FIRM BANSIDHAR PREMSUKHDAS versus STATE OF RAJASTHAN

Citation: [1966] SUPP. 1 S.C.R. 81 · Decided: 29-03-1966 · Supreme Court of India · Bench: A.K. SARKAR · Disposal: Dismissed

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Judgment (excerpt)

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FIRM BANSIDHAR PREMSUKHDAS 
v. 
STATE OF RAJASTHAN 
March 29, 1966 
81 
[A. K. SARKAR, C. J. K. SUBBA RAO AND V. RAMASWAMI, JJ.] 
Act of State-Contract with former Indian State-Enforceability 
after merger against successor State. 
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The fonner State of Bharatpur sold some plots for establishing 
a Mandi, and the appellant was one of the purchasers. Under the 
terms of the sale, a person trading in the Mandi wouldl get a reduc• 
tion of 25% in the customs duty payable, if the commodities were 
imported into or exported out of the State through the Mandi. The 
Government of Bharatpur and after its merger the Government of 
the United State of Matsya, and thereafter, the present Rajasthan 
State (respondent herein) allowed the reduction to the appellant, 
who was also a trader. In 1951, the respondent revoked the conces-
sion. The appellant filed a suit for the recovery of the excess amount 
of customs duty paid on the basis that there was a valid contractual 
liability to grant the concession. The suit was dismissed by the High 
Court on appeal. 
In appeal to this Court, 
HELD: (i) The appellant's suit must fail because there was no 
recognition of the contractual ri!>;ht to the succeeding State of 
Rajasthan. 
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The contractual liability of a former State is binding on a suc-
ceeding sovereign State on~ if it recognises that contractual liabi-
lity. The enjoyment of the concession by the appellant after the for-
mation of the Rajasthan State did not show any implied recognition 
of the contractual liability by the respondent, because, the concession 
is referable to s. 33 of the Miatsya Customs Ordinance of 1948 under 
which the concession could be granted and recognised. [85Bi 880-DJ 
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Case law referred to. 
(ii) Even upon the assumption that there was an implied re-
cognition by the respondent of the contractual liability, the suit must 
fail, for the contractual liability mu!it be taken to have been super-
seded by the enactment of the Rajasthan (Regulation of Customs 
Duties) Ordinance No. 16 of 1949. [88 E-F]. 
Parliament and State Legislatures are, subject to any prohibi-
tion in the Constitution, competent to enact laws altering the terms 
and conditions of a previous contract or of a grant under which the 
liability of the Government of India or of the State Governments 
arises. There is nothing in the provisions of the Ordinance which 
preserves the alleged contractual rights of the appellant, and in the 
absence of any express language in the Ordinance preserving such 
rights. it must be held that the general law enacted in the Ordinance 
supersedes the previous contract of the appellant with the State of 
Bharatpur. [90 D-F] 
Maharaj Umeg Singh v. The State of Bombay. [1955] 2 S.C.R. 
164 and Maharaja Shree Umaid Mills Ltd. v. Union of India, [19631 
Supp. 2 S.C.R. 515, f0llowed. 
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SUPRBME COURT REPORTS 
[1966] SUPP. S.C.B. 
(.iii) The levy of Customs duty is in conformity with Art. 306 of 
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the Constitution. (91 DJ 
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QVIL APPELLATE JURISDICllON: Civil Appeal 
No. 203 of 
1964. 
Appeal from the judgment and decree dated January 29, 1963 B 
of the Rajasthan High Court in Civil Regular First Appeal No. 29 
of 1956. 
Sarjoo Prasad and T. Satyanarayana, for appellant. 
R. Ganapapathy Iyer and B.R.G.K. Achar, for the respondent. 
The Judgment of the Court was delivered by 
Ramuwami, J. This appeal is brought by certificate against 
the judgment and decree of the Rajasthan High Court dated Janu-
ary 29, 1963. 
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The appellant firm Bansidhar Premsukhdas brought a suit 
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which is the subject-matter of this appeal against the State of Rajas-
than on March 31, 1953 for the recovery of Rs. 86,646 I 3 /- in the 
Court of District Judge. Bharatpur. The case of the appellant was 
that the former State of Bharatpur with a view to increase the trade 
and commerce in the said State decided to establish a Mandi at 
Bharatpur where at the material time a T.B. Hospital was located. 
lt decided to sell plots for certain fixed amounts and, therefore, • 
issued a notification on May 18, 1946 offering the plots by public 
advertisement for sale on certain terms and conditions. The notifi-
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fication-Ex. 4-was published in Bharatpur Rajpatra and one of 
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the concessions proposed to be granted was embodied in cl. 3 of 
the notification which stated: 
"If any commodity is imported from outside into the 
Mandi and is sold for consumption within the State, or if 
any commodity received in the 

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