LexSTATE OF RAJASTHAN versus SHYAM LAL
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1964 Marrh 12 174 SUPREME COURT REPORTS [1901 l STATE OF RAJASTHAN v. SHYAM LA)'., [P. B. GAJENDRAGADKAR, c. J., K. N. WANCHOO, J. c. SHAH, N. RAJAGOPALA AYYANGAR AND S. M. SIKRI, JJ.] State-Liability of-Merger of one State into another-- Liability incurred before merger-Merger agreement providing for taking over liability of the merging State- Whether suit against new State maintainable-Constitution of India, Art. 295(2). In 1947, the Dholpur State acceded to the Dcminion of India. Later on, it was merged with other States and as a result of that merger, the Matsya Union was formed on March 18, 1948. One of the provisions of the merger agreement was that the exist- ing laws in the Covenanting States were to be continued till such time as they were modified or repealed by the new State ·•nd that all the assets and liabilities of the Covenanting States were taken over by the new State. Later on, the Matsya Union was merged with the United State of Rajasthan which had come into existence from April 7, 1949. A similar provision with regard to the recognition of the liabilities of tbe Covenant- ing States by the new State was also provided. On January 26, 1950, Part B State of Rajasthan came into existence. In the four appeals the respondents secured permits from the Dholpur State for the export of certain commodities and they had to pay export duties in advance. As the respondents could not export the full quantity for which they had secured permits they asked the appellant to refund the excess export duty and when the latter refused to do so, filed suits for refund of the same with interest. The defence taken up by the appel- lant was that it was not bound by any liability which might have arisen against the former State of Dholpur. lt was " new Sovereign and was not bound by any liability of the former State of Dholpur unless it .chose to recognise the obligation but no such obligation was recognised in the present case. One suit was dismissed by the trial court and other three were decreed. The appeals of the State to the District Judge were substantially dismissed while the appeal in the first suit by the plaintiff was substantially allowed. The State filed appeals to the High Court . . After referring the matter to the Full Bench, a Division Bench 'of the High Court dismissed the appeals filed by the State. The appellant came to this Court after obtaining certificate of fit- ness from the High Court. The only question raised before this Court was about the liability of the State of Rajasthan under Art. 295(2) of the Cons- titution in respect of the obligations of the former State ·of Dholpur which came to be included in the State of Rajasthan. Dismissing the appeals, Held, that the new State by continuing the old laws without change till they were repealed or altered, recogirised that it was liable in the same way as the merging State would have been in any case. Throughout the process of integration from 1948 to 1950, the new Sovereign must be taken to have recog- nised the rights of the subjects and lindertaken the liabilitil!tl 7 S.C.R. SUPREME COURT REPORTS 175 of the old State. So under Art. 295(2) of the Constitution, the State of Rajasthan was liable to meet the liabilities of all old States which eventually were merged into it. Moreover, there was nothing to show that the right to claim the refund was taken away by any law competently passed. M / s Dalmia Dadri Cement Co. Limited v. The Commissioner of Income-tax [1959], S.C.R. 729 and Maharaj a Shree Umaid Mil! Limited v. Union of India, A.LR. 1953, S.C. 953 referred to. Civ1L APPELLATE JURISDICTION: Civil Appeals Nos. 884-887 of 1962. Appeals from the judgment and decree dated May 2, 1960, of the Ra.jasthan High Court in Civil Second Appeal Nos. 268 of 1954, 203 of 1955, 4 of 1954 and 27 of 1954. S. K. Kapur and B. R. G. ](. Achar, for the appellant (in all the appeals). R. P. Modi and R. K. Garg, for the respondents (in C.A. No. 887I1962). March 12, 1964. The Judgment of the Court was deliver- ed by- WAN CHOO, J .-These four appeals arise out of four certi- ficates granted by the High Court of Rajasthan and raise a common question. We therefore, propose to set out facts in one of the present appeals (No. 887), as the facts in other ap- peals are similar, except that the commodity involved was diffe- rent and so was the amount in dispute. The suit out of which appeal No. 887 has
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