State of Rajasthan v. Sanwal Das — 1963 DIGILAW 20 (RAJ)

Chhangani, J.—This is a group of five appeals, all directed against the judgments and decrees of varying dates passed by the District Judge, Bharatpur in five different suits. The preliminary and basic facts as also the main questions of facts and law arising in them are common and consequently they were argued together and shall be disposed of by one judgment. 2. To appreciate and decide the controversial questions, we consider it convenient to set forth in detail the facts of appeal No. 51 of 1955 (The State of Rajasthan Vs. M/s. Haricharan Lal & Sons, New Mandi, Bharatpur) which was argued before us as the principal appeal. With regard to other cases, we will only briefly indicate the peculiar and special facts in so far as they are in variance with the facts in this appeal. 3. In appeal No. 51 of 1955 the two plaintiffs—(1) Firm Haricharan Lal & Sons, carrying on its business at New Mandi, Bharatpur, and (2) Lala Haricharan Lal brought a suit against the State of Rajasthan on 18.12.52 for the recovery of Rs. 89,678/4/3. The plaintiffs case was that in the year 1946 the building premises and lands which once used to house a T.B. Hospital, were lying vacant at Bharatpur and the Government of the former Bharatpur State in order to augment the sources of its income decided to utilise the land of the hospital premises together with lands contiguous to it for establishing a New Mandi at Bharatpur. The land was parcelled out into plots to be used as building sites for shops and was offered for sale. In order to attract purchasers at handsome prices, the State offered by public advertisement certain terms and concessions which were intended to be the terms of the sale, being in the nature of reciprocal promises on the part of the vendor as their part of the consideration of the sale. The plaintiffs specifically relied upon item No. 3 of the terms and concessions advertised by the State vide a notification Ex. The plaintiffs specifically relied upon item No. 3 of the terms and concessions advertised by the State vide a notification Ex. P-12 dated 1.6.46 which reads as follows:– "If any commodity is imported from outside into the Mandi and is sold for consumption within the State, or if any commodity is received in the Mandi from within the State and is exported, in both cases, a reduction of 25% in the customs duty prevailing at the time of the import and export of such commodities will be allowed. The concession shall not be available in case of vegetable Ghee." The plots were then sold by public auction and that at the time of public auction the terms and concessions were repeated. The plaintiff-respondent Haricharan Lal purchased two plots No. 2 and 3, for Rs. 2,000/- each and inspite of the scarcity of the materials completed the construction on the plots within one year of the issue of the sale certificate as required by para 5 of the procedure of the sale laid down in the Government notification. The plaintiffs thus carried out their part of the promise. A large number of shops have been constructed in the New Mandi which are attracting good business and that the object of the Government was amply served. That the Government of the former State of Bharatpur and after its merger the United State of Matsya and thereafter the State of Rajasthan continued to abide by the terms and conditions and allowed reduction of 25% in the customs duty. The plaintiffs also alleged that the State of Rajasthan as the eventual successor of Bharatpur State was bound by the terms of the sale as also by condition No. 3. That the Rajasthan Government, however, issued notification No. F.4(18)SR/49 dated 13th January, 1951 which appeared in the Rajasthan Raj Patra dated 16th January, 1951 reading as follows: — "Now therefore...Government of Rajasthan is hereby pleased to direct that with an immediate effect all free Mandies and Zones including the area comprising the former Kishangarh State and the Bhim District of the former Rajasthan State shall be abolished and that in consequence, all the customs concessions hitherto enjoyed by or applicable to these Mandies or Zones shall cease to have force and duties of customs shall be levied and collected in such Mandies or Zones in accordance with the revised tariff...... amended from time to time." The plaintiffs case further is that the said notification was not on its face applicable to the New Mandies, Bharatpur, nor was it duly and validly promulgated nor could it legally abrogate the contractual obligation which had devolved upon the State and was in any way ultra vires of the powers of the Government. According to the plaintiffs, even the highest Government Officers did not consider the notification as applicable to the New Mandies and that it was on this account that they while collecting the full duty directed that 25% of the duty be kept as Amanat pending the final decision of the Government on the question of concessions to be enjoyed by the plaintiffs. During the period from 29th January, 1951 to 14th August, 1951 the collections kept in Amanat amounted to Rs. 41,127/10/9 out of which the Government paid to the plaintiffs an amount of Rs. 5,131/10/3 as due in respect of stock existing with the plaintiffs on the date of the notification, but did not pay the balance of Rs. 35,996/0/6. Further, with effect from 14th August, 1951 the Government ceased to keep even 25% of the duties collected as Amanat and began appropriating the full customs duty. The plaintiffs are entitled to a refund of 25% of the duty collected from them. According to the plaintiffs, they are entitled to a refund of Rs. 89.178/4/3 on account of the excess duty recovered from them in disregard of the 25% concession upto the date of the suit out of the amount of Rs. 12,000/5/- for the period between the date of the notice and the date of the suit. They prayed for a decree of this amount together with pendente lite and future interest. The plaintiffs also prayed for an injunction restraining the defendant from realising any amount from the customs in contravention of the terms of sale as contemplated in item No. 3 of the notification and in para 6 of the plaint. 4. The facts in appeals Nos. 28, 29 and 33 of 1956 are on the same lines except for differences in the dates and the amounts claimed. In appeal No. 32 of 1956—State of Rajasthan Vs. Ratan Lal, the plaintiffs case is that at the time of notification they had a stock of 7081 mds. and 10 srs. of rape seed and that an amount of Rs. In appeal No. 32 of 1956—State of Rajasthan Vs. Ratan Lal, the plaintiffs case is that at the time of notification they had a stock of 7081 mds. and 10 srs. of rape seed and that an amount of Rs. 4425/12/6 on account of 25% was kept in deposit in respect of this stock. The Rajasthan Government refunded Rs. 3223/9/6 only on 8.5.52 and the remaining amount of Rs. 1202/3/- has not been refunded. The plaintiffs claim that they are entitled to this amount even on the basis of the notification as it maintained the exemption in respect of the existing stock. 5. The State did not dispute the plaintiffs calculations of the amounts but denied the plaintiffs right to obtain the refunds. Its case was that the terms and concessions contained in the notification advertising the sale of the plots were not the conditions of sale but were in the nature of concessions and could be enjoyed at the pleasure of the defendant. The defendant also pleaded that the concession was limited to the area which once formed the area of the former covenanting State of Bharatpur. The defendants case further was that the Rajasthan State as a successor State was not bound by the orders of the former State and that at any rate, the applicability of the terms and the concessions became impracticable on the formation of Rajasthan and by the operation of law. The defendants also alleged that the plaintiffs abused the concessions and thereby defrauded the Government of the legitimate customs duty to a considerable extent. It was also averred that the continuance of the concessions to the shop-keepers in New Mandies and the denial of the same to the general public conflicted with Articles 14, 15, 44 and 301 of the Constitution of India. The defendants further plea was that the plaintiffs failed to construct the shops within the stipulated period and hence they lost the right of the enjoyment of the concessions. Yet, another plea of the defendant was that the plots having been purchased by Lala Haricharan Lal, the plaintiffs firm is not entitled to bring the suit. The validity of the notice was also challenged. On the basis of these pleas the defendant prayed for the dismissal of the suit and claimed special costs. 5. Yet, another plea of the defendant was that the plots having been purchased by Lala Haricharan Lal, the plaintiffs firm is not entitled to bring the suit. The validity of the notice was also challenged. On the basis of these pleas the defendant prayed for the dismissal of the suit and claimed special costs. 5. In Ratanlals case (Appeal No. 32/56) the factual allegations were admitted though the liability was not admitted. 6. The District Judge, Bharatpur, after framing issues and recording evidence of the parties, disallowed the plaintiff Haricharanlals case for an amount of Rs. 12000/5/-in respect of the period after the notice but decreed the suit for an amount of Rs. 76,289/10/9 with proportionate costs and also granted an injunction restraining the defendant from realising any money from the plaintiffs in contravention of the terms of the sale as in item No. 3 i.e. more than 75% of the customs duty. Similar decrees for varying amounts were passed in other suits. The State has filed appeals in all the cases. 7. Mr. Agarwal, who appeared for the State in all these cases, strenuously challenged the correctness of the judgments and decrees of the trial court. He contended that the terms No. 2 and 3 of the notification No. 57 dated 13.5.46 (Ex. P-12) could not be and were not the conditions of sale and that the State of Bharatpur did not incur any contractual liability to abide by these terms. According to him, they were merely in the nature of partial exemptions from customs duty and concessions which could be revoked at any time. Relying upon M/s Dalmia Dadri Cement Co. Ltd. Vs. The Commissioner of Income-tax(l) and The Maharaja Shree Umed Mills Ltd. Vs. The Union of India (Civil Appeals 244/56 and 399/60), he made an alternative submission that even if there was a contract between the plaintiffs and the former State of Bharatpur, the Rajasthan State as a successor State was not bound by the contract and that there is no evidence on record to justify that the Rajasthan State recognised the contract either expressly or impliedly. On behalf of the plaintiff-respondents the main arguments were addressed by Mr. Kriparam who appeared for the respondents Banshidhar Premsukh in appeal No. 29/56 and Mr. Rastogi for the respondents Messrs Haricharanlal and Sons in Appeal No. 51 of 1955. Mr. On behalf of the plaintiff-respondents the main arguments were addressed by Mr. Kriparam who appeared for the respondents Banshidhar Premsukh in appeal No. 29/56 and Mr. Rastogi for the respondents Messrs Haricharanlal and Sons in Appeal No. 51 of 1955. Mr. Kriparams main argument was that the notification inviting bids from prospective purchasers and the offer of bids by the plaintiffs in pursuance of the notification and the acceptance of the bids by the Bharatpur State and the issue of sale-certificates did bring about a contractual liability on the part of the Bharatpur State to abide by the terms and the conditions. The liability devolved on the Matsya Union after the integration of Bharatpur State and was expressly recognised by the Matsya Union vide their letter No. 277 dated 12.11.48 (Ex. P-28). Subsequently on the integration of the Matsya Union and the four covenanting States of the Matsya Union of the State of Rajasthan on 15th May, the Rajasthan became the successor State. The Rajasthan State having continued the customs concessions in favour of the plaintiffs should be deemed to have impliedly recognised the contractual liability of the former Bharatpur State particularly when there was no express repudiation by the Rajasthan State. As for the evidence of implied recognition, he relied upon the notification of the Rajasthan State No. F. 4 (18) SR/49 dated 13.1.1951 evidencing the continuance of the customs concessions. The case reported in M/s Dalmia Dadri Cement Co.Ltd. Vs. Commissioner of Income-tax(l) was sought to be distinguished on the ground that in that case there was an express repudiation of the contractual liability of the former State by the integrating State of Pepsu. 8. Mr. Rastogi, appearing for Haricharanlal supported the decree of the trial court on a different ground. The substance of his argument was that the customs concessions referred to in the notification No. 57 were and at any rate should be deemed to have been issued under miscellaneous circular No. 15, Department of Customs, Raj Bharatpur, dated January, 1896 under sec. 40. On the formation of Matsya Union these concessions continued under sec. 33 and sec. 2 of the Matsya-Customs Ordinance No. 14 of 1948). 40. On the formation of Matsya Union these concessions continued under sec. 33 and sec. 2 of the Matsya-Customs Ordinance No. 14 of 1948). After the formation of the State of Rajasthan, the Rajasthan (Regulation of Customs Duties) Ordinance, 1949 (Ordinance No. XVI of 1949) abolished customs duties on transport of goods within Rajasthan and also made provisions for the issue of a revised tariff which was eventually brought into force by notification No. F4(18) SR/49. In other respects, the customs laws of the covenanting States continued to remain in force. The plaintiffs thus continued to enjoy concessions under the provisions of the Matsya Union. That the Constitution of India which came into force on 26th of January, 1950 introduced a policy of economic unity to sustain political unity and provided for free trade, commerce and intercourse throughout the territory of India under Art. 301 and placed certain restrictions on the powers of the Parliament and the State Legislatures in the matter of restricting free trade, commerce and intercourse. Art. 305 saved the existing laws while Art. 306 provided for the continuance of the levy and imposition of customs duty by the former part "B" States. The continuance was, however, conditional upon an agreement being entered into between the Government of India and the Government of State and was subject to the terms of the agreement. An agreement was executed on 25th of February, 1950 under which the recommendations of the Indian States Finances Enquiry Committee 1948-49 contained in Part I of its report read with chapters 1, 2, 3, 4 of Part II of its report were accepted. The Federal Finances Enquiry Committees (hereinafter to be referred to as the committee) report in Part I, page 15 accepted the following recommendations of the Expert Committee— "As a first step it may be arranged that— (1) a State shall not in future levy land customs on a commodity on which there is no such duty now; (2) a State shall not after a fixed date, increase the rate on any commodity; and (3) a State levying land customs should grant refunds on re-exports." In this background, Mr. Rastogi contended that the Notification of the Rajasthan Government No. F. 4 (18) SR/49 withdrawing the customs duty was in violation of these recommendations as they constituted levy of customs duty on new commodities or at any rate amounted to increase in the rate of the customs duty and were not enforceable. 9. Both the learned Advocates contended that the notification in terms also did not apply to Bharatpur as it was not a free Mandi but enjoyed only partial exemptions from customs duty. 10. Mr. Gumanmal, appearing for Firm Mohanlal Hari Bhai supplemented Mr. Kriparams argument and added that the contracts between the parties were in the nature of legislative contract and could not be affected by any administrative order and could only be abolished under proper legislative enactments. 11. Mr. A. L. Mehta, appearing for Ratanlal in Appal No. 32 to 56 made a point that the part of plaintiffs claim in this case was in respect of the customs duty on the stock of goods existing on the date of notification and that, there was no justification whatsoever for dis-allowing that part of the claim. 12. Without dealing with the individual cases issue-wise, we may formulate as follows the common important questions calling for determination in this appeal in the light of the arguments advanced and the facts and the circumstances emphasised— 1. (a) Whether Bharatpur State Notification No. 57 dated l.6.46 inviting bids for plots for establishing a new Mandi, and notifying the terms and concessions therein, the offer of bids by the plaintiffs evidently in pursuance of the above notification and finally the acceptances of bids by the Government and issue of sale-certificates brought about contracts between the Bharatpur State and the plaintiffs under which the State while transferring shop sites further agreed as its part of the reciprocal promise to abide by the terms and concessions No. 2 and 3 in exchange for the plaintiffs reciprocal promise consisting of payment of prices and undertaking to build shops within one year and to start business. (b) Whether these contracts are in the nature of legislative contracts. 2. (b) Whether these contracts are in the nature of legislative contracts. 2. (a) Whether the Rajasthan State which is a successor State of the former Bharatpur State recognised the contracts and thus became bound by them, (b) If so, whether the State Notification No. F. 4(18) SR/49 abolishing free Mandies and Zones in Rajasthan cannot affect plaintiffs rights and they were entitled to the continuance of concessions No. 2 and 3 in spite of the notification. 3. Whether the customs concessions were validly granted under circular No. 15 of 1896 of the Bharatpur State and were continued under corresponding laws of the Matsya Union and the Rajasthan State and after the promulgation of the Constitution, the State Government, had no authority to revoke them and to increase the burden of customs duties in view of Art. 306, read with the agreement referred to therein. 4. Whether Bharatpur Mandi was not a free Mandi or Zone within the terms of Notification |No. F. 4 (18) SR/49 as it enjoyed partial exemptions from customs duty and consequently the notification did not affect the plaintiffs right. 13. Dealing with point No. 1, the first submission made on behalf of the State is that the various sales in favour of the plaintiffs are evidenced by sale certificates which make no mention of the customs concession and that the plaintiffs have no right to go beyond the sale certificates as no oral evidence can be admissible in this connection under the provisions of sec. 91 and 92 of the Evidence Act. It was further contended that the notification No. 57 dated 13.5.46 of the Bharatpur State was not an offer but an invitation to offer and, therefore, cannot be looked into for determining the nature and the terms of the contract between the parties. 14. In reply to this, Mr. Kriparam contended that the sale certificates were not formal documents and were not intended to embody all the terms agreed to between the parties and, therefore, it was open to the plaintiffs to lead evidence of all the terms and concessions of the sale. Reliance was also placed upon the Bharatpur Government Grants Act, 1946 which abrogated sec. 54 of the Transfer of Property Act in respect of transfers of properties by the State. 15. Reliance was also placed upon the Bharatpur Government Grants Act, 1946 which abrogated sec. 54 of the Transfer of Property Act in respect of transfers of properties by the State. 15. The distinction between "invitation to offer" and "offer", it was pointed out, was not materia] inasmuch as there is no case of the offer having been made in variance of the concessions mentioned in the notification which is said to be only an invitation to offer. We do not propose to go into this question and will assume for the purposes of the present appeals that the notification and other evidence relied upon by the parties can be looked into for ascertaining the terms of the sale. 16. This brings us to a consideration of the notification No. 57 of 13.5.46. This notification reads as follows — Ex. P. 12 Notification No. 57 dated 13.5.46 published in the Bharatpur Rajpatra dated 1.6.46. NOTIFICATION Dated Bharatpur the 13th may, 1946. ESTABLISHMENT OF A MANDI AT BHARATPUR No. 57. With a view to increase the trade and commerce in the State, the Bharatpur Government have been pleased to approve of the establishment of a Mandi in the premises, where the T. B. Hospital is located at present. In order to conduct the sale of plots in the aforesaid premises, the Government have approved the formation of a committee consisting of the following Officers — (1) Shriman Raja Sahib Senior Minister. (2) Chief Engineer & P. W. D. Secretary, and (3) Nazool Officer, Bharatpur. It has further been directed that the first class plot should be sold for not less than Rs. 2000/-, second class Rs. 1500/- and third class Rs. 1000/- No single person or firm or a group of persons be allowed to purchase more than three plots at the auction. The interests of the local bidder be adequately safeguarded by the committee conducting the sale of the plots. A copy of the terms and concessions proposed to be granted is enclosed herewith. Sd/ Yadram Home Minister, Bharatpur. Terms and Concessions to be granted to the persons and shopkeepers who open shops in the Mandi at Bharatpur. (1) No duty or tax of any kind shall be levied on building materials which may be brought into this market for the construction of buildings within the Mandi. Sd/ Yadram Home Minister, Bharatpur. Terms and Concessions to be granted to the persons and shopkeepers who open shops in the Mandi at Bharatpur. (1) No duty or tax of any kind shall be levied on building materials which may be brought into this market for the construction of buildings within the Mandi. (2) No customs duty shall be charged on commodities coming to the Mandi from outside the State and going out of the State after being stored in the Mandi or being re-booked direct from the railway station premises, provided that the commodities in question are covered by an export Ravanna of the adjoining State or in the case of goods from British India by a Rahdari Ravanna issued by customs out-post or the Bharatpur State. This concession is tenable for 3 years in the first instance i.e. upto end of 31st January, 1950 and will be reconsidered after that period. (3) 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 Mandi from within the State and is exported in both cases a reduction of 25% in the customs duty prevailing at the time of the import and export of such commodities will be allowed. This concession shall not be available in case of vegetable Ghee. (4) All orders issued by the Government from time to time in connection with the import and export of commodities in the State shall be applicable to the Mandi as well except as provided for in para 2 above subject to the following proviso— Bans imposed upon the export of food grain and fodder necessitated by conditions of scarcity within the State shall be applicable to the Mandi. (5) The construction of the means of communications, wells lighting and sanitation will be undertaken by the Government subject to present State Rules in force but their repairs and maintenance shall be undertaken under the supervision and control of a committee of 7 persons to be elected by the shop-keepers of the Mandi of which the Government shall have the option to nominate two persons. The Committee shall make their own rules for the conduct of the business of Mandi with the previous approval of the Government. The Committee shall make their own rules for the conduct of the business of Mandi with the previous approval of the Government. (6) The Committee mentioned in the preceding clause shall have powers to levy a tax on the trade within the Mandi to meet the charges of such maintenance and repairs, with the previous approval of the Government. The terms trade also includes trucks, bullock carts and all other vehicles and animals of transport. (7) A proper account of income and expenditure of this fund shall be maintained by the committee and shall be audited by the State authorities at least once a year. (8) The Government will provide the following facilities to the Mandi— (i) Customs & Police Out Post. (ii) Committee room. (iii) Post Office building. Note:—............ (9) The owner of these shops and godowns in the Mandi shall have powers to let or transfer the land or building in favour of any person, provided the transferee uses it only for purposes of business carried on in the Mandi. (10) The Mandi shall be deemed to be outside the limits of the Municipal area for purposes of taxes only. (11) No shops for sale of wine or liquor and meat shall be permitted inside the Mandi enclosure. Procedure for the sale of Plots. (1) The arrangement and general layout of the plots will be placed before the appointed committee for their approval and any additions and alterations suggested by the Committee to suit|the requirements of the Mandi may be incorporated in it before the auction is carried out. (2) A date shall be fixed for the same by wide publicity given through the Raj Patra, Brij Patra, Kisan and other leading papers as Hindustan Times, Hindustan, Arjun and Tej. The concessions granted to the Mandi should also be simultaneously published. (3) Onefourth of the sale money should be deposited immediately and the remaining threefourth within ten days of the acceptance of the bid. In default the plot will be re-auctioned and the deficit, if any, shall be recovered from the original bidder. (4) A duly executed sale deed showing the plot sold, shall be delivered to the purchaser within one month. The sale deed shall contain an index map of the plot as well for which a fee of Rs. 21- shall be payable by the purchaser. (4) A duly executed sale deed showing the plot sold, shall be delivered to the purchaser within one month. The sale deed shall contain an index map of the plot as well for which a fee of Rs. 21- shall be payable by the purchaser. (5) The purchaser shall have to construct his shop in accordance with the plan approved by the Government within a period of one year from the date of execution of the sale deed. In case of default the Government shall have the option to recover possession of the land and to re-auction it. In such a case the transferee shall have no claim for refund of the consideration paid by him. (6) Any dispute arising in connection with the transfer of land or incurrence of any penalty relating to the non-compliance of any condition of the transfer shall be decided by the Chief Justice of the Bharatpur High Court as a sole arbitrator whose decision shall be final and shall not be called in question in any civil court." 17. Now, para (1) of the terms and concessions evidently relates to the prospective purchasers as it exempts payments of duty or tax on building materials to be brought into the market for the construction of buildings within the Mandi. The language of para (2) and para (3), which are relevant for our purposes, is however, different. These paras do not at all exclusively refer to the prospective purchasers or the plaintiffs. Para (2) exempts from payment of duty commodities coming to the Mandi from outside the State and going out of the State after being stored in the Mandi or being re-booked direct from the railway station premises under certain conditions. Similarly, para (3) grants a deduction of 25% in the customs duty on (a) commodities imported from outside into the Mandi and sold for consumption within the State and (b) on commodities received in the Mandi from within the State and exported (we are concerned with the latter case). These commodities might be in the hands of purchasers and builders of plots, their tenants, and licensees or other dealers who might employ the purchasers, their tenants, licensees as commission agents. Commodities might be even in the hands of hawkers or persons using open land or streets or lanes in the Mandi for temporarily storing the commodities or exporting them. These commodities might be in the hands of purchasers and builders of plots, their tenants, and licensees or other dealers who might employ the purchasers, their tenants, licensees as commission agents. Commodities might be even in the hands of hawkers or persons using open land or streets or lanes in the Mandi for temporarily storing the commodities or exporting them. The benefits were thus generally offered for trade and business in the Mandi and cannot be considered as an offer of benefits only to the prospective purchasers of plots. Faced with this situation, Mr. Kriparam argued that even though the benefits were available to persons other than the plaintiffs yet so far as the plaintiffs are concerned they could properly be treated as a sort of reciprocal promise by the State to continue these terms. We regret, we cannot accept this argument. The State having offered benefits generally for promoting trade and commerce, could not be said to have offered them as a reciprocal promise in connection with the contracts of sale with the plaintiffs and the plaintiffs had no justification whatsoever to treat the benefits generally offered as a consideration in return for their purchase of the plots and constructions of the shops and starting of business in the Mandi. Secondly, the position is made perfectly clear by para (4) of the terms and concessions. Under this paragraph, all orders to be issued by the Government from time to time in connection with the import and export of the commodities in the State were to be applicable to the Mandi. An exception was considered proper only in respect of para (2) which had granted concession only for a temporary period of three years. Under this clause, order of the Government raising customs duty, withdrawing exemptions would be immune from challenge by the persons carrying on trade in the Mandi. Thirdly, we may point out that there was customs law in force in the former Bharatpur State under which exemptions and concessions could be granted. Naturally, therefore; general concessions embodied in paras 2 and 3 are to be ordinarily referable to the customs law or appropriate orders thereunder and in the absence of definite evidence and circumstances establishing a contract, it will be hardly proper and reasonable to infer a contract on a matter to be ordinarily dealt with under the law. Naturally, therefore; general concessions embodied in paras 2 and 3 are to be ordinarily referable to the customs law or appropriate orders thereunder and in the absence of definite evidence and circumstances establishing a contract, it will be hardly proper and reasonable to infer a contract on a matter to be ordinarily dealt with under the law. Fourthly, it may also be pointed out that there are certain conditions which cannot in the very nature of things be treated as the terms of the sale. Paras 5, 6, 7, 10 and 11 are instances of this kind. 18. As we look at the matter, the position appears to be this—The Bharatpur State with a view to increase the commerce and trade of the State wanted to establish a new Mandi. In order to popularise the Mandi, it offered general customs concessions. It was as a measure of States economic and commercial policy. It is true that the plaintiffs generally could and did expect the continuance of the Governments policy and the Governments regard for safe-guarding the interests of the people acting on its declared policy. It is also true that the State of Bharatpur did continue its policy. This, however, does not mean that the Bharatpur State when notifying general customs concessions was offering those benefits as a part of its reciprocal promise in exchange for the payment of sale price and promise of construction by the prospective purchasers of the plots, and was debarred from withdrawing such con-cessions by issuing orders under the provisions of the customer law. 19. For these reasons, we are quite unable to accept the plaintiff-respondents contention that paras 2 and 3 of the terms and concessions were the conditions of sale and that the former Bharatpur State had incurred contractual liability to abide by them. 20. In view of this conclusion, it does not appear to be necessary to decide point No. 1(b) and 2 but since the points were argued at some length, we consider it proper to deal with them as well. 21. For a proper determination of the question whether the alleged contracts relied upon by the plaintiffs could be considered legislative contracts, we must first have a clear picture of the plaintiffs case as to the manner in which the contracts were negotiated and completed. 21. For a proper determination of the question whether the alleged contracts relied upon by the plaintiffs could be considered legislative contracts, we must first have a clear picture of the plaintiffs case as to the manner in which the contracts were negotiated and completed. There may be a few variance in the plaints but the principal allegations in this behalf are similar. As the point was argued by Mr. Gumanmal, appearing in case No. 33/1956—State of Rajasthan Vs. Firm Mohanlal Hari Bhai, it will be fair to refer to the facts stated in that case. After referring to the decision of the Bharatpur State to utilise Hospital premises for establishing a new Mandi and for dividing it into plots for the construction of shops, the plaintiff alleged that in order to attract purchasers at handsome prices the State offered by public advertisement certain terms and concessions, and that they were really terms of the sale forming the reciprocal promises of the vendors as their part of the consideration of the sale. The plaintiff further alleged that all the intending purchasers were fully appraised of the terms and concessions and that at the time of public auction the terms and concessions were repeated in order to appraise the intending purchasers of the terms of the sale. On these facts it is clear that the plaintiff came forward with a case of a contract entered into with the consent of both the parties. Gould such a contract be treated a legislative contract ? 22. A similar question arose before the Supreme Court in Civil Appeals Nos. 214/1956 and 399/1960—The Maharaja Shree Umaid Mills Ltd., Vs. The Union of India and others, decided on November 27, 1962, a certified copy of which was produced for our perusal. The facts in that case were that after some negotiations and correspondence about the concessions which were to be granted a formal deed of agreement incorporating the concessions and immunities granted was executed between the Government of His Highness the Maharaja of Jodhpur on one side and The Maharaja Shree Umaid Mills Ltd., the appellant, on the other, on 17th April, 1941. Under the agreement the State undertook to exempt or remit specified duties and royalties and in consideration of the concessions the appellant agreed to pay to the State of Jodhpur a royalty of 7-1/2 per cent on the net profits of the company in each of its financial year........ such payments to be made payable within three months after the close of each financial year. On these facts it was contended that the agreement of 17th April, 1941 was a legislative contract and was a special law. Repelling the contention, the Supreme Court observed— "We have come to the conclusion that the agreement of April 17, 1941, rests solely on the consent of the parties ; it is entirely contractual in nature and is not law, because it has none of he characteristics of law." Noting the various cases relied upon by the appellant, the Supreme Court further observed :— "None of the aforesaid decisions go to the extent of laying down that any and every order of a sovereign ruler who combines in himself all functions must be treated as law irrespective of the nature or character of the order passed." Then examining the nature of the transaction, the Supreme Court treated the contract as a simple contract and expressed the opinion that to call such an agreement as law is to misuse the term "law". Referring to the argument based on a contention relating to legislative contract, the Court after referring to the decision of the Supreme Court of America summed up the position as follows :— "There is no magic in the expression legislative contract. A contract is a compact between two or more parties and is either executory or executed. If a statute adopts or confirms it, it becomes law and is no longer a mere contract. This is all that a legislative contract means. In the cases before us there is no legislative contract." The principle enunciated in the above case applies fully to the facts of the present case where the plaintiffs came forward with a case of a contract with the consent of the parties. The contention in this behalf is, therefore, rejected. 23. The next question to be considered is whether the alleged contract between the former State of Bharatpur and the plaintiffs are binding upon the successor State of Rajasthan ? 24. The contention in this behalf is, therefore, rejected. 23. The next question to be considered is whether the alleged contract between the former State of Bharatpur and the plaintiffs are binding upon the successor State of Rajasthan ? 24. On the question of the liability of the successor State there are several Privy Council and Supreme Court decisions. We need only quote the observations of the Supreme Court in The Maharaja Shree Umaid Mills Ltd. Vs. The Union of India, referred to above :— "It is now well settled by a number of decisions of this court that an act of State is the taking over of sovereign powers by a State in respect of territory which was not till then a part of it, by conquest, treaty, cession or otherwise, and the municipal courts recognized by the new sovereign have the power and jurisdiction to investigate and ascertain only such rights as the new sovereign has chosen to recognize or acknowledge by legislation, agreement or otherwise ; and that such recognition may be express or may be implied from circumstances." 25. The question then arising is, did the United State of Rajasthan and the next succeeding sovereign recognise the right claimed by the respondents ? 26. In the lower court, the plaintiff-respondents relied upon the terms of the Covenant to establish recognition. However, in view of the following observations of the Supreme Court in M/s. Dalmia Dadri Cement Co. Ltd. Vs. Commissioner of Income-tax (1), the plaintiff- respondents gave up the stand based on the Covenant :— "It must follow from this that the Covenant in question entered into by the rulers of the covenanting States is in its entirety an act of the State, and that Art.VI therein cannot operate to confer on the appellant any right as against the Patiala Union. This conclusion becomes all the more impregnable when it is remembered that the Covenant was signed by the rulers on 5.5.1948, whereas the new State came into being only on 20.8.1948. It was, however, contended that as the Rajasthan State, which expression will include the various successive States, continued the exemptions upto 13th January, 1951 and revoked them with effect from that date it should be deemed to have impliedly recognised them. In support of this contention, the plaintiffs relied upon the evidence furnished by the notification itself. It was, however, contended that as the Rajasthan State, which expression will include the various successive States, continued the exemptions upto 13th January, 1951 and revoked them with effect from that date it should be deemed to have impliedly recognised them. In support of this contention, the plaintiffs relied upon the evidence furnished by the notification itself. For a proper examination of this contention, it is necessary to consider the position with regard to the customs law. Before the process; of integration began, each covenanting State was a separate geographical unit for customs purposes and had its own customs laws and barrier. After the formation of the United State of Rajasthan, the State promulgated Ordinance No. XVI of 1949—The Rajasthan (Regulation of Customs Duties) Ordinance, 1949. Sec. 3 of the Ordinance abolished duties on the transport of goods within Rajasthan. Sec. 4 sub-sec. (1) provided for the levy and collection of customs duty on the export or import of goods (evidently from or into Rajasthan) in accordance with various tariffs governing various parts. Sub-sec. (2) provided for the issue of a revised customs tariff and eventually with effect from 15th August, 1949 a uniform revised tariff was made applicable to the whole of Rajasthan. Sub-sec. 6 provided that the existing law in force of the covenanting States shall regulate the collection of such duties and other ancillary duties in relation thereto, unless altered, modified or repealed by a competent legislative authority of Rajasthan, and thus, saved existing laws with regard to the procedure and ancillary matters. This Ordinance must be taken to have repealed all customs laws of the covenanting States in so far as they provided for the levy and collection of duties in the particular territorial limits of the covenanting States and introduced a new law imposing duty on export and import in Rajasthan State as a whole. Further, after the issue of a revised tariff the old tariffs under the various laws also stood repealed. This uniform customs law must affect the existing contracts, if any, relating to customs duties on the well recognised principle that there could be no contract for fettering the legislative powers of the State. In the absence of any express saving contract with regard to customs duty, they stood repudiated. This uniform customs law must affect the existing contracts, if any, relating to customs duties on the well recognised principle that there could be no contract for fettering the legislative powers of the State. In the absence of any express saving contract with regard to customs duty, they stood repudiated. The enjoyment of the concessions by the plaintiffs after the formation of Rajasthan is clearly referable to the law under which the customs concessions could be granted and recognised. In this view, we are fortified by reference to sections 10 and 33 of the Matsya Customs Ordinance No. 14 of 1948 in the notification by which the customs concessions were revoked. The notification in this back-ground does not furnish any evidence of the implied recognition. Shri Ranjit Singh (DW/l), appearing for the appellants has clearly stated that so far as he knew the Rajasthan State never recognised contracts with the plaintiffs for the continuance of the customs concessions. 27. Mr. Guman Mal, while supporting Mr. Kripa Ram, placed reliance upon a Full Bench decision of this Court in State of Rajasthan Vs. Shyam Lal(2). It will be sufficient to observe in this connection that on the facts of that case the principle of M/s. Dalmia Dadri Cement Co. Ltd. Vs. Commissioner of Income-tax(l) could not be attracted. In the present case, Ordinance No. XVI of 1949 (The Rajasthan Regulation of Customs Duties Ordinance) read with the revised tariff introduced uniform customs law repealling old laws in relevant particulars repudiating rights under contracts, if any, relating to customs. The principle of Dalmias case(l) therefore, fully applies to the facts of the present case and the respondent cannot derive assistance from the full bench decision of this Court. 28. Point No. 2 thus stands decided against the respondents. 29. We now proceed to examine the alternative line of reasoning adopted by Mr. Rastogi to support the decrees in the appeals. We need not refer to the various provisions of law relating to the customs in force in the former State of Bharatpur or the United State of Matsya or the State of Rajasthan nor to other provisions and books referred to by Mr. Rastogi as we accept (and there is no serious controversy by the State also in this behalf) the following propositions:— 1. That the plaintiffs were enjoying concessions in the former Bharatpur State granted to them under sec. Rastogi as we accept (and there is no serious controversy by the State also in this behalf) the following propositions:— 1. That the plaintiffs were enjoying concessions in the former Bharatpur State granted to them under sec. 40 of the Customs Circular No. 15, that they continued to enjoy them in the State of Matsya under sec. 34 of the Matsya Customs Ordinance No. 14 of 1948, and subsequently in the State of Rajasthan under sec. 6 of the Rajasthan (Regulation of Customs Duties) Ordinance No. XVI of 1949 read with the laws of the covenanting States. 2. That the continuance of the customs duty by a Part "B" State was conditional upon and subject to the terms of an agreement to be entered into between the Government of India and the Government of the States. 3. That an agreement was so executed on the 25th of February, 1950 and it incorporated certain portions of the Federal Finance Enquiry Committee Report 1948-49 accepting recommendations of the Expert Committee set-forth earlier and that these recommendations have to be respected in connection with the continuance of the customs duties. 30. We now proceed to consider the further contentions raised by Mr. Rastogi on the above stated position. 31. Mr. Rastogi, in the first instance, contended, of course hesitatingly, obviously on the insistence of the juniors assisting him, that an agreement of the nature contemplated by Art. 306 of the Constitution was executed on 25th of February, 1950 whereas the Constitution came into force on 26th of January, 1950. There was thus, a gap of about a month. On account of this gap, the customs duties could not be continued under Art. 306. 32. Art. 306 of the Constitution, as it was then in force, did not provide any date for entering into the agreement and time was no essence of the Article. The agreement having in-fact been executed and the condition having been satisfied the continuance of the customs duty is perfectly in accordance with law and cannot be challenged. 33. Next, it was contended that the imposition of the customs duty or export duty on goods received in Bharatpur Mandi from parts of Rajasthan other than the area of the former Bharatpur State amounted to imposition of duties on new commodities and thus violated recommendation No. 1 of the Expert Committee. The argument was stated thus. 33. Next, it was contended that the imposition of the customs duty or export duty on goods received in Bharatpur Mandi from parts of Rajasthan other than the area of the former Bharatpur State amounted to imposition of duties on new commodities and thus violated recommendation No. 1 of the Expert Committee. The argument was stated thus. On 26th of January, 1950 goods could be taken free from customs from any part of Rajasthan for being stored in the Bharatpur Mandi and could be re-booked and reexported without payment of customs duty under para (2) of the terms and concessions of the notification No. 57 dated 13.5.1946. Thus there was no duty on any commodity to be thus re-exported from Bharatpur Mandi. 34. The plaintiff of course did not raise any objection with regard to the payment of 75 per cent of the duty but that does not prevent them from objecting to the payment of the remaining 25 percent duty. It is true that on 26th of January, 1950 goods could be freely moved to Bharatpur Mandi from any part of Rajasthan but the further contention that they could be re-exported free from customs duty has to be examined in the back ground with regard to the changing limits of the territories for customs purposes. 35. As stated earlier, before the process of integration of Bharatpur State, it was a separate entity and had its customs laws and barrier. Under the laws, customs duties were leviable both on import into and export from Bharatpur. The other States had also been similarly levying customs duties. In that situation movement of goods from one State to Bharatpur was subject to export duties of the exporting State and the import duty of the Bharatpur State. A difficulty used to be experienced when the goods used to pass through many States. There was a possibility of levy of multiple duties in case the goods were sent from one State to another through one or more States. In order to avoid such multiple taxation the States introduced the system of exempting goods in transit from duties. Para (2) of the notification purported to deal with that situation and in order to popularise the Mandi, prescribed a longer period for which the goods could be kept at Bharatpur Mandi. In order to avoid such multiple taxation the States introduced the system of exempting goods in transit from duties. Para (2) of the notification purported to deal with that situation and in order to popularise the Mandi, prescribed a longer period for which the goods could be kept at Bharatpur Mandi. It may be mentioned that under para (2) there was no absolute free movement of goods to Bharatpur Mandi as it was subject to export duty of the exporting State and thus para (2) of the notification did not facilitate free movement of goods into Bharatpur Mandi. The free movement within Rajasthan and thus from other parts of Rajasthan to Bharatpur Mandi was brought about by Ordinance No. XVI of 1942 of the Rajasthan State. This Ordinance, while abolishing duties on movement of goods within Rajasthan, provided for the levy of customs duty on export from Rajasthan including from Bharatpur Mandi even in respect of goods received into Mandi from other parts of Rajasthan. Thus, on account of this Ordinance the export of goods received into Bharatpur Mandi from other parts of Rajasthan was subject to custom duty and Mr. Rastogi is not correct when he says that they were not subject to customs duty and that levy of customs duty on them amounted to imposition of customs duties on new commodities. We also consider that the new commodities referred to in the Expert Committees Report referred to commodities outside the customs tariff in force in Rajasthan on the date of the promulgation of the Constitution. 36. Thirdly, Mr. Rastogi submitted that the customs duty leviable on export from Bharatpur Mandi on 26th January, 1950 should be treated as 75 per cent of the duty under the Rajasthan tariff as that was payable on account of the enjoyment of concessions. The notification withdrawing exemptions and authorising the levy of full customs duty amounted to an increase in the rate of duty and was not permissible in terms of the recommendation No. 2 of the Experts Committee. 37. In our opinion, there is no force in this contention. The rate of customs duty for the purposes of the recommendation of the Expert Committee should be treated as the one prescribed by the customs tariff. The Expert Committee could not have taken note of exemptions granted under the various customs laws either in respect of goods or in respect of individuals. The rate of customs duty for the purposes of the recommendation of the Expert Committee should be treated as the one prescribed by the customs tariff. The Expert Committee could not have taken note of exemptions granted under the various customs laws either in respect of goods or in respect of individuals. The granting and revoking of the customs concessions is merely an exercise of powers under the law and cannot be taken as a new legislation nor can it be taken to increase the rate of duty. It may also be pointed out that the recommendations of the Expert Committee clearly stated that increase in the rate of duty shall not be permissible after the fixed date and the learned counsel for the plaintiff-respondents have not been able to inform us whether any such date was fixed. If no date had been fixed, there could be no objection to the rate of duty. 38. In this view of the matter, the alternative arguments of Mr. Rastogi are inadequate to support the decrees of the trial court. 39. The last point deserving examination is whether the notification was applicable to Bharatpur Mandi ? 40. The plaintiffs case in the lower court was that the notification was applicable to those Mandies or Zones where there was complete exemption from payment of customs duty. Bharatpur Mandi did not enjoy complete exemption. It enjoyed partial exemptions. Notification was thus not applicable to them. The trial court accepted the plaintiffs contention. In some of the judgments support was also derived from the fact that the notification continued exemptions in respect of existing stocks. Continuing this exemption in general it was observed that it could not be applicable to Bharatpur Mandi which had never enjoyed complete exemption and complete exemption even in respect of existing stocks could not have been intended for Bharatpur Mandi. Now on the well recognised principle relating to interpretation the expression "free" may include "partially free" if the context permits it. Now on the well recognised principle relating to interpretation the expression "free" may include "partially free" if the context permits it. An analysis of the notification shows that it mentioned two things— "(1) All free Mandies and Zones......shall be abolished and, (2) That in consequence, all the customs concessions hitherto enjoyed by or applicable to these Mandies or Zones shall cease to have force and duties of customs shall be levied.........in accordance with the revised tariff." Withdrawal of concessions and introduction of the revised tariff clearly implied that the intention was to revoke partial exemptions also. Secondly, it was neither suggested in the lower court nor before us that there was any Mandi within the areas of the Matsya Union which was enjoying any customs concessions. It has been stated on behalf of the State that only Bharatpur was the only Mandi within the former Matsya Union which was enjoying customs concessions. In the notification there is a reference to secs. 10 and 33 of the Matsya Customs Ordinance. This clearly shows that the intention of the notification was to revoke the customs concessions applicable to Bharatpur Mandi. Thirdly, secs. 33 and 34 of the Matsya Customs Ordinance only provide for exemption and they do not refer to partial exemptions. On Mr. Rastogis own case the partial exemptions enjoyed by them could only be under sec. 34. We have no doubt that the word "exemptions" includes "partial exemption" and the lower court was not justified in excluding the applicability of the notification to Bharatpur Mandi. It may also be observed that the back-ground in which the notification was made also supports the above interpretation. After the formation of Rajasthan a situation arose or was at any rate, apprehended under which on account of the customs concessions available at Bharatpur Mandi all exports and imports were sought to be channelled through Bharatpur Mandi so as to evade full customs duty. It was to prevent such a mischief that the notification was issued. In this back-ground, there can be no doubt that the notification was intended to apply to the Bharatpur Mandi also. 41. Mr. Rastogi referred to the dictionary meaning of the word "free zone" In view of the nature of the controversy joined by the parties, this dictionary meaning has no particular bearing on the nature of the controversy, and so much assistance cannot be drawn therefrom. 42. 41. Mr. Rastogi referred to the dictionary meaning of the word "free zone" In view of the nature of the controversy joined by the parties, this dictionary meaning has no particular bearing on the nature of the controversy, and so much assistance cannot be drawn therefrom. 42. Thus all the common points stand decided in favour of the State and against the plaintiff-respondent, with the result that the States authority to issue the notification and revoking the concession could not be challenged. 43. It may also be mentioned here that certain contentions with regard to individual cases were also raised. One important contention with respect to most of the cases was that the plaintiffs were merely commission agents and that they paid customs duty on behalf of the principals and they could not bring suits. A question, though not raised, may arise whether the dealers residing outside Bharatpur Mandi and employing owners of shops in Bharatpur Mandi or their tenants or licensees as commission agents for transacting business in their goods can claim exemption under the alleged contract of sale ? In Appeal No. 51 /1955—The State of Rajasthan Vs. Messrs Haricharan Lal & Sons an additional question also arose whether the initial purchaser of the plots Lala Haricharan Lal—plaintiff No. 2 having let out the shops to firm Messrs Haricharan Lal & Sons—plaintiff No. 1, and having charged rent at Rs. 300/- per month, could claim concessions on the basis of the terms of the sale deed. As the present appeals could be decided on the common points formulated above without deciding these questions, we do not propose to determine these points. 44. In Appeal No. 32 of 1956—State of Rajasthan Vs. Ratanlal and others, we may, however, refer to one special feature. The plaintiffs in that case alleged that on an existing stock of goods with them Rs. 4425/12/6 were levied in excess above 75 per cent rate and that it was kept in amanat Out of that Rs. 3223/9/6 were refunded to them on 8.5.52 and the remaining amount of Rs. 1202/3/0 has not been refunded to them. The plaintiffs are entitled to this refund even in spite of the notification. The learned counsel for the State accepted this part of the plaintiffs claim which deserves to be decreed. 45. The result of the above discussions clearly is that the plaintiffs suits Nos. 11/52, 1/54, 5/53. 1202/3/0 has not been refunded to them. The plaintiffs are entitled to this refund even in spite of the notification. The learned counsel for the State accepted this part of the plaintiffs claim which deserves to be decreed. 45. The result of the above discussions clearly is that the plaintiffs suits Nos. 11/52, 1/54, 5/53. 4/54 and 12/52, except to the extent of Rs. 1202/3/-in Appeal No. 32 of 1956—State of Rajasthan Vs. Ratanlal & others have been wrongly decreed. We accordingly accept Appeals Nos. 51/55, 28/56, 29/56 and 33/56 in entirety, set aside the decrees of the court below and dismiss the plaintiffs suits with costs throughout. Appeal No. 32/56 is partially allowed and the decree of the trial court is reduced to Rs. 1202/3/-. The rest of the suit stands dismissed. The costs in this appeal shall be in proportion to the success and failure of the parties in both the courts.