Case: The State Of Madhya Pradesh Vs. Shri Mouia Bux And Others

Briefly stated, the suit was for damages valued at Rs. 1,00,000/- and for a permanent injunction against the State of Vindhya Pradesh. The suit was filed in the following circumstances: The respondents are bidi merchants, and for that purpose, had obtained on October 18, 1951 from the Divisional Forest Officer, Rewa, a lease for plucking and appropriating tendu leaves from the Makundpur Range for three years, commencing from October 18, 1951 on payment of Rs. 1,63,000/- per year (Ex. p. 85). For some reasons into which it is not necessary to go, this contract was cancelled, and the right was put up for auction, but no bidders came. The Government, therefore, demanded the yearly instalments, claiming them under the contract as the difference between the original contract amount less the amount fetched by way of fresh auction, which was nil. The suit was filed for a perpetual injunction against this claim and for damages on the averment that the State of Vindhya Pradesh was guilty of breach of the contract.3. The trial Judge decreed both the parts of the claim, placing the damages at Rs. 36,570/-. Appeals were filed by both sides before the Judicial Commissioner; the appeal of the State Government was allowed and that of the plaintiffs dismissed, resulting in the dismissal of the entire suit. The Judicial Commissioner held that the State of Vindhya Pradesh was not a juristic entity and the suit ought to have been filed against the Union of India. On an Application for review the Judicial Commissioner held that there was an error apparent on the face of his earlier judgment, and that the State of Vindhya Pradesh could be legally sued. He accordingly granted review, and modified his judgment and decree by upholding the claim for perpetual injunction; but he dismissed the claim for damages on merits. It is against this order that the present appeal has been filed with certificate.4. Prior to the formation of the State of Vindhya Pradesh, a Union of 35 States in Baghelkhand and Bundelkhand had been formed by the Rulers in March, 1948. On December 26, 1949, this Union merged with India, and on January 22, 1950, the United State of Vindhya Pradesh became a Chief Commissioners Province underthe Government of India Act, 1935. On the commencement of the Constitution, the Chief Commissioners Province of Vindhya Pradesh became a Part C State administered by the President. In September, 1951, an Act known as the Government of Part C States Act, 1951, was passed by Parliament, and under it, a Lieutenant-Governor was appointed for Vindhya Pradesh. In 1956, underthe States Reorganisation Act, 1956, this Part C State became a part of the State of Madhya pradesh.5. The suit was filed on May 11, 1953, after notices under S. 80 of theCode of Civil Procedure were served, inter alia, on the Secretary, Forests and Industries Department, Vindhya Pradesh and the Collector of Rewa. The defendants raised the plea for the first time in appeal before the Judicial Commissioner that the suit was filed against a wrong defendant. According to them, the proper defendant was the Union of India. The Judicial Commissioner, relying upon Art. 300 of the Constitution and the definition of "State" in Art. 264, which did not include Part C States, held that the State of Vindhya Pradesh was not a juristic entity, and that the suit could not be filed against it. Later, on an application for review, he held that Art. 300 was not applicable to suits by or against Part C States, and he, therefore, considered the matter in the light of S. 79 of theCode of Civil Procedure. Before him, a notification issued by the President appointing the Lieutenant-Governor as a person authorised under Order 27 of theCode of Civil Procedure was produced, to which earlier his attention had not been called. He, therefore, held that, in view of the provisions of S. 79 and the definition of "State Government" in S. 3 (60) of the General Clauses Act, the proper defendant was, in fact, the State of Vindhya Pradesh. He accordingly observed asprevious judgment of this court was based on the assumption that the State of Vindhya Pradesh was not a legal entity, that is, entity capable of holding property and of entering into contracts. As has been shown above this assumption wasthis view of the matter, he reviewed his order, with the result stated above.

Court's reasoning:
9. In view of this notification, the Lieutenant Governor became the proper authority under O. 27 of theCode of Civil Procedure. By virtue of the definitions of "State and "Central Government" read with the definition of "State Government," the Lieutenant Governor of the State was the proper party to be sued. The Government of Vindhya Pradesh meant the Lieutenant Governor only by an amendment made in 1954 in the Vindhya Pradesh General Clauses Act. Since the contract in question was entered into by the Government of Vindhya Pradesh and could not be construed as a contract with the Central Government, see 1955-1 S C R 549 : (AIR 1954 S C 587) the suit had to be brought against the State of Vindhya Pradesh, and the State was the proper authority to be named under S. 79 (b) of the Code. In addition to this, there was the Act called the Government of Part C States Act, and under S. 38 (2) of that Act, all executive action of a Part C State was to be expressed to be taken in the name of the Lieutenant Governor and the executive power of the Government was to be exercised by him, including the grant, sale, disposition or mortgage etc., of any property held for the purposes of the State. The combined effect of all these provisions was to constitute the Part C State of Vindhya Pradesh into a separate State, and under Art. 239, the administration of it was to be done by the President through such person, as he notified. Under the notification, the Lieutenant Governor was appointed as the person to discharge the functions under O. 27 and under S. 32 (2) of the Government of Part C States Act he exercised the executive power of Government. The Government of the State of Vindhya Pradesh entered into the contract with the plaintiffs in respect of the property of the State. The definitions to which we have referred, made the State the proper authority to be sued, even though the State Government was defined in the General Clauses Act as the Central Government, because the definition of "Central Government" takes us to the Lieutenant Governor, and from the Lieutenant Governor, we go to the State. In this view of the matter, S. 79(a) of the Code, which says that in a suit by or against the Central Government, the proper plaintiff or defendant, as the case may be, is the Union of India, does not apply to a Part C State, and only the definition in cl. (b) of the section applies to this State, even though a Part C State, In our opinion, therefore, the decision of the Judicial Commissioner was correct.