CHOUDHARY JAWAHARLAL & ORS. versus STATE OF MADHYA PRADESH

Citation: [1970] 3 S.C.R. 208 · Decided: 30-10-1969 · Supreme Court of India · Bench: S.M. SIKRI · Disposal: Dismissed

Judgment (excerpt)

208 
CHOUDHARY JAWAHARLAL & ORS. 
v. 
STATE OF MADHYA PRADESH 
October 30, 1969 
[S. M. SJICRI, G. K. MITTER AND P. JAGANMOHAN REDDY, JJ.] 
Princely State-Construction of public buildings-Merger with Indian 
State-Liability of successor State to honour claim for payment-Act of 
State; what is. 
The appellants constructed certain public buildings in a princely state 
and the Maharaja admitted the claim of the appellants and executed a 
promissory note for the amount claimed. The princely State was merged 
with State of Madhya Pradesh and the State Government (respondent) 
took over the possession of the public buildings. 
On the question of the liability of the respondent to pay the amount of 
the promissory note, 
HELD : ( 1) The fact that the appellants were asked by the respondent 
to supply details of their claim did not amount to an acceptance of the 
liability. It was open to the respondent to examine and satisfy itself 
whether it should honour the liability or not and it could not be said that 
the State had waived its defence of Act of State. 
(2) An Act of State is an exercise of sovereign power over a territory 
which was not earlier subject to its sway. When such an event takes 
place and territory is merged, although the soverign might allow the in-
habitants to retain their old laws and customs or undertake to honour the 
liabilities, it could not be itself bound by them until it purported to act 
within the laws by bringing to an end the defence of Act of State. The 
rule applies even in case of a public prope'rty of the erstwhile State which 
the successor State takes over and retains as part of its public property. 
[212 AJ 
]J.aja Rajender Chand v. Sukhi & Ors. [1956] 2 S.C.R. 889, State of 
Saurashtra v. Memon Haji lsmali, A.l.R. 1959 S.C.R. 1383 and Vaje Singh 
ji Ioravar Singh & Ors. v. Secretary of State for India, 
51 
I.A. 357, 
referred to. 
CIVIL APPELLATE JURISDICTION: 
Civil Appeal No. 91 of 
1966. 
Appeal from the judgment anjl decree dated January 11, 1962 
of the Madhya Pradesh High Court in First Appeal No. 115 of 
A 
c 
D 
E 
F 
1958. 
G 
M. S. Gupta, for the appellants. 
I. N. Shroff, for respondent No. 1. 
The Judgment of the Court was delivered by 
P. Jaganmohlul Reddy, J.-This appeal is by certificate 
granted by the High Court of Madhya Pradesh under Article 
13 3 ( i) (a) of the Constitution of India against its judgme-nt and 
decree by which it reversed the judgment and decree of the Addi. 
H 
A 
B 
c 
D 
E 
F 
G 
H 
JAWAHARLAL v. M. P. STATE (Reddy, J.) 
209 
District Judge, Ambikapur. 
The High Court held that the claim 
of the appellant on the proinisory note executed by the Maharaja 
of Surguja-an erstwhile Ruler whose state was merged in Madhya 
Pradesh, could not be enforced against the 1st Respondent the 
State of Madhya Pradesh because after the cessiQil of the erstwhile 
State, the new State had not expressly or impliedly undertaken to 
ffillet that liability. 
In other words, the plea of 'an act of Slate' 
raised by the' 1st respondent was accepted. 
The circumstances in which the suit was filed by the appellants 
and the array of parties may now be stated. 
Appellants 1, 2, 3 
and deceased Hira Lal were brothers and members 
of a Joint 
Hindu family. 
Appellant 4 is the wife of Hira Lal, appellants 5 
to 7 are his sons and appellant 8 is the grand-son. All these appel-
lants along with appellants 1 to 3 constitute a Joint Hindu family 
which was carrying on business of construction of buildings under 
the name and style of Hira Lal & Bros, at Ambikapur in the erst-
while State of Surguja. 
The allegations in the suit filed by the 
appellant against the respondent State was that they had construct-
ed buildings of the District Court and the Secretariat at Ambikapur 
in 1936. 
The work was completed but in so far as payment was 
conce!iried, there was a difference of opinion about the measure-
ments etc. but ultimately it was decided to pay to the appellants 
Rs. 80,000 on account of the said construction and accordingly 
the Maharaja of Surguja-2nd respondent executed a promisory 
note in favour of the appellants on 27-9-1947 for Rs. 80,000 with 
~nterest @ Rs. 3 per annum. 
Thereafter the Madhya Pradesh 
Government took over the administration of the State of Surguja 
on 1-1-48 after the merger of the Chattisgarh State and conse-
quently the Court building as well as Secretariat building were 
taken possession of by the Government. 
When the appellants 
claimed the mo

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