramukh of Tnwancore. For our present purpose it will

16-1 S.C. India/71

SUPREME COURT REPORTS [1971) SUPP. s.c.R.

suffice to quote a portion of the said judgement. According to that judgment the agreement :

"Incorporated the recommendations made by the Indian States Finances Enquiry Committee with some modi fications and the Union of India a.greed to recoup the State for the loss caused to it by reason of the federal financial integration in the manner described thereunder. It was not a piecemeal agreement confined to a few items, but ai comprehensive one to fill up the entire revenue-gap caused to the State by reasonof some of its sources of revenue having been taken away by the Union or otherwise lost to it."

Further (see p. 292) :

"The agreement, read with the Report, makes the following position clear : The loss arising to the State on account of the federal fina.ncial integration in the State was ascertained and a provision was made for subsidising the State by filling up the said revenue-gap. The agree ment ex facie appears to be a comprehensive one.

It takes into consideration the entire loss caused to the State by reason of some of its sources of revenue being transferred under the Constitution to the Union. It would be unreasonable to construe the agreement as to exclude from its operation certain taxes which the Sta.le was authorised to levy for a temporary period ............ that saving was subject to an agreement and, as by the agreement effective adjustments were made to meet the loss which the Sta.le would have incurred but for the agreement, there was no longer any necessity for the continuance of the saving and it ceased to have any force thereafter between the parties to the agreement.''"

The Court also opined that it was not called upon to decide whether the said power revived after the expiry of ten years from the commencement of the Constitution, for all the impugned as sessments fell within the said period. The Court observed that there was no force in the contention that because Art. 278 was omitted by the Constitution (Seventh Amendment) Act, 1956, the a.greement entered into in exercise of a power thereunder automatically came to an end and thereafter the power of the State to levy the tax would come into life again.

It was enough for the Court in that case to say that the a, greement would have its full force unless the Constitution (Seventh Amendment) Act, 1956 in terms avoided it and in the result it held that the impugned assessment orders were not validly made

KERI.LA v. s. I. CORP. (Mitter, J.)

by the sales tax authorities in excrci$e of the power saved by Art. 277 of the Constitution.

The question directly arises before 11$ as to whether Art. 277 would still have effect in regard to the power to Jevy taxes falling within its scope after the said agreement of 25th February 1950 came to an end. The a.nswer must clearly be in the negative because the essential condition for the validity of the imposition is the continuity of the levy and once there is a break in its operation it ceases to be effective and it cannot matter that no provision to the contrary a.s envisaged by Art, 277 was made by Parliament

It is clear that Art. 277 and particularly Art. 278 were en- 1lrafted in the Constitution with the immediate object of maintaining the financial viability of the new States for such time as the Parliament thought proper. So far as the State of Kerala was concerned the need for financial assistance was met by the agreement between the President of India and the Ra.j Pramukh of Travancore. That agreement itself shows that there wa.s liberal assistance for the first five years which was to be tapered off in another five years' time. It would ncit be wrong to observe that it was contemplated that a.ftcr ten years the State of Kera!a would be able to find its own feet and do without any special assistance from the Centre. One of the objects of the said agreement was to recoup tbe State of Kerafa for the loss of revenue which that State

used to derive from inter alia, the sales tax on works contracts being a tax which was leviable under the Constitution by the Government of India alone. The agreement came to an end in 1960 a.nd with it the financial assistance rendered in terms thereof. The agreement broke the continuity of the levy of sales tax on works contracts and there is nothing in Art. 277 to resuscitate it.

In the result we must hold that sales tax on works contracts was not leviable by tbe State of Kerala a.fter the 26th January 1960

under the Kerala General Sales Tax Act XI of 1125. The appeals therefore fail and are dismissed with costs. There will be one set of hearing fee.

V.P.S.

Appeals dismissed.

STATE OF KERALA

soum INDIA CORPORATION(P) LTD

G. K. MITTER

K. S. HEGDE

A. N. GROVER

P. JAGANMOHAN REDDY, JJ.

Constitution of India

Arts. 271 and 218

Art. 278

Travancore General Sales Tax Act, 1948

Cochin General Sales Tax Act, 1945

Art. 278

Art. 277

Art. 277

Art. 248

Art. 277

Art. 277

Art. 278

Articles 277 and 278

Art. 277

[1964] 4 S.C.R. 280

s. 41

Keralai General Sales Tax Act, 1963

Tax Act XV of 1121

Tax Act XVIII of 1124

Constitution of India

Tax Act XI of 1125

s. 1(3)

Cochin Act XI of 1125

Kerala Surcharge on Taxes Act, 1957

Art. 226

Art. 227

Art. 278

Tax Act XI of 1125

Art. 277

Art. 14

Art. 14

Seventh Schedule

Madras General Sa-les Tax Act 1939

Seventh Schedule

[1964] 4 S. C.R. 280

Arts 277 and 278

Art. 372

Art. 372

Art. 277

Seventh Schedule

Art. 248

Art. 277

Art. 278

Art. 278

First Schedule

Article 291

Art. 278

Art. 278

Art. 277

Art. 277

Art. 277

Art. 278

Art. 277

Tax Act XI of 1125


%44

UNION OF INDIA

SUDHANSU MAZUMDAR & ORS.

March 29, 1971.

B [S. M. Suoo, c. J .• J. M. SHE LAT. c. A. v AJDIALINGAM,

A. N. GROVER AND A. N. RAY, JJ.]

Cession-Constitution (Ninth Amendment} Act, 1960-Cession of territory 10 Pakistan-If acquisition within the meaning of Art. 31(2).

Constitution of India, 1950, Art. 31(2)-<:ession of territory to foreign State if acquisition.

Constitution of India, 1950-Article 132(1)-<:ertificate by Single Judge -Propriety of.

Pursuant to the Indo-Pakistan Agreement, 1958, and after this Court's Advisory opinion in In re the Berubari Union and Exchange and Enclaves, (1960] 3 S.C.R. 250, Parliament enacted the Constitution (Ninth Amendment) Act, 1960 for cession of part of the territory of India to Pakistan.

In order to implement the provisions of the Act a physical demarcation of the portion that had to be ceaded was necessary. The respondents filed a petition under Art. 226 of the Constitution before the High Court challenging the validity of the proposed demarcation principally on the ground that they would be deprived of their property without compensation. A single Judge of the High Court held that the cession of the territory involved transfer of ownership and other private property rights to Pakistan through the Union of India, which, though outside cl. 2A of Art. 31 was compulsory acquisition within the meaning of Art. 31(2). The single Juds~ granted a certificate under Art. 132(1) for appeal to this Court.

HELD: (1) No question of acquisition within the meaning of Article 31(2) is involved in the present case. The Constitution (Fourth Amendment) Act, 1955, makes it clear that mere deprivation of property unles• it is acquisition or requisitioning within the meaning of cl. 2A will not attract cl. (2) and no obligation to pay compensation will arise thereunder and it is essential under clause (2} that in order to constitute acquisition or requisitioning there must be transfer of the ownership or right to possession of the property to the State or to a co_rporation o"vned or controlled by the State. Cession indisputably involves transference of sovereignty from one sovereign State to another. But, there is no transference of owner. ship or right to possession in the properties of the inhabitants of the territory ccdt.d to the ceding State itself.

The effect of the Constitution (Ninth Amendment) Act, 1960, can by no stretch of reasoning be regarded as transfer of .the ownership or right to possession of any property of the respondents to the "State" within the meaning of Article 12 of the Constitution. [202C-F, HJ

Charanjit Lal Chowdhury v. Union of India, (1950] S.C.R. 869, 902.

State of West Bengal v. Subodh Gopal Bose & Ors. [1954] S.C.R. 587, Dwarkadas Shrinivas of Bombay v. Sholapur Spinning ... t Weavbig Co.

Ltd. & Ors. [1954] S.C.R. 674, Saghir Ahmed v. State of Uttar Pradesh, (1955] 1 S.C.R. 707 and Gul/apalli Nage>wara Rao & Ors. v. Andhra Pradesh State Road Transport Corporation & Anr. (1959] Supp. 1 S.C.R. 319, referred 10.

UNION v. s. MAzUMDAR (Grover, J.)

(ii) l'his Court has on earlier occasions, observed that the practice of a single Judge deciding the case and giving a certificate under Article 132

(1) for appeal to this Court, although technically correct, was an improper practice and that such a certificate should be given only in very exceptional cases where a direct appeal was necessary. The present case may be of an exceptional kind; but this Court has been deprived of the benefit of the judgment of a larger Bench of the High Court on points which are of substantial importance. [246B]

R. D. Agarwala. & Anr. v. Union of India & Ors .. C.A. Nos. 2634/69 etc. dt. 23-2-1970 and Union of India v. J. P. Mitter, [1971] 3 S.C.R. 483, referred to.

OVIL APPELLATE JURISDICTION: Civil Appeal No. 974 of 1968.

Appeal from the judgment and order dated December 22, 1967 and January 3, 1968 of the Calcutta High Court in Civil Rule No. 3369(W) of 1966.

L. M. Singhvi and S. P. Nayar, for the appellant.

A. K. Dutta and K. Rajendra Chowdhary, for respondents D Nos. 1 to 3.

Santosh Chatterjee and G. S. Chatterjee, for respondent No. 4

The Judgement of the Court wa.i delivered by

Grover, J.-This is an appeal from a judgment of a learned single judge of the Calcutta High Court who granted a certificate under Art. 132(1) of the Constitution. It inyolves primarily the question whether the cession of a territory by India as a result of a treaty with Pakista.n would be compulsory acquisition of the property comprised in that territory by the Union of India and would, therefore, attract the provisions of Art. 31 of our Constitution.

At the outset it may be mentioned with reference to a preliminary objection which has been raised by the respondents that the judgment under appeal waii delivered by the learned single Judge in a petition under Art. 226 of the Constitution and it appears that on an oral prayer made to him he granted a certificate under Art. 132(1) even though under the Letters Patent of the High Court an a.ppeal lay to a division bench of that court.

This Court has said on an earlier occasion in clear and unequivocal terms that the practice of a single Judge deciding the case and giving a certificate under Art. 132(1) for appeal to this Court, although technically correct, was an improper practice. The right of the parties to file an appeal in the High Court itself against the decision of the single Judge should not be short-circuited. Indeed

in R. D. Agarwala & Another etc. v. Union of India & Ors.(') the certificate was cancelled. In Union of India v. J. P. Mitter(') it was observed that a certificate by a single judge under Art. 132(1) should be given in very exceptional cases where a direct appeal was necessary. Even though the present case may be of an exceptional kind we have been deprived of the benefit of the judgment of a larger bench of the High Court on points which are of substantial importance. Presumably a number of matters which had no bearing on the real questions to be determined and which have been dealt with by the leacned single judge would have been either satisfactorily disposed of or would not have been the subject matter of discussion by the court, being irrelevant and unnecessary, if the decision had been given by a larger Bench.

The facts ma.y be shortly stated. On September 10, 1958, an agreement was entered into between the Government of India and Pakistan called the Inda-Pakistan Agreement. Item No. 3 of the agreement related to Berubari Union No. 12 which was a group of villages lying within the territory of India. This territory was to be so divided as to give one half area to Pakistan. The other half adjacent to India was to be retained by India. Subsequently a doubt arose whether the implementa.tion of the agreement relat ing to Berubari Union required Legislative action either by way of an Act of Parliament relatable to Art. 3 of the Constitution or by way of a suitable amendment of the Constitution in a.ccordance with the provisions of Art. 368 or both. A similar doubt had also arisen in respect of another item of the agreement which related to the exchange of certain enclaves but with which we are not concerned.

The President of India made a reference to this Court under Art. 143(1), of the Constitution for its oovisory opinion.

The opinion was deliveried on March 14, 1960. (In Re: The Berubari Union and Exchange of Enclaves Refer ence Under Article 143 (I) of the Constitution of India(').

As mentioned in the advisory opinion Berubari Union No. 12 had an area of 8·75 Sq. Miles and a• population of 10 to 12 thousand resi dents. It was situated in the district of Jalpaiguri. This Court expressed the view that since the agreement between India and Pakistan amounted to cession of a pa.rt of the territory of India in favour of Pakistan its implementation would naturally involve the alteration of the content of and the consequent amendment of Article I and of the relevant part of the First Schedule to the Constitution which could be made only under Article 368. Pursuant to the opinion delivered by this Court the Parliament enacted

(I) C. As. 2634/69 & 63/70 decided on 23·2 70.

(3) [1960] 3 S. C. R. ZSO.

UNION v. s. MAZUMOAR (Grover, J.)

the Constitution (Ninth Amendment) Act 1960 on December 28,

1960.

In order to implement the provisions of the above Act a physical division of the Berubari Union in accordance with the agreement and demarcation of the portion that was to go to Pakistan was necessary. Some of the inhabitants of the Berubari Union filed a petition under Article 226 of the Constitution challenging its proposed partition with the object of transferring its southern part to Pakistain.

The writ petition was dismissed and an appeal was brought to this Court which was disposed of on August

II, 1965. (Ram Kislwre Sen & Others v. Umon of India & Ors.)('). It was helil that the Ninth Constitution Amendment Act had been passed by the Parliament in the manner indicated in the advisory opinion of this Court. No merit was found on the other points which were agitated.

The appeal was dismissed.

On June 11, 1965, the respondents filecl another petition under Article 226 of the Constitution before the High Court challenging the validity of the proposed demarcation principally on the ground that they would be deprived of the right of citizenship conferred by the Constitution of India and also of their property without pa.yment of compensation.

D. D. Basu J. called for an affidavit in opposition and after hearing lengthy arguments delivered an elaborate judgment A.LR. 1967 Cal. 216) directing the issue of rule nisi limited to ground No. 3 of the writ petition. This ground was:

"For that no Act of the State is involved in the transfer of Berubari Union No. 12 to Pakistan a.nd as such your petitioners are entitled to compensation in terms of Art. 31(2) of the Constitution inasmuch as the operation of transfer involves deprivation of their right to property for which no provision has been made in the Constitution 9th Amendment Act, 1960."

According to the allegation in the writ petition respondent Dhanoswar Roy had 2 acres 64 decima.ls of khas land in the area in q uestion.

It was also claimed that the respondents had their household property, ancestral homes and cultivated lands in the Beru bari Union No. 12.

The constitutional question formulated by the learned judge was whether compensa.tion under Article 31(2) of the Constitution was to be provided for the respondents before the demarcation in implementation of the Constitution (Ninth Amedment) Act took place.

We may mention some of the material conclusions of the learned judge out of the numerous matters dealt with by

-- (I) (1966] 1 S. C. R. 430.

him. These are : (!) the treaty making power must be exercised subject to the fundamental rights guaranteed by the Constitution.

(2) Once it is established that a treaty making Jaw involves a transfer which attracts Art. 31(2) it cannot be exempted from the requirements of tha.t Article on the ground that it is a treaty of "cession".

(3) Although under the International Law the private rights of the inhabitants of the ceded territory are not instantly affected they shall have no legal right to assert against the new State under its own municipal Jaw to which such inhabitants shall be subject from the moment the cession is complete.

(4) As a result of cession it would be competent for the Government of Pakistan to deal with the disputed territory as absolute owner in complete disregard of the existing rights of the respondents. "The rights of the Government of Pakistan under its municipal law would in no way be Jess than whait would have happened if the lands were vested in that Government by a direct Act of the Government of India.

Such vesting the Government of India could arrange for only after acquiring the disputed lands''. (5) The present case will not be covered by clause 2(A) of Article 31 of the Constitution as so far all the ca6es which have been held to fall within its purview have been those in which there was exercise of the regulatory power of the State.

(6) The cession of the disputed properties sought to be implemented by the impugned demarcation involved compulsory acquisition of those properties by the Union of India within the meaning of Art. 31 (2) and unless competent legislation is enacted to provide for compensaition the Union cannot announce the appointed day within the meaning of s. 2(A) of the Constitution <Ninth Amendment) Act 1960 &nd for constructing pillars to demarcate Berubari Union No. 12 for the purpose of effecting the transfer of the specified portion to Pakistan.

Accord_ing to Dr. Singhvi learned counsel for the appellant the High Court has fallen into serious errors inasmuch as it has proceeded on many assumptions, reasoned on a priori theories and has founded its judgment on certain premises which do not e~:ist either in fact or in Jaw. Stress has been lruid on the true import of "cession''. According to all authorities on International Lw "cession" is the transfer of sovereignty over the State territory by the owner State to another State"('). Under the International Law two of the essential attributes of sovereignty are the power to acquire foreign territory as well as the power to cede national territory in favour of foreign State(') (supra at p. 281). Hardship is certainly involved in the fact that in all cases of cession the inhabi tan ts of the territory ceded lose their old citizenship and have to submit to a new sovereign whether they like it or not.

As the object of cession is sovereignty over the ceded territory all such

(I) Oppenbeim's International L•W V< !. l, 8th Edn. at pp. 547, 551.

(2) [1960] 3 s.c.R. 250.

UNION v. s. MAzUMDAR (Grover, J.)

individuals domiciled thereon as are subjects of the ceding State become ipso facto, by the cession, subjects of the acquiring State(') (supra at p. 551).

Dr. Singhvi says that the first premise on which the High Court has proceeded is that as a result of cession it would be competent for the Government of Pakistan to deal with the disputed territory a8 an absolute owner in complete disregard of the existing rights of the respondents. In other words it has been assumed that the Government of Pakistan will not recognise ownership or other similar rights of the respondents in. the lands and properties which belong to them. This, Dr. Singhvi claims, is contrary to the rule enunciated by Chief Justice Marshall in The

United States v. Juan Perchman(') in the following words:-

"The modern usage of nations, which has become law, would be violated; that sense of justice and of right which is acknowledged and felt by the whole civilised world would be outraged, if private property should be generally confiscated a.nd private rights annulled. The people change their allegiance; their relation to their ancient sovereign is dissolved; but their relations to each other and their rights of property, remain undisturbed."

The rule set forth in the Perchman case has been followed in over forty American ca;; es and has been accepted as the rule of International Jaw in English, French, German and Italian law(').

This Court has had occasion to consider fully the Perchman's case as also the English law apart from several other authorities on International law and the decisions of the Permanent Court of International Jutice. In State of Gujarat v. Vora Fiddali Badruddin Mithibarwala(') the following passage from the judgment of Mudholkar J., at pages 590, 591 gives tersely the position which obtains in our country :-

"Thus while according to one view there is a Sta.le succession in so far as private rights are concerned according to the other which we might say is reflected in our laws, it is not so. Two concepts underline our law; one is that the inhabitants. of acquired territories bring with them no rights enforceable a.gainst the new sovereign. The other is th!llt the municipal courts have

(I) Opp, nheim's lntecnational L1w Vol. ',8th Edn. at pp. 547, 551.

(2) 8 L. ed. 604.

(3) Extracts from the L1w of N 1tions (2nd Edn. 1953 p. 237 Cf. F. B.

H S1yic, '"Change of S Jve:-eigntY and Private Ownership of Land," 12 XlXL A. J. I. L. (19!8), 475, 481, 495-497.

(4) [1964] 6 S. c. R. 46!.

SUPREMI! COURT RllPORTS [1971} SUPP. s.c.R.

no jurisdiction to enforce any rights claimed by them, even by virtue of the provisions of a treaty or other transacticn internationally binding on the new sovereign unless their rights have been recognised by the new sovereign."

The above case related to rights pertaining to the exploitation of the forests which were claimed under a Tharao which was held by the majority to be a grant to the jagirdars by the ruler of the erstwhile Sant State which mergtd in the Dominion of India as from June JO, 1948. It was thus held that the rights derived by the inhabitants of the ceded territory from its former rulers. could not be enforced by them a.gains! the new sovereign in the courts of that sovereign unless they had been recognised by the new sovereign. It is altogether unnecessary to discuss the principles established by the decisions of this Court further because they can afford no assistance in deciding the present case in which: no question arises of how the private rights of the inhabitants of a particular territory would be affected if the same were to be ceded to India. The cession involved is of territory to Pakistan and no evidence was placed before the High Court from which it could be concluded tha.t under the Pakistan Jaws the private rights of the inhabitants therein would. not be respected in accordance with the ordinary principles of •Internaitional Jaw. In this situation it would be a wholly wrong approach to conclude that the respondents are bound to lose all their property rights in the territory which is being ceded by India to Pakistan. Even on the assumption that the respondents will not he entitled to enforce their private rights in the municipal courts of Plikistan unless they are recognised by the new sovereign it is incomprehensible how such a prospect or possibility can attract the wpplicability of Art. 31(2) of our Constitution so as to entitle the respondens to compensation as provided thereby. Nor can we understand the process of reasoning by which the High Court has reached the result tha, t cession would be tantamount to vesting by the direct act of the Government of India of the properties of the respondents in Pakistan.

In order to determine whether the case of the respondents would fall within Art. 31(2} it is necessary to set out that provision as also para 2A of that Article which was added by the Constitution (4th Amendment) Act 1955 :

(2) "No property shall be compulsorily acquired or requisitioned save for a. public purpose and save by authority of a Jaw which provides for compensation for the property so aquired or requisitioned and either fixes the amount of the compensation or sF.fies the principles on which, and the manner in which, the compensa-

UNION v. s. MAZUMDAR (Grover, J.)

tion is to be determined and given; and no such law shall be called in question in any court on tbe ground tbat tbe compensation provided by tbat law is not adequate."

(2A) Where a law does not provide for tbe transfer of tbe ownership or right to possession of a.ny property to tbe State or to Ill corporation owned or controlled by the State it shall not be deemed to provide for tbe compulsory acquisition or requisitioning of property, notwithstanding tbat it deprives any person of his property."

As far back as 1950 Mukherjea J. (as he tben was) gave the meaning of "acquisition" in Chmanjit Lal Chowdhury v. Union of India(') in the following words:

"Acquisition means and implies tbe . acquiring of tbe entire title of tbe expropriated owner, whatever tbe nature or extent of tbat title mi8ht be. The entire bundle of rights which were vested in the original holder would pass on acquisition to tbe acquirer lelllving nothing in tbe former".

But in tbe State of West Bengal v. Subodh Gopal Bose & others(') the view taken in the judgment of the majority was that clauses I and 2 of Article 31 were not mutually exclusive in scope and content but should be read together and understoOd as dealing with the same subject.

Thus a wider meaning was given to

acquisition, deprivation contemplated in clause I being no other E than the acquisition or taking possession of the property referred to in clause('). In Dwarkadas Shrinivasa of Bombay v. The Sholapur Spinning & Weaving Co. Ltd. & Others(') this Court, while confirming the above principle, held that the word "acquisition" had quite a wide concept, meanin!!l the procuring of property or taking of it permlllnently or temporarily and it was not confined only to F the acquisition of a legal title, by the State in the property taken possession of. This was the position relating to Art. 31 as it stood before the Constitution (4th Amendment) Act, Clause 2A was inserted in 1955 with the object of superseding tbe majority decision in Subodh Gopal's(') case as also in Saghir Ahmed

v. The State of Uttar Pradesh(') in which the earlier decisions were G followed. It was pointed out in Gullapalli Nageswara Rao & other v. Andhra Pradesh State Road Transport Corporation & Another(') :

"The Constitution (Fourth Amendment) Act, 1955 Amended clause (2) of Art. 31 and inserted clause 2A in

(I) [19SO] S. C.R. 869 at p. 902.

(3) [19S4] S. C. R 674.

(5) [19S9] Suppl. IS. C.R. 319.

(2) [19S4] S. C.R. 587.

(4) [19SS] I S. C. R 707.

that article. The amendments, in so far as they a•e relevant to the present purpose, substitute in place of the words 'taken possession or acquired' the words 'compulsorily acquired or requisitioned' and provide an explanation of the words 'acquired and requisitioned' in clause (2A). The result is that unless the law depriving any person of his property provides for the transfer of the ownership or right to the possession of any property to the State, the law does not relate to 'acquisition or requisition' of property a-nd therefore the limitations placed upon the legislature under cl. (2) will not apply to such law." It is therefore essential that in order to constitute acquisition or requisitioning there must be transfer of the ownership or right to possession of any property to the State or to a corporation owned or controlled by the State. Article 12 provides thai in Part III (in which Article 31 appears) unless the context otherwise requ- . ires the State "includes the Government and Parliament of India and the Government and the legislature of each of the States and all locaJ or other authorities within the territory of India or under the control of the Government of India. The effect of the Constitution (Ninth Amendment) Act 1960 by which part of the Berubari Union No. 12 shall be ceded to Pakistan can by no stretch of reasoning be regarded as a transfer of the ownership or right to possession of any property of the respondents to the State within the meaning of Art. 12 of the Constitution.

The amendment of 1955 makes it clear that mere deprivation of property unless it is acquisition or requisitioning within the meaning of clause (2A) will not attract clause (2) and no obligation to pay compensation will arise thereunder.

Cession indisputably involves transference of sovereignty from one sovereign State to another.

There is no transference of ownership or right to possession in the properties of the itiliabitants of the territory ceded to the ceding State itself. The Constitution (Ninth Amendment) Act having been enacted in accodance with the Advisory opinion of this court(') there can be no impediment in the way of ceding part of Berubari Union No. 12 pursuant to the Indo-Pakistan Treaty 1958. The view of the High Court that the cession of the said territory involves transfer of the ownership and other private property rights to Pakistan through the Union of India which was outside clause(2A) of Article 31 and was covered by clause(2) of that Article is to say the least wholly untenable and cannot be sustained.

In our judgment no question of acquisition within Art. 31(2) is involved in the present case and even though a good deal of hardship may result to the respondents owing to the change of sovereignty they

(I) [1960] 3 S. C. R. 250.

• .

UNION •• S. lllAZUMDAR (Grover, J.)

cannot claim compensation for the simple rea5on 'that there has been no transfer of the ownership of their property to the State namely the Union of India which would attract the applicablilty of Art. 31(2}.

The appeal, therefqre, succeeds and it is hereby allowed. In view of the nature of the points decided there will be no order as to costs.

K.B.N.

Appeal allowed •

SUDHANSU MAZUMDAR & ORS

A. N. GROVER

A. N. RAY, JJ.

Art. 31(2)

Constitution of India

Art. 31(2)

Constitution of India

Article 132(1)

(1960] 3 S.C.R. 250

Art. 226

the Union of India

cl. 2A

Art. 31

Art. 31(2)

Art. 132(1)

Article 31(2)

cl. 2A

Article 12

(1955] 1 S.C.R. 707

Article 132

[1971] 3 S.C.R. 483

Art. 132(1)

Art. 31

Art. 226

Art. 132(1)

Art. 132(1)

Art. 132(1)

Art. 3

Art. 368

Art. 143(1)

Article 143

Constitution of India

First Schedule

Article 368

Article 226

Article 226

Constitution of India

Art. 31(2)

Amendment Act, 1960

Article 31(2)

(1966] 1 S. C. R. 430

Art. 31(2)

clause 2(A)

Article 31

Art. 31

s. 2(A)

Art. 31(2)

Article 31

Art. 31

Clause 2A

Art. 31

clause 2A

Article 12

Article 31

Art. 12

Article 31

Art. 31(2)

[1960] 3 S. C. R. 250

Art. 31