P L D 1961 Dacca 369 (PLP)

HAMOODUR RAHMAN, J.‑This reference to the Full Bench arises out of an appeal from the original judgment and decree of the learned Subordinate Judge, Rangpur, in a suit filed by the respondent here, in forma pauperis for the recovery of a sum of Rs. 12,17,066 from the Government of Pakistan under various heads of account. The plaintiff claimed the said amount under various con tracts alleged to have been entered into between him and the Burma Refugee Organisation for supply of foodstuffs, clothings, construction material etc.' and for work done at the Refugee Camp situated at Kantabari,. Police Station Gobindaganj in the district of Rangpur, from the middle, of June 1944 to the middle of November 1944, when the supplies and works were suddenly stopped, and he was directed to remove his staff and also his belongings from the said Camp, as also from other Camps at Subirnagar and Mahimaganj. According to the plaintiff, the said Refugee Camp was built for housing, feeding and maintaining refugees coming from Burma by the Burma Refugee Organisation set up under the direct control and supervision of the Common‑Wealth Relations Department of the then 3overnment of India. The said plaintiff maintains that the said Refugee Origanisation was, in effect, a department of the said Government of India as it was in charge of a Chief Refugee Administrator appointed by the Government of India assisted by an Assistant Administrator and other officers similarly appointed by the said Government of India. ' Hence, according to the plaintiff, after the 15th of August 1947, the said Burma Refugee Organisation became the concern of the Government of Pakistan and, as such, the liabilities in respect thereof devolved on the Government of Pakistan which was liable to satisfy the plaintiff's It is unnecessary for the purposes of this reference to go into the details of the various claims raised by the plaintiff or as to the details of the various defences raised in the suit on behalf of the defendant. Suffice it to say that the defendant; inter alia, pleaded that since the Burma Refugee Organ sation was set up before partition by the then 3overnment of India, the liabilities incurred by the said Orgnisation were the liabilities of the Govern ment of India. Further that since all the claims of the plaintiff Were in respect of contracts performed long before the 15th of August 1947, the liabilities incurred by the said Burma Refugee Organisation prior to the said date, could not be said to have arisen under any contract for purposes which, as from that date, were exclusively the purposes of the Dominion of Pakistan within the meaning of Article 8 (1) (a) of the Indian Independence (Rights, Property and Liabilities) Order; 1947, In any event, since the refugees for whom the said Organisation set up the Camp mentioned above were nazi‑pals of what is now Burma and India, the purposes of the Organisation could not after 15‑8‑47, be the exclusive purposes of Pakistan. It is not disputed that Cantabari, Subirnagar and Mahimaganj are situated in the district of Rangpur which has, after 15‑8‑47, become part of the territories now comprised in East Pakistan. The learned Subordinate Judge came to the conclusion after assessing the evidence that "after the appointed day all the pro perties and assets of the B. R. O. (Burma Rufugee Organisation) were appropriated by the Federation of Pakistan" and "that the B. R. O. was the exclusive property of Pakistan", as there was no dispute that the Burma Refugee Organisation was situated within East Pakistan. Hence, the contract was for a purpose which as from the 15th of August 1947, became the exclusive purpose of the Dominion of Pakistan and hence, it was the Dominion of Pakistan which was liable to discharge the liabilities under the plaintiff's contract with the Burma Refugee Organisation, even though the contract in question was entered into and performed before the appointed day. The suit was, however decreed only in part for Rs. 6,78,667‑0‑6 with proportionate costs and the plaintiff's claims on account of loss and damage suffered and interest by way of damages were disallowed. The defendant preferred an appeal against the said decree passed by the trial court. The plaintiff also filed a cross -objection against the refusal of the trial court to decree his claim in full. In the course of the hearing of the appeal by a Division Bench of this Court, it was contended on behalf of the defendant- appellant that the contract in the present case came under Article 8 (1) (b) of the Indian Independence (Rights, Property and Liabilities) Order, 1947 and that the liability was of the Indian Union. In support of this view, reliance was placed on the case of Haripada Roy Choudhury and another v. Province of East Bengal and another (6 D L R 131), decided by another Division Bench of this Court. In the said case of Haripada Roy Choudhury the claim was for the recovery of certain amounts by way of rebate on freight claimed by the plaintiffs in the said suit under a contract for carriage of goods. The plaintiffs in that case were appointed wholesale agents in 1944, by the S. D. O. of Habiganj‑in‑Charge of Supplies, on behalf of the Government of Assam: They were under their contract directed to take delivery of goods from the procuring agents of the Government after depositing the requisite price for each consignment in the Sub‑Treasury at Habiganj and to carry the goods from the procuring agents' godowns at Habiganj and Azmiriganj to Madhabpur for distribution among the retailers of the locality and for this they were to be paid a rebate at the rate of Rs. 1‑11‑0 per maund on account of carrying posts. The question there was as to whether the liability under clause (4) of Article 8 of the Indian Independence (Rights, Property and Liabilities) Order, 1947 had devolved on the Province of East Bengal. Under the said clause the contractual liabilities were to devolve on the Province of. East Bengal, if the contract was for purposes which, as from the 5th of August 1947, were exclusively purposes of the Province of East Bengal. The Division Bench in the course of its judgment observed at page 134 as follow : ‑ "But we are unable to see how it can be said that the con tract for carriage of ration entered into in 1944 and performed before the Dominion of Pakistan came into existence can be held as from the "appointed day" to be one that is for purposes which from that day are exclusively the purposes of East Bengal, a Province forming a part of the. Dominion of Pakistan " The Division Bench hearing the appeal out of which the present reference arises, found itself unable to agree with this observation of another Division Bench of this Court and felt that the view taken by the Indian Courts in the cases of the Union of India v. Chinubhai Jehsingbhai and others (A I R 1953 Bom. 13) and Union of India v. Messrs Chaman Lal Loona & Co., (A I R 1957 S C 652), should be prefer red. Hence this reference to the Full Bench on the following question :‑ "Whether the contract entered into by the plaintiff with the Government of India before the appointed day in connection with the Burma Refugee Organisation is for exclusive purpose of Pakistan and whether the money said to have been due to the plaintiff' on account of that contract is payable by the Govern ment of Pakistan after partition, in other words, if the contract as from the appointed day is for the exclusive purposes of Pakistan within the meaning of Article 8 (1) (a) of the Indian Independence (Rights, Property and Liabilities) Order, 1947." The question as framed unfortunately raises a mixed question of law and fact. The answer to the question as framed must necessarily depend upon what is, the purpose of a given contract and must necessarily vary in each individual case. Since the whole case is not before us we propose to deal only with the general aspect of the question. A review of the decisions of Courts both in India and Pakistan would appear to indicate that there is no real dispute as to the interpretation of Article 8 (1) (a) of the Indian Independence (Rights, Property and Liabilities) Order, 1947, or of the corresponding clauses in the other sub‑Articles of the said Article. The Division Bench making this reference also agreed that the principle enunciated in the case of Haripada Roy Choudhury and another v. Province of East Bengal and another had been correctly enunciated and was in accordance with the said Article. The main difficulty, however, appears to have arisen in determining as to what is to be understood by the words the purpose of the contract. Thus, in the case of Haripada Roy Choudhury the Division Bench took the view that if a contract was performed before the Dominion of Pakistan came into existence, the purpose of such a contract, as from the appointed day, could not be the exclusive purpose of' the Dominion of Pakistan. Again, in the case of Hazi Emdad Ali and Sons v. The Dominion of Pakistan, Karachi now the Federation of Pakistan and another. (PLR5Dacca91), another Division Bench of this Court took the view that a contract made by the Bengal and Assam Railway for transmission of goods from one Station to another, could not, after the appointed day, become a contract for the exclusive pur poses of the Federation of Pakistan, even though both the Stations, between which the goods were to be carried, were situated in East Pakistan, as the entire Railway system in question had not become the exclusive property of the Dominion of Pakistan after the appointed day. In more or less similar circumstances as in the last mentioned case a learned Judge of the Calcutta High Court sitting singly also took the same view in the case of Union of India v. Loke Nath Saha (55CWN 195). On the other hand, in the case of the Province of West Bengal v. Midanapur Zemindary Co. Ltd. (54 C W N 677), a Division Bench of the Calcutta High Court took the view that arrears of rent due for a house situated in West Bengal for the period, April 1946 to August 1946, as also the period, April and May 1948 was the liability of the Province of West Bengal, as the house in question was situated in the' district of Murshidabad and served as a Hospital and there was no evidence that the Hospital served any area other than the areas situated in the district of Murshidabad. Again, in the case of Sree Sree Iswar Madan Gopal Jiu arid others w. Province of West Bengal (54 C W N 807), another Division Bench of the Calcutta High Court also took the view that in respect of the acquisition of land situated in the Sub‑Division of Asansol in the district of Burdwan. the liability was the liability of the Province of West Bengal, and it was the Province of West Bengal which should be substituted in the proceedings for the non‑existing Province of Bengal. In the case of Elahi Bux v. Union of India (A I R 1952 Cal. 471) the liabilities under a contract with the military authorities entered in or about November 1943 for the construction of works at Comilla, which fell in Pakistan after the 15th of August 1947, were held to be the liabilities of the Dominion of Pakistan, as the work was done at Comilla which is in Pakistan and that this would be also in the case of past liabilities which had already accrued due. In the case of Union of India v. Chinubhoi Jeshingbhai and others, a Division Bench of the Bombay High Court held that :‑ "Once it is conceded that property belongs to a particular State or Dominion and the State or the Dominion enters into a contract with a third party in respect of that property or goods, then the contract in its very nature is for the purpose of that State or Dominion." Hence a contract for the recovery of damages suffered on account of breach of a contract, to deliver certain textile goods lying at Lahore, entered into prior to partition between the plaintiff in the said suit and the Ordinance Parachute Factory in Lahore, was held to be contract for purpose; which as from the 15th August 1947 were the exclusive purposes of Pakistan. The principles enunciated in the last four cases mentioned above were approved by the Supreme Court of India in the cases of The State of West Bengal v. Serajuddin Batley (A I R 1954 S C 193) and Union of India v. Messrs Chaman Lal Loona & Co. In the last men tioned case the Supreme Court of India accepted in toto the principle enunciated by Chagla C. J. in the case of the Union of India v. Chinubhai Jeshingbhai and others. The learned Chief Justice of the Bombay High Court in the said case posed the following question for his answer, namely, as to what is the proper meaning to be given to the expression "a contract for the exclusive purpose of the Dominion of Pakistan," and in answer said that "the test that must be applied is an artificial test and the test may be either, if the contract had been entered into on 15‑8‑47, whether it would have been a contract for the purposes of the Dominion of Pakistan or if the Dominion of Pakistan had been in existence when the contract was entered into, whether it would have been a contract for the purposes of Pakistan." Similar view appears also to have been taken by the courts in West Pakistan. Thus, in the case of All‑India Live Stock Agency v. The Federation of Pakistan (P L D 1953 Sind 6), a learned Judge of the Sind Chief Court sitting singly took the view that the liabilities under an agreement made on behalf of the Governor‑General‑in-Council through the Assistant Director, Military Dairy Farms, Northern Circle, for supplies of much and in‑calf cows made to the Military Farm at Malir, were the liabilities of the Federation of Pakistan, as the: contract was for a purpose which, as from the 15th of August 1947, was the exclusive purpose of the Dominion of Pakistan. In the case of Federation of Pakistan v. The All India Live- Stock Agency and the Dominion of India (P L D 1957 Kar. 222), a Division Bench of the West Pakistan High Court affirming the last mentioned decision on appeal held that the purpose was exclusively the purpose of the Dominion of Pakistan irrespective of the nationality of the troops stationed at Malir. In construing the expression "a contract for the exclusive' purpose of the Dominion of Pakistan", we feel it necessary first to determine as to what is meant by a purpose of a contract. It has been suggested before us that the purpose must have some relation to the ultimate benefit to be derived from the contract or the ultimate object to be attained by the contract. The benefit theory was also canvassed in the Bombay case mentioned above but did not find favour with Chagla, C. J Indeed the only case in which it appears to have been applied is the case of T. Andrews v. The Federation of Pakistan (P L D 1953 Lah. 266). There it was observed that "the effect of the clause is that even if there was the slightest intermingl ing of, purposes, if the slightest benefit of the contract was going to that territory which is now India, the liability would be that of the Indian Dominion." We are of the opinion that in order to determine the purpose of a contract we must judge the contract by its character ex facie and not by what the parties may do with the fruits of it. Thus we are to look rather to the object or the subject‑matter of the contract and not to the reasons or motives which prompted it looked at in this way it seems to that the purpose of a contract must be the immediate object sought to be achieved thereby and not the benefit to be derived therefrom. Having thus determined as to what is meant by the purpose of a contract it seems to us to be clear upon the language of the Article itself that some kind of artificial test must be applied, for obviously the Dominion of Pakistan was not in existence prior to the 15th of August, 1947, and all contracts dealt with under the said Article must have been made before the said date with un divided India. Hence, if we have to determine as to whether the purpose or the subject‑matter of such a contract is one which has or has not become the exclusive purpose of the Dominion of Pakistan, we must necessarily consider as to what would have been the position if either the contract had been entered into after the 15th of August 1947, or Pakistan had come into existence at the date the contract was entered into. By applying this legal fiction if we find that the subject‑matte of the contract is one in which after the 15th of August 1947, only the Dominion of Pakistan could be interested, then the liability under the contract would be a liability which in terms of Article 8 (I) (a) of the Indian Independence (Rights, Property and Liabili ties) Order, 1947 would be a liability arising under a contract the purposes whereof became exclusively the purposes of the Dominion of Pakistan after the 15th August 1947. In all other cases under Article 8 (1) (b) of the said Order the liability would be the liability of the Dominion of India. This is also the test which was approved by the Supreme Court of India in the decision Union of India v. Messrs Chaman Lal Loona & Co. We have next to consider another argument, namely, as to whether there would be any difference if the contract was one which was wholly executed before the 15th of August 1947. Here also we must point out that strictly speaking, a contract which places mutual obligations on the contracting parties cannot be treated as wholly executed until the respective obligations have been discharged. Thus, in a contract for the supply of goods the contractor has to make the supplies and the other contracting party has to make payments for the said supplies and until the payments have been made the contract is not at an end and the liability arising under the said contract is still subsisting. If the contract has been wholly performed, that is to say; the supplies made and payments received, then there is nothing outstanding and no question of any liability accruing thereunder arises. Apart from this, we feel that the language of the Article itself seems to contemplate cases of contracts entered into prior to the 15th of August, 1947, in respect of which liabilities are sub sisting. The use of the words "all rights and liabilities which have accrued or may accrue under any such contract, seem to indicate that both classes of contracts, namely, executed as well as executory contracts are contemplated under the said Article, that is to say, that if the consideration for the contract is executed on one side, only, then there will be a subsisting right of one side and an out‑ standing liability on the other, and the contract will not be one which has been fully and completely, performed or satisfied on both sides. From this point of view, we are unable to appreciate the observation of the Division Bench of this Court in the earlier case of Haripada Roy Choudhury and others v. Province of East Bengal, to which exception has been taken by the Division Bench making the present reference. The contract under consideration in the said case of Haripada Roy Choudhury was one which had not been wholly performed by both sides but the liability to pay the rebates was still subsisting. If by the said observation the said Division Bench intended to lay down any rule of law that in a case of contracts if the contract had been performed by one side only prior to 15‑8‑47, then the contract could not be one which could be considered to be in any circumstance for the exclusive purpose of the Province of East Pakistan, or Pakistan, as the case may be, then we are unable to agree with this points of view and must hold that the Division Bench went too far. There is in our view, also intrinsic evidence in the said Indian 'Independence (Rights, Property and Liabilities) Order, 1947 itself to show that the distribution of liabilities that was being made, was not restricted to liabilities arising under contracts which were still executory on both sides. Clause (5) of Article 8 itself indicates that under the said Article a liability to satisfy an order or award made by a Court or other tribunal in proceedings relating to the contract was to be deemed to be included "in the liabilities which have accrued or may accrue under any contract." This is a clear indication that a contract which has already been performed by one of the parties thereto and in respect of which a liability has arisen and been adjudicated upon by a Court or tribunal, before the 15th August 1947, is still to be regarded as a liability which had accrued under the contract itself and be divided in the terms of the said Article

8. It remains for us now to consider another argument advanced on behalf of the Government by the learned Government Pleader. According to him, since the Rights, Property and Liabilities Order itself was enacted in exercise of the powers given by section 9 of the Indian Independence Act, 1947, and subsection (3) of section 9 of the said Act provided that "any order made under this section may be made so as to be retrospective to any date not earlier than the 3rd June 1947", a liability which had accrued before the 3rd day of June 1947, could not possibly be distributed under the scheme of the Rights, Property and Liabilities Order. As we have already stated, in our view, unless the contract is wholly performed, that is to say, both sides have performed their respective parts, there is a liability subsisting and no question of giving any retrospective effect arises. The fact that in the present case all supplies or works in respect of which the plaintiff had preferred his claim were either supplied or done before the 3rd day of June 1947, does not appear to us to be very relevant for if the claim of the plaintiff is found to be just, then the liability of the other con tracting party must be held to be one which was subsisting on the 15th of August 1947 and had to be discharged by the country upon which the liability had devolved in terms of the said Order of 1947. In these circumstances, our answer to the question formulated by the Division Bench is that if, according to the tests indicated, by us earlier, the immediate object or subject‑matter of the con tract is one which, as from the appointed day, namely the 15th of August 1947, has become an exclusive purpose of Pakistan, then the liability which may be subsisting on that day would be the liability of the Dominion of Pakistan within the meaning of Article 8 (1) (a) of the Indian Independence (Rights, Property and' Liabilities) Order, 1947. HASAN, J.‑I agree. SATTAR, J.‑I agree. K. B. A. Answer accordingly.