THE STATE OF KARNATAKA BY ITS CHIEF SECRETARY v. STATE OF TAMIL NADU BY ITS CHIEF SECRETARY & ORS.

OF T. N. BY ITS CHIEF SECRETARY [DIPAK MISRA, CJI]

80Copy pinpoint80. sThe Court analysed the opinions of the learned Judges A expressed in Dr. Babu Ram Saksena (supra) and eventually held thus:- “61.5. A careful consideration of the judgment by Mukherjea, J. in Ram Babu Saksena would show that His Lordship’s opinion has no application to a non-political agreement such as the 1886 Lease Agreement. The observation of Mukherjea, J., “When as B a result of amalgamation or merger, a State loses its full independent power of action over the subject-matter of a treaty previously concluded, the treaty must necessarily lapse. …” is in the context of an extradition treaty which is purely political in nature. In our view, Ram Babu Saksena is clearly distinguishable and does not help Kerala in its argument that the 1886 Lease C Agreement lapsed on merger of the two States, Travancore and Cochin, into the United State of Travancore and Cochin.”

81Copy pinpoint81. The Constitution Bench also addressed the issue whether the 1886 lease agreement was an Act of State and opined that the 1886 lease agreement is not political in nature. It distinguished the Constitution D Bench decision in Virendra Singh and others v. State of U.P.8 and ruled that the said decision is distinguishable and that the 1886 lease agreement is an ordinary agreement and not political in nature. It is worthy to note that the Constitution Bench addressed the scope of Article 363 and Article 131, scanned both the Articles and held:- E “73. Article 131 of the Constitution deals with the original jurisdiction of this Court. Subject to the provisions of the Constitution, this Court has original jurisdiction in any dispute, inter alia, between the Government of India and any State or States on one side and one or more other States on the other if and insofar as the dispute involves any question (whether of law or fact) on which the existence of legal right depends. However, by the proviso appended thereto, the jurisdiction of this Court is barred if the dispute to which a State specified in Part B of the First Schedule is a party if the dispute arises out of any provision of a treaty, agreement, covenant, engagement, sanad or other similar instrument was entered into or executed before the commencement of the Constitution and has or has been continued in operation after such commencement. 8 (1955) 1 SCR 415 : AIR 1954 SC 447 H

p. 930 Copy page pinpoint

A 74. There is similarity of provision in Article 363 and proviso to Article 131. The original jurisdiction conferred on this Court by the main provision contained in Article 131 is excepted by virtue of the proviso in the matters of political settlements. By making provisions such as Article 363 and proviso to Article 131, the political settlements have been taken out of the purview of judicial pronouncements. Proviso appended to Article 131 renders a dispute arising out of any treaty, agreement, covenant, engagement, sanad or similar instrument which is political in nature executed before the commencement of the Constitution and which has or has been continued in operation, non-justiciable and jurisdiction of this Court is barred. The jurisdiction of this Court is not taken away in respect of the dispute arising out of an ordinary agreement. The instruments referred to and described in the proviso are only those which are political in nature. Non- political instruments are not covered by the proviso.

D 75. The 1886 Lease Agreement does provide for resolution of disputes between the parties to the agreement by way of arbitration: it contains an arbitration clause. The submission of Kerala that enforcement of any award under the arbitration clause would be political in nature is misplaced. The assumption of Kerala that the 1886 Lease Agreement was not justiciable and E enforceable in court of law prior to the Constitution as no court in Travancore would obviously entertain a claim against Maharaja and no court outside the State of Travancore have jurisdiction over the Maharaja of Travancore is not relevant at all and devoid of any merit.

F 76. We are in complete agreement with the view taken by this Court in Mullaperiyar Environmental Protection Forum that the 1886 Lease Agreement would not come within the purview of Article 363 and jurisdiction of this Court is not barred. As a necessary corollary, the dispute arising out of the 1886 Lease G Agreement is not barred under Article 131 proviso as well. Moreover, the principal challenge laid in the suit pertains to the constitutional validity of the 2006 (Amendment) Act for which Article 363 or for that matter under Article 131 proviso does not come into operation at all.”

p. 931 Copy page pinpoint

OF T. N. BY ITS CHIEF SECRETARY [DIPAK MISRA, CJI]

82Copy pinpoint82. Commenting on the aforesaid decision, it is contended by Mr. A Nariman that in Madhav Rao Scindia (supra), the majority had clearly expressed the view that paramountcy no longer survived after the coming into force of the Constitution of India. In the said decision, it has been clearly spelt out that it is difficult to conceive of the Government of a democratic Republic exercising against its citizens “paramountcy claim to be inherited, imperial power”. According to Mr. Nariman, when everything has come to an end, the concept of restriction to ‘political nature’, as has been held in State of Tamil Nadu v. State of Kerala (supra), sounds a discordant note.

83Copy pinpoint83. Mr. Dwivedi, learned senior counsel, per contra, would submit that the decision in State of Tamil Nadu (supra) does not run counter to the principle stated in Madhav Rao Scindia. According to him, Madhav Rao Scindia exclusively dealt with a political situation. To bolster the said aspect, he has drawn our attention to the “Standstill Agreement” which does not apply to any paramountcy function. He has also laid stress on the passage that discusses about quid pro quo for agreeing to surrender the power and authority by the rulers and that is why it was enacted in the Constitution that the Princes who had signed the covenant of the nature specified should be recognized as rulers. In essence, the submission is that if the authority in Madhav Rao Scindia’s case is appositely read and understood, it dealt with the abolition of Privy Purses by the President of India and how the action was erroneous and how the E Court treated it to be of political nature.

84Copy pinpoint84. It is absolutely manifest that the ruling in Madhav Rao Scindia (supra) states that after coming into force of the 1947 Act, the paramountcy lapsed and after the integration of the States with the Indian Union, the shadow of paramountcy faded and the Government of India F became the full sovereign authority. After the Constitution came into force, the exercise of power by the State over its citizens stood circumscribed by the Constitution. In the said case, the doctrine of paramountcy has no play. The two agreements, on a studied scrutiny, do not indicate any aspect that can be called political or touching any G facet of the sovereignty of India. The agreements covered the areas of larger public interest like construction of dams and irrigation of land existing within the two States, namely, the State of Mysore and the State of Madras and had nothing to do with political arrangement. Therefore, we are not inclined to accept the submission of Mr. Nariman that after H

p. 932 Copy page pinpoint

A coming into force of the 1947 Act and thereafter the Constitution of India, the agreements of 1892 and 1924 became inoperative and totally extinct. I. Infraction of Article 363 and non-maintainability of the dispute on the basis of agreements

85Copy pinpoint85. The next plank of submission pertains to the constitutional infraction of Article 363. Article 363 reads as follows:- “Article 363. Bar to interference by courts in disputes arising out of certain treaties, agreements, etc.– (1) Notwithstanding anything in this Constitution but subject to the provisions of Article 143, neither the Supreme Court nor any other court shall have jurisdiction in any dispute arising out of any provision of a treaty, agreement, covenant, engagement, sanad or other similar instrument which was entered into or executed before the commencement of this Constitution by any Ruler of an Indian State and to which the Government was a party and which has or has been continued in operation after such commencement, or in any dispute in respect of any right accruing under or any liability or obligation arising out of any of the provisions of this Constitution relating to any such treaty, agreement, covenant, engagement, sanad or other similar instrument (2) In this article (a) Indian State means any territory recognised before the commencement of this Constitution by His Majesty or the F Government of the Dominion of India as being such a State; and (b) Ruler includes the Prince, Chief or other person recognised before such commencement by His Majesty or the Government of the Dominion of India as the Ruler of any Indian State.”

86Copy pinpoint86. Pressing into service the aforesaid Article, it is contended by Mr. Nariman that the said Article commences with a non-obstante clause but subject to the provisions of Article 143 and that would exclude anything contained in Article 262(1) and, therefore, the bar under Article 363(1) must prevail. He has criticized the finding of the Tribunal which has placed reliance on the judgment of this Court in the Privy Purse case H

p. 933 Copy page pinpoint

OF T. N. BY ITS CHIEF SECRETARY [DIPAK MISRA, CJI]

placing reliance on the view of Hegde, J. which is not the majority view A because the majority spoke through Shah,J. It is urged by him that the finding of the Tribunal that Article 363 cannot bar the investigation of any complaint including a complaint regarding the agreement which has been executed by the then Ruler of a Princely State like Mysore which became an Indian State within the Dominion of India, a State under the B First Schedule after coming into force of the Constitution is untenable. That apart, the Tribunal has opined that once the dispute is referred to the Tribunal which has exclusive jurisdiction under the Constitution to examine the dispute in respect of use, distribution or control of waters of any inter-state river or river valley, the said jurisdiction cannot be controlled or curtailed by Article 363 and in case of agreement relating C to sharing of water of inter-State river, the Tribunal has to examine the claims of the different riparian States in the background of such agreement and, therefore, the enquiry is not barred under Article 363 of the Constitution. Attacking the said findings, it is canvassed by Mr. Nariman that the Tribunal has failed to appreciate the fact that Articles D 262 and 263 operate in entirely different fields, for Article 262 is only an exception how a particular matter relating to inter-State river water disputes between States of India have to be decided because it is not decided by the exclusive remedy provided in Article 131 of the Constitution but by an alternative mode now prescribed by the Parliament by law under Article 261(2), that is, the 1956 Act. It is further put forth by him E that the agreements of the present nature come within the purview of Article 363 and to substantiate the said argument, he has placed reliance on State of Seraikella v. Union of India and another9.

87Copy pinpoint87. It is submitted by Mr. Dwivedi, learned senior counsel for the State of Tamil Nadu, that the bar of jurisdiction of this Court under Article F 363 of the Constitution relates only to certain clauses of agreements, treaties, covenants, engagements, “Sanad”, etc. The expression “other similar instruments’ clearly indicates that it is not as if all kinds of agreements and treaties would come within the purview of the said provision. Article 363 covers only such political agreements executed between the Rulers of Indian States and the Government of the Dominion G of India between 1947 and 1950. From the intrinsic language of Article 363 read with the proviso to Article 131, it is clear that the bar of jurisdiction of the Court applies only to disputes arising out of political agreements. 9 951 SCR 474 : AIR 1951 SC 253 H

p. 934 Copy page pinpoint

88Copy pinpoint88. He has referred to the debates of the Constituent Assembly especially the observations made by Dr. B.R. Ambedkar as the Chairman of the Drafting Committee while moving the draft Constitution for consideration by the Constituent Assembly. The said observations are extracted hereunder:- B “On the 15th August 1947 we had 600 Indian States in existence. Today by the integration of the Indian States with Indian Provinces or merger among themselves or by the Centre having taken them as centrally administered areas, there have remained some 20 or 30 States as viable States. This is a very rapid process and progress. I appeal to those States that remain to fall in line with the Indian Provinces and to become full units of the Indian Union on the same terms as the Indian Provinces. They will thereby give the Indian Union the strength it needs. They will save themselves the bother of starting their own Constituent Assemblies and drafting their own separate constitution, and they will lose nothing that is of value to them. I feel hopeful that my appeal will not go in vain and that before the Constitution is passed, we will be able to wipe off the differences between the Provinces and the Indian States.” (B. Shiva Rao (Ed.), The Framing of India’s Constitution – E Select Documents, Volume IV, at p.434)

89Copy pinpoint89. The learned senior counsel would submit that the purpose of Article 363 was to protect the Government of India from purely political agreements which had been entered into between the Rulers of the Indian States and the Dominion of India or its predecessor Governments F so as to prevent any obstruction to the smooth accession of the Indian States to the Dominion of India.

90Copy pinpoint90. To appreciate the submissions advanced before this Court, we are required to analyse what has been said by this Court in State of Seraikella. In the said case, a suit was filed under the Original G Jurisdiction of the Federal Court as it was functioning before the Constitution of India came into force. The State of Seraikella was a State in Orissa and on 16th August, 1947, the plaintiff-State acceded to the Dominion of India by virtue of the Instrument of Accession executed by its Ruler and accepted by the Governor General under Section 6 of the Government of India Act, 1935. After coming into force of the H Indian Independence Act, 1947, the Dominion of India was set up under

p. 935 Copy page pinpoint

OF T. N. BY ITS CHIEF SECRETARY [DIPAK MISRA, CJI]

the Government of India Act, 1935 as adopted which provided that the A Indian State may accede to the Dominion of India by an Instrument of Accession. It was expressly provided that by executing the said instrument, the Ruler should not be deemed to have committed to the acceptance of any future Constitution of India or to fetter his discretion to enter into arrangements with the Government of India under any such future Constitution. Various other postulates which were part of the instrument have been taken note of by the Constitution Bench. It is worthy to note that apart from the initial instrument, no supplement instrument was executed by the Ruler and no amendment of the 1947 Act was accepted by him. A “Standstill Agreement” was also executed by the Ruler under which it was agreed that matters of common concern as specified in the Schedule to the agreement would continue between the Dominion of India and the said State until new agreements were made in that behalf. The controversy arose in the suit as the plaintiff- State claimed to have merged in the province of Bihar. It was contended by the plaintiff that the Government of Orissa wrongfully and illegally purported to administer the plaintiff-State by virtue of the Notification of 23.12.1947 under the Indian Independence Act, 1947. It was claimed that the Act was ultra vires and had no binding effect on the plaintiff- State. It was also contended that the agreement dated 15.12.1947 was void for want of consideration and was inoperative. It was further canvassed that on 18th May, 1948, without the consent and approval of the plaintiff-State or its Ruler, the Province of Bihar absolutely illegally took over the administration of the State and passed the Seraikella and Kharsawan States Order, 1948. It was also asserted that the Dominion of India had no authority to go beyond the Instrument of Accession and further had no authority to delegate powers to the Province of Bihar to administer the plaintiff-State. The Constitution Bench, noting various facts and commenting on coming into effect of the Constitution of India and the jurisdiction conferred on the Court under Article 131, proceeded to analyse the scope and ambit of Article 363 of the Constitution. Dwelling upon the same, Kania, C. J. opined that the all-embracing opening words of Article 363 in terms override all provisions of the Constitution, but are made subject only to the provisions of Article 143 which enables the President to consult the Supreme Court on matters referred to and, therefore, clearly override the operation of Article 374(2) also. The jurisdiction of the Supreme Court having been stated in Articles 131 to 136, Article 363 provides that notwithstanding anything contained in those H

p. 936 Copy page pinpoint

A articles and other articles of the Constitution, neither the Supreme Court nor any other court will have jurisdiction in any dispute arising out of any provision of a treaty, agreement, covenant, engagement, “Sanad” or other similar instrument which was entered into or executed before the commencement of this Constitution and which had or had been continued in operation after such commencement. If, therefore, the dispute arises in respect of a document of that description and if such document had been executed before the Constitution by a Ruler and which was or had continued in operation after such commencement, this Court has no jurisdiction to determine such issue. The learned Chief Justice repelled the argument that the Article is prospective and not retrospective and, hence, it only covers the cases which are filed in the Supreme Court after the Constitution came into force and did not affect suits filed in the Federal Court before the Constitution of India came into operation. Thereafter, he adverted to the assertions made in the plaint and stated that the only question which remained for decision was whether on the structure of the plaint, the dispute raised in the suit arose out of the provision of a treaty, agreement, covenant, engagement, “Sanad” or any other similar instrument. Eventually, Kania, C.J. held:- “I have already noticed above that the dispute in respect of the agreement of the 15th December, 1947, is immaterial for the present discussion. If the plaintiff repudiates that agreement he is seeking to enforce his rights after ignoring the same. If the plaintiff (as noticed in four of the suits) relies on this agreement, it becomes a part of the Instrument of Accession under Section 6(5) of the Government of India Act, 1935, and the dispute will still have to be considered having regard to the terms of the two documents viz. the original Instrument of Accession and the supplementary Instrument. The question thus resolves itself into an analysis of the plaint and to find out what the plaintiff seeks to get by his suit. Apart from the fact that in prayers (f) and (g) of his plaint he seeks to enforce his rights under the Agreement of the 15th December, 1947, it appears clear that the whole ambit of the suit is to enforce his Instrument of Accession. The plaintiff contends firstly that it had signed the Instrument of Accession through its Ruler. The State next complains that, acting beyond the powers given over under the Instrument of Accession, the Dominion of India and the State of Bihar are trespassing H

p. 937 Copy page pinpoint

OF T. N. BY ITS CHIEF SECRETARY [DIPAK MISRA, CJI]

wrongfully on its legislative and executive functions, that the A Dominion of India and the State of Bihar are making laws which they have no power to make having regard to the Instrument of Accession, and are wrongfully interfering with the administration of the State beyond the rights given to them under the Instrument of Accession. The whole plaint is nothing else except the claim B to enforce the plaintiff’s right under the Instrument of Accession. The dispute therefore in my opinion clearly is in respect of this Instrument of Accession and is covered by Article 363(1) of the Constitution of India. The question of the validity of the different enactments and orders is also based on the rights claimed under the Instrument of Accession so far as the plaintiff is concerned. C On the side of the defendants, the position is that they admit the Instrument of Accession and they do not claim that they are exercising the disputed rights under that Instrument. Their contention is that the Agreement of the 15th of December, 1947, was validly signed and is binding and enforceable against the plaintiff. The defendants contend that their action in passing the disputed legislation and orders and the action in taking over the administration are all based on that Agreement of 15th December,

1947. If the plaintiff contends that that Agreement is not binding on it, it cannot enforce its rights under the original jurisdiction of the Court. If the plaintiff has a grievance and a right to a relief which the defendants contend it has not, the forum to seek redress is not the Supreme Court exercising its original jurisdiction on the transfer of the suit from the Federal Court. According to the defendants, the situation in those circumstances will be of a Sovereign Independent State trespassing on the territories, powers and privileges of another neighbouring independent State. To redress a grievance arising out of such action on the part of the defendants, the Supreme Court is not the forum to give relief. The issue is answered in the negative, costs in the cause.”

91Copy pinpoint91. Bose, J., in his separate opinion, addressed the Issue No.1 which was to the following effect:- G

“1. Whether having regard to the subject-matter of the suit and the provisions contained in Article 363(1) of the Constitution of India, this Hon’ble Court has jurisdiction to entertain the suit?” Answering the said issue, he opined:- H

p. 938 Copy page pinpoint

A “Even so, it is next contended, Article 363, which enacts a general rule of non-interference by courts in certain classes of disputes, cannot control the operation of Article 374(2), which is a special provision providing that suits, appeals and proceedings pending in the Federal Court at the commencement of the Constitution shall stand removed to the Supreme Court and that the Supreme B Court shall have jurisdiction to hear and determine the same. There would be considerable force in this argument but for the opening words of Article 363(1), namely, “notwithstanding anything in this Constitution.” These words clearly indicate that the bar to the exercise of jurisdiction enacted in Article 363 C controls the operation of Article 374(2)and excludes the rule of construction invoked by the plaintiffs.”

92Copy pinpoint92. The aforesaid decision has to be appositely understood and appreciated. Mr. Nariman would submit that any controversy relating to any agreement is not entertainable by this Court. According to him, a D complaint for raising a dispute under Article 262 of the Constitution can be independent without the base or foundation of the 1892 and 1924 agreements but to structure the stand on the fulcrum of the agreements would run counter to Article 363 of the Constitution as has been held by the Constitution Bench in State of Seraikella (supra). It is also proponed by him that the later decision in State of Tamil Nadu v. State of Kerala E (supra) has not taken note of the earlier decision and introduced the element of political agreement and categorized agreements into distinct ones, namely, political agreement and ordinary agreement. The argument deserves keen scrutiny. We have extensively discussed the facts in State of Seraikella (supra) and the view expressed therein. As is perceptible F to us, the Constitution Bench, in actuality, was dealing with a political issue as there is constant reference to the “Instrument of Accession” and the claim was to enforce the instrument and further to declare the legislative and executive action of the Dominion of India and the State of Bihar as illegal. The stand of the respondent, namely, Dominion of India, was that it was acting as per the Instrument of Accession. The G rival stands and the analysis made thereon clearly reflect the political nature of the controversy.

93Copy pinpoint93. Sastri, J., in his concurring opinion, stated:- “22. … The controversies regarding these matters are but contentions whereby the parties seek to establish, on the one H hand, that the Instrument of Accession still governs their mutual

p. 939 Copy page pinpoint

OF T. N. BY ITS CHIEF SECRETARY [DIPAK MISRA, CJI]

rights and obligations and, on the other, that that Instrument stands A superseded and is no longer in force. Issues have no doubt been framed in regard to these matters but they cannot, in my opinion, be considered to be disputes for the purposes of Article 131 or Article 363(1). These articles deal with the jurisdiction of Courts and they envisage disputed claims to substantive legal rights. B The claims in these suits are undoubtedly based on the respective Instruments of Accession and they are repudiated because those Instruments of Accession are said to have been superseded by reason of the alleged agreement of December, 1947. These claims are disputes to which Article 363(1) clearly applies. The other so-called disputes are only incidental and ancillary controversies C raised with a view to support or overthrow the claims and cannot, in my opinion, affect the operation of the bar under that Article any more than, for instance, Issue 5 relating to the necessity for notice to the defendants under Section 80 of the Civil Procedure Code. D

23. Nevertheless, it is contended, the article has no application here and it cannot operate retrospectively and applies only to disputes arising after the commencement of the Constitution. I am unable to accept this restricted interpretation of Article 363(1). While the Article undoubtedly postulates the continued operation of the treaties, agreements, etc., entered into or executed before the commencement of the Constitution and giving rise to the disputes, it does not require, as a condition of its application, that such Disputes should arise after the commencement of the Constitution. I see no reason for importing a restriction which a plain grammatical construction of the language employed does not warrant. It is not correct to say that the wider construction would make the operation of the article retrospective, for the bar to interference by the court operates only after the Constitution came into force irrespective of the disputes concerned having arisen before or after the commencement of the Constitution. It was said that the article should not be construed so as to bar the trial of pending suits or proceedings. But this is not a case of a pending action in a court which continues to function. The Federal Court, in which the suits were pending, and which had exclusive jurisdiction to deal with them, was abolished and a new court, the Supreme Court of India, was H

p. 940 Copy page pinpoint

A created with original jurisdiction strictly limited to disputes relating to legal rights between States recognised as such under the Constitution. But as the States specified in Part B of the First Schedule had a semi-sovereign status before the Constitution, agreements with them were in the nature of international treaties and covenants, and disputes arising out of them would not lie in municipal courts. That principle is given effect to, so far as the Supreme Court’s original jurisdiction is concerned, by the proviso to Article 131 which defines such jurisdiction and, in regard to all courts and in respect of all proceedings, by Article 363(1). The reason for applying that principle is greater, not less, in regard to such disputes arising before the Constitution when these States, then known as Indian States, enjoyed a higher degree of political freedom. Furthermore, the construction contended for by the plaintiffs as applied to Article 131 would mean that the Court would, notwithstanding the proviso, have jurisdiction in respect of such disputes, provided they arose before the commencement of the Constitution. If that had been intended, one would expect that such jurisdiction would have been conferred by positive enactment, instead of being left to be derived by implication from a proviso intended to delimit the jurisdiction conferred by that article. It seems to me, therefore, that the proviso to Article 131 E must be construed as applicable to disputes of the kind mentioned arising both before and after the commencement of the Constitution. If so, Article 363(1) must receive the same construction, the language employed being essentially the same.”

94Copy pinpoint94. Relying on the aforesaid opinion of Sastri. J., it is submitted by F Mr. Nariman that each of the agreements of 1892 and 1924 executed by the Ruler of a semi-sovereign state has to be regarded as an international treaty, covenant or agreement as in any case even under common law which continues under the provisions of Article 372 and thus, the municipal courts or authorities would not have jurisdiction to adjudicate upon them, for Article 363 clearly stipulates that municipal courts do not interfere in G such agreements where one of the parties has a semi-sovereign status. In essence, the contention is that the agreements are not liable to be adjudicated in a court of law or tribunal as has been held by the Constitution Bench in In Re: Presidential Reference (Cauvery Water Disputes Tribunal)10 to the effect that the entire “judicial power of the State” H 10 1993 (Supp) (1) SCC 96

p. 941 Copy page pinpoint

OF T. N. BY ITS CHIEF SECRETARY [DIPAK MISRA, CJI]

under Article 131 relating to adjudication of water disputes stood transferred under the law enacted under Article 262(1), that is, the 1956 Act and the finding recorded by the Tribunal is not a court and, therefore, Article 363(1) would not apply to it is incorrect. According to him, the agreements are not to be looked into for any purpose.

95Copy pinpoint95. To appreciate the submission, we may refer to the analysis put forth by the Tribunal in this regard. The Tribunal adverted to the decision in Madhav Rao Scindia (supra) and came to hold thus:- “21. The same is the position here. The Inter-State Water Disputes Act, 1956 has not been enacted under Entry 56 of the Union List of Seventh Schedule of the Constitution. It has been enacted under power vested in the Parliament by Article 262 of the Constitution. In view of Article 262 Parliament may by law provide for adjudication of any dispute or complaint with respect to the use, distribution or control of the waters of, or in, any inter- State river or river valley. Article 262(2) has a non-obstante clause saying that notwithstanding anything in the Constitution, D Parliament may by law provide that neither the Supreme Court nor any other court shall exercise jurisdiction in respect of any such dispute or complaint as is referred in clause (1). It has already been pointed out above that in exercise of this power in the Inter-State Water Disputes Act, 1956, Section 11 excludes the jurisdiction of all courts including the Supreme Court, if in Article 363(1) there is a non- obstante clause giving an over- riding effect, then even in Article 262(2) there is a non-obstante clause which read with Section 11 of the Inter-State Water Disputes Act shall exclude the jurisdiction of Supreme Court or any other court in respect of a dispute relating to use, distribution and control of waters of inter-State river or river valley. It cannot be disputed that Article 262 is a special provision providing for adjudication of any dispute in respect of use, distribution or control of waters of an inter-State river or river valley. As such on the well-known rule of construction generalia specialibus non derogant, a special provision excludes the general provision; Article 363 cannot bar the investigation in respect of any complaint including a complaint regarding the non-compliance of terms of an agreement which had been executed by the then ruler of a princely State like Mysore which became an Indian State within H

p. 942 Copy page pinpoint

A the Dominion of India and later after coming into force of the Constitution, a State under First Schedule of the Constitution.”

96Copy pinpoint96. The Tribunal, thereafter, placed reliance on Maharaja Shree Umaid Mills Ltd. v. Union of India11; State of Seraikella (supra) and H.H. Maharajadhiraja Madhav Rao Jiwaji Rao Scindia B Bahadur (supra) and the 1956 Act and opined:- “In this background, it is very difficult to hold that Article 363 of the Constitution shall govern or control the inquiry and investigation by the Tribunal in respect of a water dispute relating to interpretation of the terms of any agreement or failure of any C State to implement the terms of such agreement relating to the use, distribution or control of such waters.”

97Copy pinpoint97. Having noted the same, we may look at what has been stated by this Court in the context of Article 363 of the Constitution. In Madhav Rao Scindia case, Hidayatullah, C.J., while dealing with the interpretation D of Article 363, observed:- “66. I begin with Article 363. That article was quoted in extenso earlier. The learned Attorney-General used the historical events as background for his contention that Article 363 must be construed as giving an exclusive right of determination to the E President on the subject of recognition and withdrawal of recognition. He submitted that just as an act of State cannot be questioned in a Municipal Court so also the withdrawal of recognition cannot be called in question. He cited a large number of authorities in support of his case that an act of State is not subject to the scrutiny of the Courts. F

67. The question here is not one of an act of State. Nor can any assurance be drawn from the doctrine of act of State. What we have to do is to construe the article. It bars jurisdiction of Court. It has no bearing upon the rights of the Rulers as such. It neither increases nor reduces those rights by an iota. I shall presently G attempt to find out its meaning. Before I do so I must say that it is a well-known rule of interpretation of provisions barring the jurisdiction of civil courts that they must be strictly construed for the exclusion of the jurisdiction of a civil court, and least of all the Supreme Court, is not to be lightly inferred. The gist of the 11 H (1963) Supp. (2) SCR 515 : AIR 1963 SC 953

p. 943 Copy page pinpoint

OF T. N. BY ITS CHIEF SECRETARY [DIPAK MISRA, CJI]

present dispute is whether the article bars the relief to the petitioners although as held by me, the order of the President is ultra vires.

68. The article commences with the opening words “notwithstanding anything in this Constitution”. These exclusionary words are no doubt potent enough to exclude every consideration arising from the other provisions of the Constitution including the Chapter on Fundamental Rights, but for that reason alone we must determine the scope of the article strictly. The article goes on to say that jurisdiction of all Courts including the Supreme Court is barred except that the President may consult the Supreme Court. Having said this the articles goes on to specify the matters on which the jurisdiction is barred. This it does in two parts. The first part is: “In any dispute arising out of any provision of a treaty etc., which was entered into or executed before the commencement of this Constitution by any Ruler of an Indian State to which the Government of the Dominion of D India was a party and which has or has been continued in operation after such commencement”. This shows that a dispute relating to the enforcement, interpretation or breach of any treaty etc., is barred from the Courts’ jurisdiction. The words ‘arising out of the provisions of a treaty etc.,’ limit the words. Thus if a treaty, covenant, etc., is characterised as forged by any party, E that would not be a dispute ‘arising out of any provision of a treaty, covenant, etc.’ That dispute would be whether there is a genuine treaty or not. This illustration is given by me to show that the exclusion is not all-embracing. The dispute to be barred must arise from a provision of the treaty, etc.” F

98Copy pinpoint98. Shah, J., while speaking for the majority, interpreting Article 363, ruled:- “133. Jurisdiction of the Courts in matters specified is excluded not because the Union of India is successor to the paramountcy of the British Crown, nor because the rights and obligations G accepted and recognized by the Constitution may still be regarded as flowing from acts of State: it is only excluded in respect of specific matters by the express provision in Article 363 of the Constitution. Jurisdiction of the Courts even in those matters is not barred “at the threshold” as contended by the Attorney- H

p. 944 Copy page pinpoint

A General. The President cannot lay down the extent of this Court’s jurisdiction. He is not made by the Constitution the arbiter of the extent of his authority, nor of the validity of his acts. Action of President is liable to be tested for its validity before the Courts unless their jurisdiction is by express enactment or clear implication barred. To accede to the claim that the jurisdiction of B the Court is barred in respect of whatever the executive asserts is valid, is plainly to subvert the Rule of law. It is therefore within the province of the Court alone to determine what the dispute brought before it is and to determine whether the jurisdiction of the Court is, because it falls within one of the two limbs of Article C 363, excluded qua that dispute. The first limb of Article 363 operates to defeat the jurisdiction of the Courts only when a claim to relief founded on the covenants is disputed: the second limb of Article 363 operates when there is a dispute with respect to rights or obligations accruing or arising out of a provision of the Constitution relating to a covenant. D

134. In dealing with the dimensions of exclusion of the exercise of judicial power under Article 363, it is necessary to bear in mind certain broad considerations. The proper forum under our Constitution for determining a legal dispute is the Court which is by training and experience, assisted by properly qualified advocates, fitted to perform that task. A provision which purports to exclude the jurisdiction of the Courts in certain matters and to deprive the aggrieved party of the normal remedy will be strictly construed, for it is a principle not to be whittled down that an aggrieved party will not, unless the jurisdiction of the Courts is by clear enactment or necessary implication barred, be denied his right to seek recourse to the Courts for determination of his rights. The Court will interpret a statute as far as possible, agreeably to justice and reason and that in case of two or more interpretations, one which is more reasonable and just will be adopted, for there is always a presumption against the law maker intending injustice and unreason. The Court will avoid imputing to the Legislature an intention to enact a provision which flouts notions of justice and norms of fairplay, unless a contrary intention is manifest from words plain and unambiguous. The provision in a statute will not be construed to defeat its manifest purpose and general values which animate its structure. In an avowedly

p. 945 Copy page pinpoint

OF T. N. BY ITS CHIEF SECRETARY [DIPAK MISRA, CJI]

democratic polity, statutory provisions ensuring the security of A fundamental human rights including the right to property must, unless the mandate to precise and unqualified, be construed liberally so as to uphold the right. These rules apply to the interpretation of constitutional and statutory provisions alike.” And again:- B “141. … Article 363 prescribes a limited exclusion of the jurisdiction of Courts, but that exclusion does not operate upon the claim for a Privy Purse, relying upon Article 291. The question as to the jurisdiction of the Courts to entertain a claim for payment of Privy Purse did not fall to be determined in Nawab Usman C Ali Khan case. The only question raised was whether the Privy Purse was not capable of attachment in execution of the decree of a civil court, because of the specific exemption of political pensions under Section 60(1)(g) of the Code of Civil Procedure. In Kunvar Shri Vir Rajendra Singh case the Court did not express any opinion that Article 366(22) was a provision relating to a covenant within the meaning of Article 363. In that case the petitioner who was not recognised as a Ruler by the President abandoned at the hearing of his petition his claim to the Privy Purse payable to the Ruler of Dholpur, and pressed his claim by succession under the Hindu Law to the Private property of the former Ruler. The Court was not called upon to decide and did not decide that Article 366(22) was a provision relating to a covenant within the meaning of Article 363. It is difficult to regard a word or a clause occurring in a judgment of this Court, divorced from its context, as containing a full exposition of the law on a question when the question did not fall to be answered in that judgment.

142. In the view we have expressed, the argument raised by Mr Palkhivala that even if clause (22) of Article 366 is a provision relating to the covenants, the jurisdiction of this Court under Article 32 to grant relief against an invalid exercise of power withdrawing recognition of the Rulers is not barred, needs no consideration.

99Copy pinpoint99. Presently, we may refer to the analysis of Article 363 as has been made by the Constitution Bench in State of Tamil Nadu v. State of Kerala (supra). In the said case, the learned Chief Justice, speaking for the Court, opined that a plain reading of Article 363 leaves no manner H

p. 946 Copy page pinpoint

A of doubt that if the dispute arises in respect of a document of that description and if such document had been executed before the commencement of the Constitution, the interference by courts is barred. The documents referred to in Article 363 are those which are political in nature. Any dispute regarding such documents is non-justiciable. The object behind Article 363 is to bind the Indian Rulers with treaties, agreements, covenants, engagements, “Sanads” or other similar instruments entered into or executed before the commencement of the Constitution and to prevent the Indian Rulers from resiling from such agreements as the integrity of India was to be maintained at all costs and could not be affected by raising certain disputes. Thereafter, the larger Bench referred to the ‘White Paper’ on Indian States prepared by the Government of India in 1948 which brings out the historical perspective which necessitated the adoption of the provisions in Article 363.

100Copy pinpoint100. The Court reproduced a passage from the ‘White Paper’ which reads as under:- D “Article 363 has therefore been embodied in the Constitution which excludes specifically the Agreements of Merger and the Covenants from the jurisdiction of courts except in cases which may be referred to the Supreme Court by the President”.

101Copy pinpoint101. After so stating, the Court referred to Article 131 that deals with the original jurisdiction of this Court and proceeded to state:- “74. There is similarity of provision in Article 363 and proviso to Article 131. The original jurisdiction conferred on this Court by the main provision contained in Article 131 is excepted by virtue of the proviso in the matters of political settlements. By making provisions such as Article 363 and proviso to Article 131, the political settlements have been taken out of the purview of judicial pronouncements. Proviso appended to Article 131 renders a dispute arising out of any treaty, agreement, covenant, engagement, sanad or similar instrument which is political in nature executed before the commencement of the Constitution and which has or has been continued in operation, non-justiciable and jurisdiction of this Court is barred. The jurisdiction of this Court is not taken away in respect of the dispute arising out of an ordinary agreement. The instruments referred to and described in the proviso are only those which are political in nature. Non- H political instruments are not covered by the proviso.”

p. 947 Copy page pinpoint

OF T. N. BY ITS CHIEF SECRETARY [DIPAK MISRA, CJI]

102Copy pinpoint102. Be it noted, the larger Bench has referred to the decision in A Virendra Singh (supra) and opined thus:- “70.2. The exposition of above legal position by the Constitution Bench hardly admits of any doubt. Obviously, the accession of an Indian State to the Dominion of India and acceptance of it by the Dominion are acts of State and jurisdiction of the courts to go into its competency or settle any dispute arising out of them are clearly barred under Article 363 and the proviso to Article

131. As we have already held—and that is what has been held in the 2006 judgment as well—that the 1886 Lease Agreement is an ordinary agreement and that it is not political in nature, the embargo of Article 363 and the proviso to Article 131 have no application.” And again:- “76. We are in complete agreement with the view taken by this Court in Mullaperiyar Environmental Protection Forum that the 1886 Lease Agreement would not come within the purview of Article 363 and jurisdiction of this Court is not barred. As a necessary corollary, the dispute arising out of the 1886 Lease Agreement is not barred under Article 131 proviso as well. Moreover, the principal challenge laid in the suit pertains to the constitutional validity of the 2006 (Amendment) Act for which E Article 363 or for that matter under Article 131 proviso does not come into operation at all.”

103Copy pinpoint103. On a perusal of the aforesaid, it seems to us that there is no discord or lack of concord with the view expressed in State of Seraikella (supra). We are persuaded to think so as the Constitution Bench in the earlier case was dealing with a different kind of instrument which was indubitably of political character entered prior to coming into force of the Constitution.

104Copy pinpoint104. In the case of Madhav Rao Scindia (supra), the sphere of adjudication was absolutely different. In the case at hand, the agreements in question relate to the sphere of water sharing, irrigation, etc. and have nothing to do, even remotely, with the concept of sovereignty and integrity of India and, therefore, it will be erroneous to hold that the bar under Article 363 of the Constitution would apply. It is so as both the agreements between the States do not refer to any political element and cannot be H

p. 948 Copy page pinpoint

A termed as political in character. The view expressed in State of Seraikella (supra), as already stated hereinbefore, related to an aspect of integrity or sovereignty of India and that is why, the bar operated. The bar under Article 363 was not allowed to stand in Madhav Rao Scindia (supra) as it was dealing with a constitutional claim of the Rulers relating to Privy Purse and the same did not have any political characteristics. In B any case, the position has been absolutely made clear by the Constitution Bench in State of Tamil Nadu (popularly known as Mullaperiyar dam case). Therefore, it can be stated, without desiring to give rise to any controversy and without fear of any contradiction, that the bar under Article 363 is not applicable. The submission astutely advanced on behalf of the State of Karnataka that the two agreements should not be looked into at all for the purpose of adjudication of the water dispute by the Tribunal because of Article 262 of the Constitution is unacceptable. J. Unconscionability of the 1892 and 1924 agreements

105Copy pinpoint105. It is submitted by Mr. Nariman, learned senior counsel, that both the 1892 and 1924 agreements are hit by the doctrine of unconscionability as the Princely State of Mysore and the State of Madras were on two different platforms. The State of Mysore was a vassal State and had really no authority to speak on various aspects of the agreement. In fact, it had no power to bargain and it is reflectible when the Secretary of State was able to set aside the binding award passed by the learned Arbitrator. The agreements, contends Mr. Nariman, suffer from unconscionable bargain. Learned senior counsel is critical that the Tribunal has not adverted to the principle of unconscionability at all and erroneously relied on the decision in New Bihar Biri Leaves Co. and others v. State of Bihar and others12 and arrived at the conclusion that the agreement having been acted upon by both the parties in 1974, there was an estoppel. He has referred to Section 16 of the Indian Contract Act and the commentary by Pollock and Mulla in the book (1st Edition, 1905). The commentary commended reads as follows:- “ “Unconscionable bargains” - Illustration (c) contemplates the case of a person already indebted to a money-lender contracting a fresh loan with him on terms on the face of them unconscionable. In such a case a presumption is raised that the borrower’s consent was not free. The presumption is rebuttable, but the burden of proof is on the party who has sought to make H 12 (1981) 1 SCC 537

p. 949 Copy page pinpoint

OF T. N. BY ITS CHIEF SECRETARY [DIPAK MISRA, CJI]

an exorbitant profit of the other’s distress. The question is not of A fraud, but of the unconscientious use of superior power.” [Emphasis Supplied]

106Copy pinpoint106. He has also referred to the 8th Edition by M.C. Setalvad in 1957 wherein it has been commented:- B “........ Relief in case of unconscionable bargains is an old head of English equity. It was formerly associated in a special manner with sales of reversionary interests, which the Court was eager to restrain; and for some time it was the doctrine of the Court that a sale of any reversionary interest, if proved to have been made for only a little under the value, must be set aside without C further inquiry. This rule was at last found so inconvenient that it was abolished by statute. But the general principles of equity in dealing with what are called “catching bargains” remain, and the third clause of the section now before us is apparently intended to embody them.” D [Underlining is ours]

107Copy pinpoint107. Apart from relying on the said provision and the commentaries, he has also drawn inspiration from the authorities in Central Inland Water Transport Corporation Limited and another v. Brojo Nath Ganguly & Another.13; O.P. Bhandari v. ITDC14; Delhi E Transport Corporation v. D.T.C. Mazdoor Congress and others15; and Balmer Lawrie & Company Limited and others v. Partha Sarathi Sen Roy and others (2J)16. He has also drawn our attention to the Black’s Law Dictionary by Bryan Garner, Editor-Chief (10th Edition, Thomson Reuters) wherein unconscionability has been defined thus:- F “Unconscionability. 1. Extreme unfairness. Unconscionability is normally assessed by an objective standard: (1) one party’s lack of meaningful choice, and (2) contractual terms that unreasonably favor the other party. 2. The principle that a court may refuse to enforce a contract that is unfair or G oppressive because of procedural abuses during contract formation or because of overreaching contractual terms, esp. 13 (1986) 3 SCC 156 14 (1986) 4 SCC 337 15 1991 Supp. (1) SCC 600 16 (2013) 8 SCC 345 H

p. 950 Copy page pinpoint

A terms that are unreasonably favorable to one party while precluding meaningful choice for the other party.”

108Copy pinpoint108. A passage from John Westlake International Law: Part-I. Peace, Cambridge University Press, 1910 has been commended to us. The said passage reads thus:- B “On the internal side, that is the relation of the native states to the British power, the Government of India published the following notification in its official Gazette, No. 1700 E, 21 August 1891: “The principles of international law have no bearing upon the relations between the Government of India as representing C the queen-empress on the one hand, and the native states under the suzerainty of Her Majesty on the other. The paramount supremacy of the former presupposes and implies the subordination of the latter.” And again :- D “Thus India is a world of itself. Not only is the action of all foreign states excluded from every part of it, but those parts which are not included in the dominions of the king-emperor are subject to a suzerainty, paramountcy or supremacy possessed by him, to which nothing parallel exists in the relations of states E of international law”.

109Copy pinpoint109. Inspiration has also been drawn from the book Rivers in International Law (1959) by F.J. Berber, which states:- “The Cauvery dispute between Mysore and Madras, settled in 1925, was a dispute between two territories of which one was a F province of British India and the other was a dependent princely state under British suzerainty. The dispute was not settled by the application of international law but through an authoritative decision of the sovereign power, or the British Crown. under its general responsibility to interfere in every matter in which G according to its estimation the public interest was threatened with injury. That means that it was a typical case of the application of norms of municipal law. We can therefore extract nothing from it for our inquiry. Only one aspect in the dispute is significant for international law, namely, the endeavour to protect the rights of Karikal, at that time still a French possession. After H

p. 951 Copy page pinpoint

OF T. N. BY ITS CHIEF SECRETARY [DIPAK MISRA, CJI]

representations by the French Ambassador in London the Indian A Government in its Note of May 1, 1924, was able to state that the existing water rights of Karikal would be safeguarded. This recognition of the water rights of a neighbouring colony is in harmony with Anglo- French practice in connection with water rights in their African colonies.” B

110Copy pinpoint110. We have also been referred to a passage from L. Oppenheim International Law (8th Edition) which is extracted below:- “91. The fact that the relation between the suzerain and the vassal always depends upon the special case, excludes the possibility of laying down a general rule as to the international position of vassal States. The vassal State has no relations with other States since the suzerain absorbs these relations entirety; yet the vassal remains nevertheless a half- sovereign State on account of its internal independence. This was the position of the Indian vassal States of Great Britain, which had no international relations whatever either between themselves or with foreign States. Yet instances can be given which demonstrate that” vassal States can have some subordinate international position.”

111Copy pinpoint111. Laying emphasis on the aforesaid passages, it is argued by Mr. Nariman that the agreements are ex facie unconscionable and smack of absolute unfairness and unreasonableness because the parties were not at arm’s length and they never did possess equal bargaining power. In Central Inland Water Transport Corporation Limited (supra), the two-Judge Bench referred to Sections 16, 23 and 24 of the Contract Act and quoted some relevant passages from Chitty on Contracts (25th Edition, F Vol.I). We think it appropriate to extract the said passages:- “These ideas have to a large extent lost their appeal today. ‘Freedom of contract’, it has been said, ‘is a reasonable social ideal only to the extent that equality of bargaining power between contracting parties can be assumed, and no injury is done to the G economic interests of the community at large’. Freedom of contract is of little value when one party has no alternative between accepting a set of terms proposed by the other or doing without the goods or services offered. Many contracts entered into by public utility undertakings and others take the form of a H

p. 952 Copy page pinpoint

A set of terms fixed in advance by one party and not open to discussion by the other. These are called ‘contracts d’adhesion’ by French lawyers. Traders frequently contract, not on individually negotiated terms, but on those contained in a standard form of contract settled by a trade association. And the terms of an employee’s contract of employment may be determined by agreement between his trade union and his employer, or by a statutory scheme of employment. Such transactions are nevertheless contracts notwithstanding that freedom of contract is to a great extent lacking. Where freedom of contract is absent, the disadvantages to consumers or members of the public have to some extent been offset by administrative procedures for consultation, and by legislation. Many statutes introduce terms into contracts which the parties are forbidden to exclude, or declare that certain provisions in a contract shall be void. And the courts have developed a number of devices for refusing to implement exemption clauses imposed by the economically stronger party on the weaker, although they have not recognised in themselves any general power (except by statute) to declare broadly that an exemption clause will not be enforced unless it is reasonable. Again, more recently, certain of the judges appear to have recognised the possibility of relief from contractual obligations on the ground of ‘inequality of bargaining power’.”

112Copy pinpoint112. Thereafter, the learned Judges referred to the meaning of Adhesion Contract and reproduced a passage from Reinstatement of the Law—Second as adopted and promulgated by the American Law F Institute, Volume II:- “208. Unconscionable Contract or Term If a contract or term thereof is unconscionable at the time the contract is made a court may refuse to enforce the contract, or may enforce the remainder of the contract without the unconscionable term, or may so limit the application of any unconscionable term as to avoid any unconscionable result.” In the Comments given under that section, it is stated at page 107: “Like the obligation of good faith and fair dealing (§ 205), the policy against unconscionable contracts or terms applies to

p. 953 Copy page pinpoint

OF T. N. BY ITS CHIEF SECRETARY [DIPAK MISRA, CJI]

a wide variety of types of conduct. The determination that a A contract or term is or is not unconscionable is made in the light of its setting, purpose and effect. Relevant factors include weaknesses in the contracting process like those involved in more specific rules as to contractual capacity, fraud and other invalidating causes; the policy also overlaps with rules which render particular bargains or terms unenforceable on grounds of public policy. Policing against unconscionable contracts or terms has sometimes been accomplished by adverse construction of language, by manipulation of the rules of offer and acceptance or by determinations that the clause is contrary to public policy or to the dominant purpose of the contract. Uniform Commercial Code § 2-302 Comment 1 .... A bargain is not unconscionable merely because the parties to it are unequal in bargaining position, nor even because the inequality results in an allocation of risks to the weaker party. But gross inequality of bargaining power, together with terms unreasonably favourable to the stronger party, may confirm indications that the transaction involved elements of deception or compulsion, or may show that the weaker party had no meaningful choice, no real alternative, or did not in fact assent or appear to assent to the unfair terms.”

113Copy pinpoint113. After referring to many authors and decisions, the Court came to hold:- “As seen above, apart from judicial decisions, the United States and the United Kingdom have statutorily recognised, at least in certain areas of the law of contracts, that there can be unreasonableness (or lack of fairness, if one prefers that phrase) F in a contract or a clause in a contract where there is inequality of bargaining power between the parties although arising out of circumstances not within their control or as a result of situations not of their creation. Other legal systems also permit judicial review of a contractual transaction entered into in similar G circumstances. For example, Section 138(2) of the German Civil Code provides that a transaction is void “when a person” exploits “the distressed situation, inexperience, lack of judgmental ability, or grave weakness of will of another to obtain the grant or promise of pecuniary advantages ... which are obviously disproportionate H

p. 954 Copy page pinpoint

A to the performance given in return”. The position according to the French law is very much the same.”

114Copy pinpoint114. After so stating, the Court posed the question as to whether our Court should advance with time and, thereafter, referred to Article 14 of the Constitution and ruled:- B “It will apply where the inequality is the result of circumstances, whether of the creation of the parties or not. It will apply to situations in which the weaker party is in a position in which he can obtain goods or services or means of livelihood only upon the terms imposed by the stronger party or go without them. It C will also apply where a man has no choice, or rather no meaningful choice, but to give his assent to a contract or to sign on the dotted line in a prescribed or standard form or to accept a set of rules as part of the contract, however unfair, unreasonable and unconscionable a clause in that contract or form or rules may be. This principle, however, will not apply where the bargaining power of the contracting parties is equal or almost equal. This principle may not apply where both parties are businessmen and the contract is a commercial transaction. In today’s complex world of giant corporations with their vast infrastructural organizations and with the State through its instrumentalities and agencies entering into almost every branch of industry and commerce, there can be myriad situations which result in unfair and unreasonable bargains between parties possessing wholly disproportionate and unequal bargaining power. These cases can neither be enumerated nor fully illustrated. The court must judge each case on its own facts and circumstances.” F And again:- “The types of contracts to which the principle formulated by us above applies are not contracts which are tainted with illegality but are contracts which contain terms which are so unfair and G unreasonable that they shock the conscience of the court. They are opposed to public policy and require to be adjudged void.”

115Copy pinpoint115. We must note with profit that in the said case, the Court did not accept the stand of the appellant-Corporation that it was an ordinary contract entered by the employer with the employee but treated it as a contract with higher bargaining power by the Corporation with the H

p. 955 Copy page pinpoint

OF T. N. BY ITS CHIEF SECRETARY [DIPAK MISRA, CJI]

workmen and that the conditions incorporated in the contract were wholly unconscionable and against the public interest, for it had the tendency to create a sense of insecurity in the minds of those to whom it applies and further it was against public good.

116Copy pinpoint116. In Delhi Transport Corporation (supra), B.C. Ray, J. placed reliance on O. P. Bhandari (supra) which had followed the observations made in Central Inland Water Transport Corporation Limited (supra), and West Bengal State Electricity Board and others v. Desh Bandhu Ghosh and others17 and came to the conclusion that it was impossible to hold Regulation 9(b) of the Delhi Road Transport Authority (Conditions of Appointment and Service) Regulations, 1952 as constitutional. Sawant, J. opined that the arbitrary rules are called Henry-VIII and the self asserting reliance on the theory of high authority was unacceptable. The said decision has been pressed into service to highlight that the majority in the Constitution bench has accepted the principle laid down in Central Inland Water Transport Corporation Limited (supra) which pertains to the bargaining power and how a contract of employment becomes unconscionable.

117Copy pinpoint117. The aforesaid submission of Mr. Nariman has been vehemently opposed by Mr. Dwivedi and Mr. Naphade, learned senior counsel appearing for the State of Tamil Nadu, on two counts, namely, that the “Standstill Agreement” executed by the State of Mysore allowed the said agreement to continue and further, the agreement was not denounced as required under the proviso to Section 7(1)(c) of the 1947 Act. Though we have referred to the “Standstill Agreement” and quoted a portion of it, yet at this juncture, it is pertinent to reproduce the said agreement along with the Schedule in entirety:- F “Agreement between the State of Mysore and the Dominion of India. WHEREAS it is to the benefit and advantage of the dominion of India as well as of the Indian States that existing agreements and administrative arrangements in the matters of common concern, should continue for the time being, between the G Dominion of India or any part thereof and the India States:- Now, therefore, it is agreed between the Mysore State and the Dominion of India that:- 17 AIR 1985 SC 722 H

p. 956 Copy page pinpoint

A 1. (1) Until new agreements in this behalf are made, all agreements and administrative arrangements as to matters of common concern now existing between the Crown and any Indian State shall, in so far as may be appropriate, continue as between the Dominion of India or, as the case may be, the part thereof, and the State. B (2) In particular, and without derogation from the generality of sub-clause (1) of this clause the matters referred to above shall include the matters specified in the Schedule to this Agreement.

2. Any dispute arising out of this Agreement, or out of the agreements or arrangements hereby continued, shall unless any provision is made therein for arbitration by an authority other than the Governor General or Governor, be settled by arbitration according, as far as may be, to the procedure of the Indian Arbitration Act, 1899.

3. Nothing in this agreement includes the exercise of any paramountcy functions. SCHEDULE

1. Air Communications

2. Arms and equipment

3. Control of commodities

E 4. Currency and coinage

5. Customs

6. Indian States Forces

7. External Affairs.

8. Extradition

9. Import and Export Control.

F 10. Irrigation and Electric Power

11. Motor Vehicles

12. National Highways

13. Opium

14. Posts, Telegraphs and Telephones

G 15. Railways

16. Salt

17. Central Excises, relief from double income-tax and other arrangements relating to taxation.

18. Wireless.” [Underlining is by us] H

p. 957 Copy page pinpoint

OF T. N. BY ITS CHIEF SECRETARY [DIPAK MISRA, CJI]

118Copy pinpoint118. At this stage, we may also reproduce the proviso to Section A 7(1)(c) of the 1947 Act. It is as follows:- “Provided that, notwithstanding anything in paragraph (b) or paragraph (c) of this subsection, effect shall, as nearly as may be, continue to be given to the provisions of any such agreement as is therein referred to which relate to customs, transit and B communications, -posts and telegraphs, or other like matters, until the provisions in question are denounced by the Ruler of the Indian State or person having authority in the tribal areas on the one hand, or by the Dominion or Province or other part thereof concerned on the other hand, or are superseded by subsequent agreements.” C

[Emphasis Supplied]

119Copy pinpoint119. On a keen scrutiny of the evidence on record, there is no proof that the State of Mysore, at the relevant time, had denounced the agreement. We have already discussed the doctrine of paramountcy and how the same is not applicable to these categories of agreements. Mr. Nariman, learned senior counsel, would submit that automatic extinction of agreement because of evaporation of the doctrine of paramountcy is one thing and applicability of the said principle to treat the agreement as unconscionable is quite a distinct aspect. As held earlier, the agreements did not automatically come to an end either after coming into force of the 1947 Act or after coming into force of the Constitution because of the “Standstill Agreement” and further owing to the fact that there had been no denouncement. The bargaining power may not have existed in 1892 or 1924 but definitely, the said power to bargain or to choose came alive after the 1947 Act and, undoubtedly, after the Constitution came into being. However, the State of Karnataka chose not to do so. If we allow ourselves to say so, it chose not to rise like a phoenix but, on the contrary, it maintained sphinx like silence at the relevant time. Therefore, we are not persuaded to accept the submission that the agreements should be declared as void because of unconscionability. G K. Status of the agreements after coming into force of the States Reorganization Act, 1956

120Copy pinpoint120. Challenging the subsistence and continuance of the agreements, the next limb of submission of Mr. Nariman is that after the H

p. 958 Copy page pinpoint

A coming into force of the States Reorganization Act, 1956, (for short “the Reorganization Act’), the agreements became extinct for the newly formed State of Mysore was not bound by the 1924 agreement since the Part B State of Mysore had not entered into any agreement with the State of Madras. It is contended by him that the Part B State of Mysore was not the new State of Mysore and on a careful reading of the various provisions of the Reorganisation Act, it is abundantly clear that only the rights, responsibilities, liabilities and obligations to be borne by the new State of Mysore find mention but the same has no reference to the rights and obligations under the 1924 agreement. Elaborating further, learned senior counsel would contend that the rights and obligations under the 1924 agreement may have devolved upon the Part B State of Mysore but that would not be considered as an agreement made in exercise of the executive power by the said Part B State of Mysore.

121Copy pinpoint121. Mr. Nariman has referred to Section 7 of the Reorganisation Act to highlight that by reason of the provisions contained under Section D 7 of the said Act, the new State of Mysore cannot be treated as the successor State in respect of the obligations of the Ruler of the Indian State of Mysore under the Agreements of 1892 and 1924. To appreciate the said submission in proper perspective, we think it appropriate to reproduce the provisions. It reads as follows:- E “Section 7. Formation of a new Mysore State.%(1) As from the appointed day, there shall be formed a new State to be known as the State of Mysore comprising the following territories, namely:% (a) the territories of the existing State of Mysore; F (b) Belgaum district except Chandgad taluka and Bijapur, Dharwar and Kanara districts, in the existing State of Bombay; (c) Gulbarga district except Kodangal and Tandur taluks, Raichur district except Alampur and Gadwal taluks, and Bidar district except Ahmadpur, Nilanga and Udgir taluks and the portions G specified in clause (d) of sub- section (1) of section 3, in the existing State of Hyderabad; (d) South Kanara district except Kasaragod taluk and Amindivi Islands, and Kollegal taluk of Coimbatore district, in the State of Madras; and H

p. 959 Copy page pinpoint

OF T. N. BY ITS CHIEF SECRETARY [DIPAK MISRA, CJI]

(e) the territories of the existing State of Coorg; A and thereupon the said territories shall cease to form part of the said existing States of Mysore, Bombay, Hyderabad, Madras and Coorg, respectively. (2) The territory comprised in the existing State of Coorg shall form a separate district to be known as Coorg district, and the said Kollegal taluk shall be included in, and become part of, Mysore district, in the new State of Mysore.”

122Copy pinpoint122. Learned senior counsel has emphasized on the amalgamation of various areas from various States and exclusion of some areas and, on that foundation, a structured argument has been advanced that the successor State cannot be held liable. Per contra, Mr. Dwivedi, learned senior counsel, would contend that the present case is not one where the territory of a Sovereign State got acceded to another Sovereign State. It is a case for merger where a situation obtained that the State of Mysore had accepted the 1924 Agreement and it constitutionally remained in continuance a Part B State under Article 295(2) of the Constitution. Formation of new States and alteration of areas, boundaries or names of the existing States under the parliamentary legislation did not alter the rights and liabilities and continued to remain in force and binding upon the successor State so long as they are not modified, changed or repudiated. He has drawn a distinction between a statutory acceptance and the recognition by the new State which can be explicit or implied. For the said purpose, he has pressed into service the decisions in M/s. Dalmia Dadri Cement Co. Ltd. v. Commissioner of Income Tax18, Amar Chand Butail v. Union of India and others 19; and Firm Bansidhar Premsukhdas v. State of Rajasthan20. Distinguishing the aforesaid issue, it is urged by him that the case at hand is not one where the Sovereign State has been acceded to or been annexed by another Sovereign State and, therefore, the principles in State of Punjab & Ors. v. Balbir Singh & Ors. 21 , Ranjan Sinha v. Ajay Kumar Vishwakarma22, State of M.P. v. Bhopal Sugar Industries Ltd.23 are applicable. G 18 AIR 1958 SC 816 19 AIR 1964 SC 1658 20 AIR 1967 SC 40 21 (1976) 3 SCC 242 22 2017 (7) SCLAE 234 23 1964 (6) SCR 846 H

p. 960 Copy page pinpoint

123Copy pinpoint123. In Balbir Singh (supra), the erstwhile State of Punjab was reorganized by the Punjab Reorganisation Act, 1966 and on the appointed date, i.e., November 1, 1966, the former State of Punjab ceased to exist. The successor States of Punjab, Haryana and Union Territory of Chandigarh and the transferred territory came into being. The controversy related to the service conditions of the respondents. The B Court referred to the dictionary clause and Section 88 of the 1966 Act and came to hold thus:- “Law is defined in clause (g) of Section 2 of the Act to say: “‘law’ includes any enactment, ordinance, regulation, order, bye-law, rule, scheme, notification or other instrument having, immediately before the appointed day, the force of law in the whole or in any part of the existing State of Punjab;”. We agree with the High Court that the impugned orders in question were not law within the meaning of Section 2(g) and hence were, in terms, not saved by Section 88. We think the High Court is right when it says: “Section 88 appears to have been introduced as a matter of abundant caution. In my opinion, mere splitting up of the territories of Punjab into four successor States would not ipso facto result in the abrogation or repeal of the laws which were immediately in force before the appointed day in those territories. There is nothing in the 1966 Act, not even in Section 88, which expressly or by necessary intendment repeals the laws which were in force immediately before the appointed day in the territories of the former Punjab. Those laws derived their force de hors the 1966 F Act. The first part of Section 88 is merely clarificatory of any doubts which might arise as a result of the reorganisation of Punjab, while the latter part of this section is merely an adaptative provision, to the effect, that the territorial references in any such law to the State of Punjab shall continue to mean the territories G within that State immediately before the appointed day. Thus, read as a whole Section 88 merely dispels doubts as to the continuity of the laws which were in force before the appointed day in the former State of Punjab, until the competent legislature or authority of the successor States effects any change in those laws”.” H

p. 961 Copy page pinpoint

OF T. N. BY ITS CHIEF SECRETARY [DIPAK MISRA, CJI]

And again:- A “In our judgment when there is no change of sovereignty and it is merely an adjustment of territories by the reorganization of a particular State, the administrative orders made by the Government of the erstwhile State continue to be in force and effective and binding on the successor States until and unless they are modified, changed or repudiated by the Governments of the successor States. No other view is possible to be taken. The other view will merely bring about chaos in the administration of the new States. We find no principle in support of the stand that administrative orders made by the Government of the erstwhile State automatically lapsed and were rendered ineffective on the coming into existence of the new successor States.”

124Copy pinpoint124. In Ranjan Sinha (supra), the controversy revolved around the applicability of laws framed by the undivided State of Bihar with the newly bifurcated State that have come into existence by virtue of the D Bihar Reorganisation Act, 2000 (for short, “the 2000 Act”). The controversy also related to the service conditions. The issue arose before the High Court of Jharkhand as to which law was in force and eventually, on scrutiny of the Act, the High Court came to hold that:- “6. A division bench of the High Court of Jharkhand on elaborate consideration of applicable provisions of the Act and BROA came to the conclusion that Education Regulations, applicable to the erstwhile Bihar, are law for the new State of Jharkhand in terms of Sections 84 and 85 of the BROA and therefore unless a person is qualified as per Education Regulations, cannot get himself registered. It was observed as under- ‘What is contended on behalf of the Petitioners is that the Pharmacy Act was extended to the State of Bihar had notified and adopted the Education Regulations issued under Section 10 of the Act which was in Part II of the Act, G that both the Act and the Education Regulations hence constitute law for the purpose of the State of Jharkhand carved out of the modification of either the Education Regulations or the Pharmacy Act by the competent Legislature, namely, the Parliament, that no such attempt was also made by the State H

p. 962 Copy page pinpoint

A of Legislature and in the Jharkhand and unless a person was qualified in terms of the Education Regulations, he could not get his name entered in the Register. We find considerable force in this submission. It is true that the Jharkhand was carved out with effect from 15.11.2000. By virtue of Section 84 of the Bihar Reorganization Act, the Pharmacy Act and the Education B Regulations applied. In the absence of any modification, alternation or repeal of either the Act or the Education Regulations by the competent Legislature, it could not be postulated that the law had ceased to be in force merely on the formation of the State of Jharkhand. Section 84 of the Bihar C Reorganization Act, in our view, is clear. Moreover, it is not possible for the Court to contemplate a law less State as it were. If the argument of the Respondents were to be accepted, the position would be that there was no law relating to Pharmacy or regarding qualifications for getting recognition as a Pharmacist in the State of Jharkhand and it is yet to be made. D In other words, until the same is made there will be a vacuum. Such an argument, unless compelled, can not be acceptable. The territories now forming the State of Jharkhand originally formed part of the State of Bihar, were governed by the Act and the Education regulations promulgated and adopted in terms E of Section 85 of the Bihar Reorganization Act. This scheme of the Reorganization Act is consistent with the general principle that a law once made applicable to a territory will continue to apply to that territory unless its application is abrogated or dispensed with by the competent Legislature or authority or its replacement by any other law enacted in that behalf. Therefore, F it is clear that Education Regulations promulgated under Section 10 and adopted in terms of Section 11 of the Act to the territory in question, continues to apply. There is also the stand adopted by the Indian pharmacy Council in its additional counter affidavit. We find the said stand sustainable in law’.”

125Copy pinpoint125. Before this Court, it was contended that every State has to have a First Register of the pharmacists on its own as mandated in Sections 30 and 31 of the Act which is an express provision and if the interpretation given by the Court is accepted, the said provision will become redundant. Adverting to the provisions of the Act and the earlier H Regulations, a two-Judge Bench held:-

p. 963 Copy page pinpoint

OF T. N. BY ITS CHIEF SECRETARY [DIPAK MISRA, CJI]

“25. The Article 3 of the Constitution inter alia, empowers the A Parliament by law to form a new State by separation of territory from any State or by uniting two or more States. Article 4 is to the effect that the law made by the Parliament with reference to Article 3 may contain supplemental, consequential and incidental provisions. When a new State is formed by law made by Parliament, whether the laws made by the existing State out of which a new State is formed continue to apply to the territories included in the new State? When the existing State territory is reorganized by the Parliament there is no change in Sovereignty. It is only adjustment of territories by transferring some territories in the existing State to a newly formed State. Therefore, all the laws which were applicable to the territories of the re-organized State would continue to apply to the territories transferred to the new State until the latter either adapts or, subject to its competency amends or repeals the existing and applicable laws.”

126Copy pinpoint126. Be it noted, the Court placed reliance on Balbir Singh D (supra) and Sher Singh and others v. Financial Commissioner of Planning, Punjab and others24 and proceeded to rule:- “35. When a State as forming part of Indian nation is re-organized, in law in so far as application of laws is concerned, the following three things would happen namely; (i) the existing State (Parent E State) which made various laws, would continue to exist; (ii) the new State so formed by transferring some territories will be deemed to be the territories of the parent State for the purpose of applicability of the laws; and (iii) those laws made by parent State shall continue to apply to new State until they are modified or amended by a competent legislature in relation to new State F and the ‘law’ as defined in the definition Clause would be the law which was in force in the existing State which would be enforceable in the newly formed State.

36. At the cost of repetition, we may mention that under Article 3 of the Constitution the Parliament can alter, amend, amalgamate, G form new States, diminish or increase area of a State. The principle of ‘clean slate’ as applicable in international law is not applicable when reorganization takes place under Article 3 of the Constitution. 17 The reorganized States do not usually start 24 (1987) 2 SCC 439 H

p. 964 Copy page pinpoint

A as tabula rasa, rather they are successors of a pre-existing erstwhile States. Under the BROA, the Jharkhand was carved out of the Bihar and the two separate states came into existence on 15.11.2000. If the laws in force were to lapse on the day the division was effected, a chaotic situation would have emerged inasmuch as the newly created State would be rendered a State B without laws. To avoid such situation, provisions like Sections 84 and 85 of BROA have been enacted to maintain continuity, and at the same time authorizing the States to make such modifications and adaptations as are considered necessary by mere issuance of orders within two years, and thereafter by C legislation.

37. As defined earlier ‘law’ includes ‘other instruments having the force of law’. In view of use of the word ‘includes’, the definition of ‘law’ under Section 2(f) shall be interpreted exhaustively. In view of the above discussion, we hold that the D First Register prepared by the Bihar has the force of law Supra, at 13 under Section 2(f) of the BROA.”

127Copy pinpoint127. In the present case, the two provisions, namely, Sections 107 and 119 of the Reorganization Act of 1956 unequivocally spell out the continuance of the assets and liabilities. That apart, the new State of E Mysore after 1956 recognised and enforced the agreement and, in any case, did not repudiate it. And in all possibilities, the State could not have done it as it related to inter-State waters and the Parliament in the Reorganisation Act did not make any law in that regard.

128Copy pinpoint128. It may be noted here that the Tribunal has referred to Section F 2(m) defining “Principal Successors State”, Section 2(o) defining “successor State” and Section 5 to conclude that the State of Kerala had become the principal successor State to the erstwhile State of Travancore-Cochin excluding the territories transferred to the State of Madras and also a successor State in respect of the territories which were transferred from Madras and, therefore, the agreements would be binding on it, as the Cauvery basin including the portion of rivers Kabini and Bhawani were in the Malabar District, which had been transferred to it. It also referred to Section 87 of the Reorganisation Act, whereunder any contract made by an existing State before the appointed day in the exercise of its executive power was deemed to have been made in the exercise of such power of the successor State or States or the principal

p. 965 Copy page pinpoint

OF T. N. BY ITS CHIEF SECRETARY [DIPAK MISRA, CJI]

successor State, as the case may be. With reference thereto, the Tribunal A analyzed that the Agreements of 1892 and 1924 entered into by Madras with the then State of Mysore were, therefore, deemed to have been entered into on behalf of the areas which were within the territories of the State of Madras including the District of Malabar and, consequently, the rights and liabilities which had accrued to Madras as an existing B State with regard thereto would be the rights and liabilities of the successor State, i.e., the State of Kerala. The Tribunal also concluded that the State of Kerala would be deemed to be bound by the terms and conditions of the two Agreements so far as the sharing of the waters of river Cauvery was concerned.

129Copy pinpoint129. The finding of the Tribunal is seriously assailed on behalf of the State of Karnataka on the ground that in a State where different boundaries came into existence, the agreements could not be allowed to remain in continuance. Sections 2(e), 2(j), 2(m) and 2(o), which are relevant in the present context, read thus:- “Section 2(e) “corresponding State” means, in relation to the new State of Bombay, Madhya Pradesh, Mysore, Punjab or Rajasthan, the existing State with the same name, and in relation to the new State of Kerala, the existing State of Travancore- Cochin; (j) “notified order” means an order published in the Official E Gazette; (m) “principal successor State” means— (i) in relation to the existing State of Bombay, Madhya Pradesh, Madras or Rajasthan, the State with the same name; and F (ii) in relation to the existing States of Hyderabad, Madhya Bharat and Travancore Cochin, the States of Andhra Pradesh, Madhya Pradesh and Kerala, respectively; (o) “successor State”, in relation to an existing State, means any State to which the whole or any part of the territories of that G existing State is transferred by the provisions of Part II, and includes in relation to the existing State of Madras, also that State as territorially altered by the said provisions and the Union;”

130Copy pinpoint130. Section 108 which has been relied upon by Mr. Dwivedi, learned senior counsel for the State of Tami Nadu, is as follows:- H

p. 966 Copy page pinpoint

A “Section 108. Continuance of agreements and arrangements relating to certain irrigation, power or multi- purpose projects.%(1) Any agreement or arrangement entered into between the Central Government and one or more existing States or between two or more existing States relating to B (a) the administration, maintenance and operation of any project executed before the appointed day, or (b) the distribution of benefits, such as, the right to receive and utilise water or electric power, to be derived as a result of the execution of such project, C which was subsisting immediately before the appointed day shall continue in force, subject to such adaptations and modifications, if any (being of a character not affecting the general operation of the agreement or arrangement) as may be agreed upon between the Central Government and the successor State D concerned or between the successor States concerned, as the case may be, by the Ist day of November, 1957, or, if no agreement is reached by the said date, as may be made therein by order of the Central Government. (2) Where a project concerning one or more of the existing States E affected by the provisions of Part II has been taken in hand, but not completed, or has been accepted by the Government of India for inclusion in the Second Five Year Plan before the appointed day, neither the scope of the project nor the provisions relating to its administration, maintenance or operation or to the distribution of benefits to be derived from it shall be varied, F (a) in the case where a single successor State is concerned with the project after the appointed day, except with the previous approval of the Central Government, and (b) in the case where two or more successor States are concerned with the project after that day, except by agreement G between those successor States, or if no agreement is reached, except in such manner as the Central Government may by order direct, and the Central Government may from time to time give such directions as may appear to it to be necessary for the due H

p. 967 Copy page pinpoint

OF T. N. BY ITS CHIEF SECRETARY [DIPAK MISRA, CJI]

completion of the project and for its administration, maintenance A and operation thereafter. (3) In this section, the expression” project” means a project for the promotion of irrigation, water supply or drainage or for the development of electric power or for the regulation or development of any inter- State river or river valley.” B Section 119 of the Reorganisation Act, 1956 reads as under:- “Section 119. Territorial extent of laws.¯The provisions of Part II shall not be deemed to have effected any change in the territories to which any law in force immediately before the appointed day extends or applies, and territorial references in any such law to an existing State shall, until otherwise provided by a competent Legislature or other competent authority, be construed as meaning the territories within that State immediately before the appointed day.”

131Copy pinpoint131. Impressing thereon, it is submitted by Mr. Dwivedi that the aforesaid provisions by operation of law made the 1924 Agreement recognisable and implementable. According to him, the rights and liabilities under the 1924 Agreement are constitutionally continued with and vest in Mysore as Part B State under Article 295(2) of the Constitution. Article 295 reads as under:- E “Article 295. Succession to property, assets, rights, liabilities and obligations in other cases (1) As from the commencement of this Constitution (a) all property and assets which immediately before such F commencement were vested in any Indian State corresponding to a State specified in Part B of the First Schedule shall vest in the Union, if the purposes for which such property and assets were held immediately before such commencement will thereafter be purposes of the Union relating to any of the matters enumerated in the Union List, and G (b) all rights, liabilities and obligations of the Government of any Indian State corresponding to a State specified in Part B of the First Schedule, whether arising out of any contract or otherwise, shall be the rights, liabilities and obligations of the H

p. 968 Copy page pinpoint

A Government of India, if the purposes for which such rights were acquired or liabilities or obligations were incurred before such commencement will thereafter be purposes of the Government of commencement will thereafter be purposes of the Government of India relating to any of the matters enumerated in the Union List, B subject to any agreement entered into in that behalf by the Government of India with the Government of that State (2) Subject as aforesaid, the Government of each State specified in Part B of the First Schedule shall, as from the commencement C of this Constitution, be the successor of the Government of the corresponding Indian State as regards all property and assets and all rights, liabilities and obligations, whether arising out of any contract or otherwise, other than those referred to in clause (1).”

132Copy pinpoint132. Emphasis has been laid on Article 295(2). According to Mr. D Dwivedi, under the Reorganisation Act, the existing rights and liabilities and the existing laws continue to be enforced and continue to be binding upon the successor State so long as they are not modified, changed or repudiated by the successor State. It is his further submission that in the case of Mysore, the territories of Part B Mysore and Coorg alone are in the Cauvery Basin and the laws operating in part B Mysore qua sharing of Cauvery waters secured for Mysore under the 1924 Agreement would continue. If the interest of Coorg was to be secured after the formation of new Mysore State, the provisions of Sections 107 and 119 covered the same. He has propounded that neither the Union Government nor the State of Mysore acted otherwise and the agreement continued to remain in force.

133Copy pinpoint133. We may clearly state here that nothing has been brought on record to show that any dispute was raised after the Reorganisation Act by the newly formed States to controvert the agreement. As the facts clearly depict, it continued. Mr. Dwivedi, in this regard, would contend that the State of Karnataka had waived its right to question the legal tenability of the agreement and keeping in view the concept of waiver, the Tribunal has also adverted to the same and accepted. We do not think that this aspect needs to be reverted to, for it remains a fact that both the agreements with the Regulations remained in force despite coming into effect of the Reorganisation Act, 1956. H

p. 969 Copy page pinpoint

OF T. N. BY ITS CHIEF SECRETARY [DIPAK MISRA, CJI]

L. Issue relating to expiry of the agreements A

134Copy pinpoint134. It is submitted by Mr. Nariman, learned senior counsel, that the 1924 Agreement was not an agreement requiring a positive or affirmative act by either of the states to go ahead with revocation but, on the contrary, to arrive at a common consensus for its continuance and if the clauses of the Agreement are studiedly scrutinized or appreciated as an instrument as a whole, its life span is 50 years and the same could not have continued, by any stretch of imagination, after the expiry of the stipulated period. He would argue that the Constitution Bench in the Presidential Reference has twice stated that both the agreements have expired and no application for review or modification was filed by the State of Tamil Nadu and rightly so, as anyone connected with the agreement was well aware that the agreements stood expired. The said submission of Mr. Nariman is seriously resisted by Mr. Naphade and Mr. Dwivedi, learned senior counsel, on the foundation of the Presidential Reference answered in In Re: Presidential Reference (Cauvery Water Disputes Tribunal) (supra). It is further urged that the issue did not arise as regards the expiry of the agreements and the Court has not addressed to it and, therefore, it cannot be regarded or treated as a decision on the said issue. Learned senior counsel would contend that merely because the expression has been used that the agreements had expired, that should not be given the status of the ratio of the judgment. E

135Copy pinpoint135. The second plank of the argument of Mr. Nariman in this regard is that even assuming that the decision of the Constitution Bench is not treated as binding for the purpose of expiration of the term of the Agreement, the clauses in the Agreement explicitly show that the 1924 Agreement comes to an end after the expiry of 50 years. For the said F purpose, emphasis is laid on the language employed in Clause 10(xi) of the Agreement. We have already reproduced the agreement and, therefore, at this stage, it is apt to reflect on how the Tribunal has understood the Agreement. On a reading of the award, it is noticeable that the Tribunal has analyzed in detail the various clauses of the said G Agreement with the mutual rights and obligations as specified therein and focused, in particular, on clause 10 (xi) which contemplated a process of reconsideration on the expiry of 50 years from the date of its execution.

136Copy pinpoint136. The Tribunal, in the context of the rival contentions on the subsistence or otherwise of the Agreement on the expiry of 50 years H

p. 970 Copy page pinpoint