T. L. Venkatarama Aiyar, J. - (1.) (On behalf of S. R. Das, C. J., S. K. Das and Gajendragadkar JJ. and himself.) Messrs. Dalmia Dadri Cement Co. Ltd. which is the appellant in Civil Appeal No. 230 of 1954 and the petitioner in Petition No. 276 of 1953, is a public Company engaged in the manufacture and sale of cement at a place called Dadri situate in what was once the independent State of Jind. On April 1, 1938, one Shanti Prasad Jain, a promoter of the above company, obtained certain concessions from the Ruler of Jind under an agreement, Ex. A, and as it is this document that forms the basis of the present claim of the appellant, it is necessary to refer to the material terms thereof. Clause (1) of the agreement grants to the licensee, Shanti Prasad Jain, "the sole and exclusive monopoly right of manufacturing cement in the Jind State", and for that purpose he is authorised in Cl. (2) to "win and work all quarries, strata, seams and beds of kankar, rorey, limestone or other like materials". Under Cl. (7), the licence is to last for a period of 25 years with option for successive renewals. Clause (10) requires that a public limited company should be formed before July 21, 1936, to work the concessions, and that it should be registered in the Jind State. Under Cl. (11), the State is to be allotted 6 per cent. cumulative preference shares fully paid up of the face value of rupees one lac and ordinary shares fully paid up of the total face value of Rs. 50,000 without any payment whatsoever. Then there are provisions for the payment of royalty to the State and sale of cement at concession rates of local consumers. Clause (2)3 is very material for the present dispute, and is as follows: "The Company shall be assessed to income-tax in accordance with the State procedure but the rate of income-tax shall always be four per cent up to a limit of the income of rupees five lacs and five per cent. on such income as is in excess of rupees five lacs......." Clause (24) grants exemption from export, import and other duties excepting octroi. Clause (37) provides for settlement of all disputes between the parties by arbitration.
(2.) In accordance with the terms set out above, the appellant Company was duly incorporated in the Jind State, and on May 27, 1938, Shanti Prasad Jain executed in its favour a deed agreeing to transfer all "his rights, privileges and obligations" under Ex. A. The appellant claims that it has become in this wise entitled as assignee of the licensee to all the benefits granted under Ex. A. The contention was raised by the respondent that the deed dated May 27, 1938, does not itself purport to assign the rights under the license, Ex. A but merely agrees to do so, and that in the absence of a further deed transferring those rights, the appellant could not claim the rights of assignee. But Cl. (35) expressly provides that "the licensee shall transfer his rights to the proposed Company on its formation", and after the appellant was incorporated, the State had throughout recognised it as the person entitled to the rights and subject to the obligations under the license and realised royalty and levied income-tax in accordance with the provisions of Ex. A. This objection was taken for the first time only in the Writ Petition No.276 of 1953 in this Court. It is stated for the appellant - and that is not controverted for the respondent - that under the law of Jind State an assignment need not be in writing, and that being so, it is open to us to infer such assignment from the conduct of the parties. We must accordingly decide these cases on the footing that the rights under the license. Ex. A, dated 1-4-1938, had become vested in the appellant by assignment.
(3.) On August, 15, 1947, India became independent, and on the same date, the Ruler of Jind signed an Instrument of Accession ceding to the Government of India power to legislate with respect to Defence, External Affairs and Communications. On May 5, 1948, eight of the Rulers of States in East Punjab including Jind entered into a Covenant for the merger of their territories into one State, called the Patiala and East Punjab States Union. For brevity, this State will hereafter be referred to as the Patiala Union. Article VI of the Covenant on which the appellant relies in support of its claim is as follows: "The Ruler of each Covenanting State shall, as soon as may be practicable, and in any event not later than the 20th August, 1948, make over the administration of his State to the Raj Pramukh; and thereupon, (a) all rights, authority and jurisdiction belonging to the Ruler which appertain, or are incidental to the Government of the Covenanting State shall vest in the Union and shall hereafter be exercisable only as provided by this Covenant or by the Constitution to be framed thereunder; (b) all duties and obligations of the Ruler pertaining or incidental to the Government of the Covenanting State shall devolve on the Union and shall be discharged by it; (c) all the assets and liabilities of the Covenanting State "shall be the assets and liabilities of the Union; and (d) the military forces, if any, of the Covenanting State shall become the military forces of the Union". Article X provides that a Constituent Assembly should be formed as early as practicable, and that it should frame a Constitution for the State, and that until the Constitution is so framed, the Rajpramukh is to have power to make and promulgate Ordinances for the peace and good government of the Union. Under Art. XVI, the Union "guarantees either the continuance in service of the permanent members of the public services of each of the Covenanting States on conditions which will be not less advantageous than those on which they were serving on the 1st February, 1948, or the payment of reasonable compensation or retirement on proportionate pension.";