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State Liability in Tort — Need for a Fresh Look
by Aman Hingorani

Cite as : (1994) 2 SCC (Jour) 7

In the Privy Purse case1 the Court had to consider the action of the President de-recognising all the Rulers under Article 366(22) of the Constitution. It was contended on behalf of the Union of India that the action of the President was in exercise of his sovereign power and was not amenable to judicial scrutiny. The Supreme Court rejected the contention and held that there is nothing like sovereign power under our Constitution in the matter of relationship between the executive and the citizens.2 It held that the functions of the President stemmed from the Constitution and not from the British Crown. Hedge, J. observed3:

"Our Constitution recognises only three powers viz. the legislative power, the judicial power and the executive power. It does not recognise any other power. In our country the executive cannot exercise any sovereignty over the citizens. The executive possesses no sovereignty.... There is no analogy between our President and the British Crown. The President is a creature of the Constitution. He can only act in accordance with the Constitution."

The Court failed to see how the Government of India can consider itself a superior power in its relationship with the citizens of this country.4 However, despite such categorical and socially relevant observations, there does seem to exist areas of doubt where the ghost of 'sovereign power' and 'sovereign immunity' of the State still casts its shadow. It is a matter of deep regret that even after 1971, the courts in India continue to accept the distinction between 'sovereign' and 'trading' activities of the State5 and have on several occasions absolved the State of its liability for tort committed in the course of the former6 following Kasturi Lal case7 decided in 1965.

In this article, an attempt is made to critically evaluate the course taken by the Supreme Court while enunciating the principles which, at present, govern the liability of the State in tort.

Liability of the State under Article 300 of the Constitution

Article 300(1) of the Constitution provides, inter alia, that the State may sue or be sued in relation to its affairs in cases like those in which the Dominion of India or a corresponding Province or an Indian State might have sued or been sued if the Constitution had not been enacted. Thus Article 300(1) relates back through successive Government of India Acts to the legal position immediately prior to the Act of 1858. In each case, therefore, the question arises whether a suit would lie against East India Company had the case arisen prior to 1858. If it did, the State can be sued, while if it did not, the State is not liable for the tort committed.

The East India Company had dual role of performing commercial functions and of exercising sovereign power as a representative of the British Crown. It was in the latter role that the East India Company claimed sovereign immunity based on the maxim 'the king can do no wrong'. This dual character of the East India Company has been explained in the Peninsular and Oriental Steam Navigation Company case (P & O case)8. In that case, the plaintiff filed an action under Section 55 of Act IX of 1850 to recover from the Company Rs 350 being the damages sustained by reason of injuries caused to a horse of the plaintiff through the negligence of certain servants of the Company. Sir Barnes Peacock, holding the Company liable, said9:

"There is great and clear distinction between acts done in the exercise of what are usually termed as sovereign powers, and acts done in the conduct of undertaking which might be carried on by private individuals without having such power delegated to them.... When an act is done or contract is entered into, in the exercise of powers usually called sovereign powers, by which we mean powers which cannot be lawfully exercised except by a sovereign, or a private individual delegated by a sovereign to exercise them, no action will lie."

The Supreme Court in Kasturi Lal case7 relied on these observations of Sir Peacock to hold that the English maxim 'the king can do no wrong' was applicable to the East India Company and hence to the State in India, granting it immunity from an action in tort committed in the exercise of its 'sovereign power'.

Kasturi Lal conundrum

In Kasturi Lal case7 a police officer misappropriated the gold deposited in police Malkhana after seizing it from the plaintiff on suspicion. Later he absconded. It was found that the police officers were negligent as they failed to observe the provisions of the U.P. Police Regulations in taking care of the gold seized. The Supreme Court held that since the negligence of the police officers was in the exercise of statutory powers, which could be characterised as sovereign powers, the State was not vicariously liable for the same. The Court relied on Sir Peacock's observations in P & O case8 to hold that if an activity could not be performed by a private individual, such activity could be termed as sovereign activity and the State is not vicariously liable for any tort arising from the exercise of such activity.

It is submitted that the decision in Kasturi Lal case7 is not legally sound and cannot be considered good law for the following reasons:

(a) The Supreme Court in Kasturi Lal case7 relied on Sir Peacock's observations in P & O case8 to reason that the maxim 'the king can do no wrong' applied to the East India Company and hence to the State in India. The Court however overlooked another observation of Sir Peacock10 to the effect that "the general principles applicable to sovereign and State, and the reasoning deduced from the maxim 'the king can do no wrong', would have no force" in determining the question whether East India Company was liable in tort. This statement of Sir Peacock had been cited by the Bombay High Court in Advani case11, a judgment which was upheld by the Supreme Court in 195012. It is surprising that the Supreme Court in Kasturi Lal case7 did not even refer to its own earlier decision of 1950.

(b) The illustrations of 'sovereign power' given by Sir Peacock, coupled with his statement quoted above, indicate that he meant 'sovereign power' to be understood as acts of State in the strict sense. Act of State cannot be directed against the citizens of that State but only against another State. According to Dicey13 "liability of East India Company extends to all wrongful acts which are not covered by the narrow meaning which the Courts apply to the term 'Act of State', whether or not they be acts which could have been done by a private individual or trading corporation."

(c) P & O case8 is an authority for the proposition that the Secretary of State can be sued for a tort committed in the conduct of business (trading activity of the State). Whether he can be sued in cases not connected with the conduct of business (sovereign activity of the State) was not really a question for the Court to decide.

(d) Even if it is presumed that Sir Peacock had said what was attributed to him in Kasturi Lal case7, that is, the maxim 'king can do no wrong' applied to East India Company, the fallacy lies in overlooking Article 372 which provides for continuance of the existing common law after the commencement of the Constitution. In U.K., the case of Adam v. Naylor14 resulted in the passing of the Crown Proceedings Act, 1947, which abolished the concept that the 'king can do no wrong' and subjects the Crown to all liabilities in tort just like a private individual. It is true that Crown Proceedings Act was not extended to India. However, having been passed by the British Parliament on 31st July 1947, it modified the common law as it stood prior to 15th August 1947, the date of the commencement of the Indian Independence Act. Since the Crown Proceedings Act became operative from January 1, 1948 i.e. prior to the commencement of the Constitution, the common law as modified by the Crown Proceedings Act, 1947 would have been the 'law in force' vide Article 372, Explanation 1. Obviously the maxim 'king can do no wrong' was no part of common law that could be extended in Kasturi Lal case7.

It can however be argued that the modified common law had not received judicial recognition between January 1, 1948 and January 26, 1950 and hence it could not be extended vide Article 372. It is submitted that it is a question of fact in each case whether any particular branch of common law became a part of the law of India or in any particular part of it. Since several judicial decisions15 had held that common law principles granting immunity to the Crown and its servants for an action in torts applied to the East India Company, it could be countered the subsequent modification of such principles did not require express recognition. It is interesting to note at this juncture that the only judicial decision in the said period on this aspect, had expressly held12 that the maxim 'the king can do no wrong' had no application to the East India Company.


It is ironical that the State in India relies on the English maxim 'the King can do no wrong' to claim immunity for any tort arising from the exercise of its 'sovereign power' when the maxim is no longer in existence in England. A Bill entitled "The Government (Liability in Tort) Bill, 1967" was introduced in the Lok Sabha. It has yet to become law. However, since the ratio in Privy Purse case1 is the law of the land by virtue of Article 141 of the Constitution, it is not necessary to have a law on the Statute Book like the one in England to make the State, in India, liable for a tort arising in the course of its activities. It is liable. It would not be appropriate for the State in these circumstances to continue to raise the plea of 'sovereign power' or of 'sovereign immunity' to escape its liability in tort.

  1. Madhav Rao Scindia v. Union of India, (1971) 1 SCC 85 Return to Text
  2. Id. on pages 53, 74, 75, 166, 169 Return to Text
  3. Id. on page 169 Return to Text
  4. Id. on page 166 Return to Text
  5. Mohd. Shafi Suleman Kazi v. Dr Vilas Dhondu Kavishwar, AIR 1982 Bom 27; Union of India v. Abdul Rahman, AIR 1981 J&K 60; N. Hiralal v. Union of India, AIR 1978 MP 209; Iqbal Kaur v. Chief of Army Staff, AIR 1978 All 417; State v. Hindustan Lever Ltd., AIR 1972 All 486; Union of India v. Miss Savita Sharma, AIR 1979 J&K 6 Return to Text
  6. AIR 1981 MP 65; AIR 1975 Mad 3; AIR 1975 Orissa 41; (1973) 75 PLR 1; (1972) 1 MLJ 71 Return to Text
  7. Kasturi Lal Ralia Ram v. Union of India, AIR 1965 SC 1039 Return to Text
  8. (1861) 5 Bombay HCR App 1 Return to Text
  9. Ibid on pages 15-16 Return to Text
  10. Supra n. 8 at 9 Return to Text
  11. P.V. Rao v. Khushaldas S. Advani, (1949) 51 Bombay LR 342 at 410 Return to Text
  12. Province of Bombay v. Kusaldas S. Advani, 1950 SCR 621: AIR 1950 SC 222 Return to Text
  13. Introduction to the ninth edn. of Dicey's Law of Constitution (1952) Return to Text
  14. (1947) KB 204 Return to Text
  15. Shivbhajan Durgaprasad v. Secretary of State for India, ILR 28 Bom 314; Secretary of State v. A. Cockcraft, AIR 1915 Mad 993; Secy. of State v. Srigobinda Chaudhuri, AIR 1932 Cal 834 Return to Text
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