Case: Bengal Nagpur Cotton Mills Vs. Board Of Revenue, Madhya Pradesh &amp; Ors

ratio of the case was that one sovereign could not bind another sovereign.No doubt, the decision was also rested on this aspect of the case but it was quite clearly laid down in the case that an agreement cannot rank as a law enacted by the Ruler. The consensual aspect of the document there considered was pointed out in Umaid Mills case, C. A. No. 214 of 1956 and 399 of 1960 D/- 27-11-1962: (AIR 1963 SC 953 ). It is plain that an agreement of the Ruler expressed in the shape of a contract cannot be regarded as a law. A law must follow the customary forms of law-making and must be expressed as a binding rule of conduct. There is generally an established method for the enactment of laws, and the laws, when enacted, have also a distinct form. It is not every indication of the will of the Ruler, however expressed which amounts to a law. An indication of the will meant to bind as a rule of conduct and enacted with some formality either traditional or specially devised for the occasion results in a law but not an agreement to which there are two parties, one of which is the Ruler.7. Judged from this angle, it is quite obvious that the document of 1943, was merely in tended to bind consensually and not by a dictate of the Ruler. The Ruler bound himself in consideration of certain advantages promised to him by the mill. The document is not worded as a law is ordinarily expected to be. It records a contract and part III where the concessions occur is also worded as a contract and uses language familiar in agreements between two parties dealing with each other at arms length. It is not necessary to refer in detail to part III, but the words."And the Darbar in consideration of the relief given to it by the Company by reason of the modification in the Principal Agreement as stated above hereby declares that the Darbar will at all times hereafter as hitherto use its power and authority in maintaining and protecting the company under its special favour and hereby confirms the privileges and rights heretofore enjoyed by the Company and in particular the Darbar with the intent to bind the Chief for the time being thereof hereby covenants with the company as follows" etc.,indicate that the Darbar was binding itself in consideration of certain acts done by the appellant-company in the past, and others, which the appellant-company undertook to perform in the future.This document, therefore, is of the same character as the one which was considered in Umaid Mills case C. A. Nos. 214 of 1956 and 399 of 1960 D/- 27-11-1962 : (AIR 1963 SC 953 ) where the sovereign expressed himself not in a rule of law but in an agreement. The present document stands distinguished from the Kalambandis which not only ordered that the pensions were to be paid but also laid down the rules of succession to the privileges and the kind of tenure which the holders for the time being were to enjoy.We are, therefore, satisfied that in the present case, the agreements culminating in the agreement of 1943, cannot be regarded as law but must be regarded only as agreements which might have bound the sovereign as a contracting party but not the Municipal Committee."8. The Municipal Committee had already imposed octroi in the State but the ruler ordered the Municipal Committee not to collect the dues from the appellant-company because of the agreement. No doubt, the Dewan who entered into the agreement of 1943, was also the local government and the Chief Officer of the Municipality, but the capacity of the Dewan in entering the agreement was different from his capacity as the head of the Municipality or as the local government of Nandgaon State. His action as the Dewan in foregoing the collection of octroi was not anything he did on behalf of the Municipality but on behalf of the sovereign. The resulting position, thus, was that the sovereign did not collect octroi from the appellant company because of the agreement, and the Municipal Committees rules and bye-laws, though they applied to the appellant company, remained in suspense because of the Rulers desire. After the State merged with the State of Madhya Pradesh and the Municipal Committee was not controlled in any ways by Ruler or by his agreement, the imposition of octroi upon the appellant company which was in suspense, began to take effect from such date as the Municipal Committee chose to determine. The Municipal Committee ceased to be subject to the wish of the Ruler after the merger, and for a time it did not collect octroi from the appellant company because the succeeding Government was accepting the royalty. In 1952, the Municipal Committee resolved to recover octroi from the appellant-company in accordance with the original imposition of the tax in the State and there was nothing which stood in the way of the Committee. The resolution was neither a fresh imposition of octroi because it had already been imposed nor the cancellation of an exemption because the Municipal Committee had not granted an exemption to the appellant-company. The resolution only indicated that on and from a particular date, the Municipal Committee would recover octroi which it had already imposed a long time ago upon all and sundry and to which the appellant-company was also subject and which was no longer affected by the will of the quondam sovereign. The agreement of the Ruler bound the Municipal Committee only indirectly, because the Ruler to whom the amount recovered would have gone, had agreed to forgo it, but the Rulers desire that octroi should not be collected ceased to operate from the moment he ceased to be the Ruler.9. The Resolution of the Municipal Committee was thus in order and the demand was rightly made. The point about limitation was properly abandoned because it has no substance.

Court's decision (1 = petition accepted / positive for appellant, 0 = rejected / negative): 0

Reasoning from the judgment:
0[ds]8. The Municipal Committee had already imposed octroi in the State but the ruler ordered the Municipal Committee not to collect the dues from the appellant-company because of the agreement. No doubt, the Dewan who entered into the agreement of 1943, was also the local government and the Chief Officer of the Municipality, but the capacity of the Dewan in entering the agreement was different from his capacity as the head of the Municipality or as the local government of Nandgaon State. His action as the Dewan in foregoing the collection of octroi was not anything he did on behalf of the Municipality but on behalf of the sovereign. The resulting position, thus, was that the sovereign did not collect octroi from the appellant company because of the agreement, and the Municipal Committees rules and bye-laws, though they applied to the appellant company, remained in suspense because of the Rulers desire. After the State merged with the State of Madhya Pradesh and the Municipal Committee was not controlled in any ways by Ruler or by his agreement, the imposition of octroi upon the appellant company which was in suspense, began to take effect from such date as the Municipal Committee chose to determine. The Municipal Committee ceased to be subject to the wish of the Ruler after the merger, and for a time it did not collect octroi from the appellant company because the succeeding Government was accepting the royalty. In 1952, the Municipal Committee resolved to recover octroi from the appellant-company in accordance with the original imposition of the tax in the State and there was nothing which stood in the way of the Committee. The resolution was neither a fresh imposition of octroi because it had already been imposed nor the cancellation of an exemption because the Municipal Committee had not granted an exemption to the appellant-company. The resolution only indicated that on and from a particular date, the Municipal Committee would recover octroi which it had already imposed a long time ago upon all and sundry and to which the appellant-company was also subject and which was no longer affected by the will of the quondam sovereign. The agreement of the Ruler bound the Municipal Committee only indirectly, because the Ruler to whom the amount recovered would have gone, had agreed to forgo it, but the Rulers desire that octroi should not be collected ceased to operate from the moment he ceased to be the Ruler.9. The Resolution of the Municipal Committee was thus in order and the demand was rightly made. The point about limitation was properly abandoned because it has no substance.