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Case Number

Suit No. 2294 of 1947

Judges

Sinha, J.

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Smart Summary

Structured Summary of the Opinion

Factual and Procedural Background

The plaintiff, a military contractor, entered into a contract with military authorities on or about 12-11-1943 to construct various works at Comilla (including latrines). The plaintiff executed the contract and submitted a bill to the Commander Royal Engineers at Chittagong on 15-12-1945 which remained unpaid. The suit seeking Rs. 62,562/- and other reliefs was filed against the Governor-General-in-Council on or about 11-8-1947.

On 15-3-1950 the plaintiff applied to amend the cause-title to substitute the "Union of India" for the Governor-General-in-Council. On 27-4-1950 an order directed substitution and placed the suit on the peremptory list to try the preliminary issue:

"As to whether or not the liability, if any, of the Governor-General of India in Council, in respect of the cause of action alleged in this suit has devolved upon the Dominion of India or its successor the Union of India."

When the preliminary issue was tried, the plaintiff testified but only on hearsay about the physical state of the constructions; the court rejected that hearsay. The defendant called no evidence. The issue was therefore decided as a question of law based on construction of Article 8(1) of the Indian Independence (Rights, Property and Liabilities) Order 1947. The "appointed day" under that Order was 15-8-1947.

Legal Issues Presented

Whether, under Article 8(1) of the Indian Independence (Rights, Property and Liabilities) Order 1947, the liability of the Governor-General-in-Council in respect of the cause of action devolved upon the Dominion of India (Union of India) or upon the Dominion of Pakistan.
Whether Article 8(1) applies to a contract that had been executed (in whole or in part) before the appointed day, and if so, by what test the successor State's liability is to be determined for executed contracts.

Arguments of the Parties

Plaintiff's Arguments (as presented by Mr. Masud)

On the appointed day (15-8-1947) the contract had already been executed; therefore there was no 'purpose' existing on that day to identify under Article 8(1).
The purpose of an executed contract is the original purpose that existed when the contract was implemented; since the contract had been implemented for military purposes that were not exclusively for the Dominion of Pakistan at the time of entering into and during performance, the contract falls under the residuary provision Article 8(1)(b), making the Union of India liable.

Defendant's Arguments (as recorded by the court)

It is not strictly accurate to call the contract fully executed: the contract involves mutual obligations (the contractor does the work and the government pays), and until payment is made the contract cannot be said to be fully executed or at an end.
Article 8(1) speaks of liabilities which have "accrued" under a contract; if the Union of India is to accept such a liability it must be shown that on the appointed day the purpose was not exclusively that of the Dominion of Pakistan.
The court should apply a legal fiction to determine which successor would be interested in the contract — either by imagining the successor States existing at the time the contract was entered into and asking whether the purpose would have been exclusively for Pakistan, or by imagining the contract as being implemented on the appointed day and asking whether on that day the purpose would have been exclusively for Pakistan.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Serajuddin Batley v. Province of West Bengal (unreported; Judgement dated 4-8-1949, Suit No. 1502 of 1948)	Interpretation of Article 8 (specifically Article 8(2) in that case): that a contract originally entered into on behalf of a predecessor authority is to be legally treated as if entered into on behalf of the successor (substitution), and that rights and liabilities accruing before the appointed day become those of the successor State.	The court relied on Sinha, J.'s observations to support the view that the relevant Article applies to executed contracts as well as executory ones; the opinion applies the same reasoning to Article 8(1) because of similarity of wording.
Province of West Bengal v. Midnapore Zemindary Co. Ltd., 85 Cal LJ 202	Application of Article 8(2)(a) to cases where subject-matter is situate in the territory of a successor State (example concerned rent of properties and a hospital serving districts that fell to West Bengal).	The court cited Harries, C.J.'s reasoning to show how Article 8 can apply straightforwardly where the subject-matter lies within the successor State's territory; used as an analogy while noting that the present facts were more complicated.

Court's Reasoning and Analysis

The court's analysis proceeded along the following lines, strictly reflecting the opinion's text:

The evidence of the plaintiff concerning the physical state of the constructions on the appointed day was hearsay (derived from what he heard from others who were not called) and was therefore rejected. The defendant called no evidence. Consequently the preliminary issue had to be decided as a question of law based on statutory construction.
Both parties agreed that the decisive question was the construction of Article 8(1) of the Indian Independence (Rights, Property and Liabilities) Order 1947, which provides for deeming contracts made on behalf of the Governor-General-in-Council as made on behalf of the Dominion of Pakistan or the Dominion of India depending on whether the contract is exclusively for Pakistan's purposes; and that all rights and liabilities which have accrued under such a contract become those of the appropriate Dominion.
The court rejected the plaintiff's submission that Article 8(1) does not apply to an executed contract. The court relied on the concluding paragraph of Article 8(1) (which speaks of rights and liabilities "which have accrued or may accrue") and Article 8(5) to demonstrate that accrued liabilities are meant to be covered.
The court cited Sinha, J.'s observations in Serajuddin Batley, which explained that the legal effect of the Article is to substitute the successor province as party from the time the contract was made; if the contract was executory the successor becomes liable to perform future and present obligations; if executed in whole or part, past accrued rights and liabilities transfer to the successor. The court reasoned that these observations, though addressed to Article 8(2), apply equally to Article 8(1) because of similar wording.
The court accepted the use of a legal fiction mandated by Article 8(1): treat the contract as if it had been entered into on behalf of the successor Dominion (Pakistan or India) and determine which successor would have been interested in the contract. In practical terms, where the subject-matter (constructions for military forces at Comilla) lies within the territory of the Dominion of Pakistan, the contracting party must be deemed to be the Dominion of Pakistan.
The court considered the defendant's point that a contract has two aspects — performance by the contractor and payment by the government — and that until payment is made it may not be fully executed. This observation led the court to frame two alternative legal fictions/tests to determine liability for executed contracts:
- Imagine the Dominion of Pakistan existed at the time the contract was entered into (or was being implemented) and ask whether the purpose of the contract would have been exclusively for Pakistan;
- Alternatively, imagine the contract as being implemented on the appointed day and ask whether on that day the subject-matter existed and whether it would have been exclusively for Pakistan.
Applying these tests to the facts (noting that the works were done at Comilla, which was in the Dominion of Pakistan), the court concluded that only the Dominion of Pakistan would be interested in the constructions for military forces stationed at Comilla and therefore only Pakistan would be liable to pay the bill. The court expressly noted that the plaintiff's unsuccessful attempt to prove demolition or non-existence of the latrines on the appointed day was irrelevant to this legal conclusion.

Holding and Implications

Holding: The preliminary issue was answered in the negative: the liability in respect of the cause of action did not devolve upon the Union of India (the defendant) and, applying Article 8(1), the Dominion of Pakistan (and not the defendant) is liable. Consequently, the suit fails and is dismissed with costs.

Direct effect on the parties: The plaintiff's suit against the Union of India is dismissed; the court found that the Dominion of Pakistan is liable to pay the unpaid bill for the works at Comilla.

Broader implications: The opinion explains and applies the legal interpretation of Article 8(1) (and related provisions) to executed and executory contracts and adopts the legal fiction approach set out in the quoted authorities. The opinion does not purport to state a novel general principle beyond the construction of Article 8(1) in the circumstances of the case. The text does not state that a new precedent is being created.

Outcome recorded in the opinion: "Suit dismissed." (V.S.B.)

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Elahi Bux v. Union Of India

1. This is a suit which was filed by the plaintiff against the Governor-General-in-Council, in or about 11-8-1947, for a decree for Rs. 62,562/- and other reliefs. The plaintiff is a military contractor and entered into a contract with the military authorities on or about 12-11-1943, for the construction of various works at Comilla, including latrines for the use of the military forces. The plaintiff executed the said contract. It is stated in the plaint that the bill was duly submitted to the Commander Royal Engineers at Chittagorig on 15-12-1945. This bill has not been paid. The suit was originally filed against the Governor-General-in-Council. On 15-3-1950, the plaintiff made an application for amending the cause-title & body of the, plaint by substituting the “Union of India” in the place & stead of the Governor-General-in-Council. On 27-4-1950, an order was made by Bachawat, J. ordering substitution & further directing as follows: “That this suit be placed on the peremptory list of suits after one month from the date hereof, for trial of the following preliminary issue, viz., “As to whether or not the liability, if any, of the Governor-General of India in Council, in respect of the cause of action alleged in this suit has devolved upon the Dominion of India or its successor the Union of India’.” This preliminary issue has now come up before me to be tried. The plaintiff has gone to the box and tried to give evidence of what happened to the constructions at Comilla. He, however, could only say about it from what he heard from others, who were not called. This is no evidence & I cannot accept it. The defendant has called no evidence. The point has therefore to be decided as a point of law. Both parties agree that the decision of the issue rests on the construction of Article 8(1) of the Indian Independence (Rights, Property and Liabilities) Order 1947, which runs as follows:

“8(1) Any contract made on behalf of the Governor-General-in-Council before the appointed day shall, as from that day—

(a) if the contract is for purposes which as from that day are exclusively purposes of the Dominion of Pakistan, be deemed to have been made on behalf of the Dominion of Pakistan instead of the Governor-General-in-Council, and

(b) in any other case, be deemed to have been made on behalf of the Dominion of India instead of the Governor-General-in-Council;

and all rights and liabilities which have accrued or may accrue under any such contract shall, to the extent to which they would have been rights or liabilities of the Governor-General, be rights or liabilities of the Dominion of Pakistan or the Dominion of India as the case may be.”

2. The “appointed day” was 15-8-1947.

3. Mr. Masud appearing on behalf of the plaintiff, argues that on the appointed day, the contract had already been executed and as such, there could not be a ‘purpose’ on that day. According to him, the purpose of an executed contract is the original purpose, which existed when the contract was actually being implemented. As this contract was for military purposes which, at the time of entering into the contract and during the period, it was being carried out, was not exclusively for the purposes of the Dominion of Pakistan it came under the residuary liability under Article 8(1)(b) and the Union of India was liable.

4. I am unable to accept the argument that Article 8(1) does not apply to an executed contract. There might have been some scope for such an argument if we did not have the concluding para of Article 8(1). This para makes it quite clear that rights & liabilities which have already accrued under a contract, are to be taken into consideration. This is also clear from a perusal of Art: 8(5). This aspect of the question was considered by Sinha, J. in ‘Serajuddin Batley v. Province of West Bengal’, (unreported. Judgment dated 4-8-1949, suit No. 1502 of 1948). The learned Judge made the following observation:

“Paragraph 8(2) provides that if the contract was entered into on behalf of the Province of Bengal for purposes which are exclusively purposes of the Province of West Bengal (as from the appointed day) the following consequences ensue:

(a) the Contract (which was originally entered into on behalf of the Province of Bengal) shall be DEEMED TO HAVE BEEN ENTERED INTO on behalf of the province of West Bengal;

(b) the rights & liabilities which have accrued or may accrue under any such contract shall be rights & liabilities of the Province of West Bengal.

This clearly means that by a legal Action the province of West Bengal is, so to say, substituted as a party to a contract from the time the contract was made on behalf of the Province of Bengal. The result, is that, if the contract is executory, the Province of Bengal becomes liable to perform & entitled to call for performance of the contract and the rights and liabilities which may accrue under the contract become its rights & liabilities. If the contract has been executed in whole or in part & rights & liabilities have accrued under the contract before the appointed day the province of West Bengal becomes entitled to such rights & responsible for such liabilities.”

5. His Lordship then proceeded to consider Article 8(5) & said “There is nothing in Para 8(2) to limit its operation to subsisting & executory contract”. Although the observations related to Article 8(2), they apply with equal force to Article 8(1), the wordings being similar. The judgment of Sinha, J. has since been upheld by the Court of Appeal, but I am informed that there has been a further appeal to the Supreme Court.

6. If we are to use the legal fiction that the contract would be deemed to have been entered into by the Union of India or Dominion of Pakistan as the case may be, then it is clear that for constructions to be built for military forces at Comilla, the contracting party must be the Dominion of Pakistan, in whose territory, it lies.

7. It has been pertinently pointed out on behalf of the defts that it is not strictly accurate to speak of the contract as an executed contract. A contract has two aspects. The contractor does the work & the Govt pays. These are mutual obligations under the contract & until payment has been made, it cannot be said that the contract has been fully executed, or that it is at an end. That is why, the Article speaks of liabilities which have “accrued” under a contract. If the Union of India is to accept such a liability then it must be shown that on the appointed day the purpose was not exclusively that of the Dominion of Pakistan. It will not do to say that the liability exists but the purpose does not exist. Either of two legal fictions will have to be introduced. Either, imagine that at the time the contract was entered into, both the Union of India & the Dominion of Pakistan existed & then consider whether the purpose of the contract would have been exclusively for the Dominion of Pakistan or not, or alternatively, imagine the contract as being implemented on the appointed day & consider whether on that day it would be for the purposes exclusively of the Dominion of Pakistan or not. In the case just referred to, & in the case of ‘Province of West Bengal v. Midnapore Zemindary Co. Ltd.’, 85 Cal LJ 202, the dispute arose regarding the rent of properties which after the appointed day were situated in the State of West Bengal & were in their occupation. In such a case the matter is much more simple. In the latter case, Harries, C.J said as follows:

“As I have said earlier, it was never the case of the Provincial Govt that this hospital which was housed in the house in question (In the Murshidabad district) served any district which is now part of Eastern Pakistan……It seems to have been assumed in the Court below that before partition this hospital was maintained exclusively for the purposes of certain districts which on partition fell to West Bengal & if that be so I think there can be no doubt whatsoever the Article 8(2)(a) of the Indian Independence Order applies & that West Bengal would be liable………”

8. In this case, however, the facts are much more complicated. But it is not disputed that the work was done at Comilla which is in the Dominion of Pakistan. If by legal fiction, the Dominion of Pakistan existed at the date of the contract or the contract existed on the appointed day, when Eastern Pakistan had certainly come into existence, then in either case, only the Dominion of Pakistan would be interested in the constructions for military forces stationed at Comilla & must pay for the same. An attempt was made by the plff. to prove that on the appointed day these latrines etc. had been demolished or no longer existed. As I have said, he has failed to prove this. But to my mind, this is not at all relevant. The position analysed comes to this:

1. Articles 8(1) & (2) of the Indian Independence Order 1947 contemplate contracts entered into on behalf of the Governor General in Council which, on the appointed day, are either executed, continuing or executory.

2. In the case of continuing or executory contracts, if the Dominion of Pakistan was going to be exclusively interested in it, either because the subject-matter of it was situate in its territory, or if it was to be performed for its benefit, or if it solely related to its affairs, then the liability would be of the Dominion of Pakistan. In such a case, not only the present & future liabilities would be hers but also all past liabilities as had accrued due.

3. In the case of executed contracts, the Dominion of Pakistan will be liable if:

(a) she would have been similarly interested in the subject-matter of the contract, imagining that she had come into existence as a separate State at the time the contract was entered into, and/or was being implemented, or

(b) she would have been similarly interested in the subject-matter of the contract, imagining that the subject-matter of the contract existed on the ‘appointed day’, whether in fact it existed or not.

9. Applying these tests, I must come to the conclusion that it is the Dominion of Pakistan & not the defendant who is liable to pay the bill of the plff. which is the subject-matter of the suit. The issue is therefore answered in the negative. It is conceded that the result of the suit obviously depends upon the result of this issue & the suit accordingly fails & must be dismissed with costs.

V.S.B

10. Suit dismissed.

Elahi Bux v. Union Of India

Structured Summary of the Opinion

Factual and Procedural Background

Legal Issues Presented

Arguments of the Parties

Plaintiff's Arguments (as presented by Mr. Masud)

Defendant's Arguments (as recorded by the court)

Table of Precedents Cited

Court's Reasoning and Analysis

Holding and Implications

Elahi Bux v. Union Of India

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