N. Nagendra Rao and Co. v. State of Andhra Pradesh

Supreme Court of India · 6 September 1994 · 2 judges

The State is vicariously liable for the negligence of its officers in discharging statutory duties under the Essential Commodities Act, and cannot plead sovereign immunity; the owner of seized goods that deteriorated in custody was entitled to their price.

Facts

The appellant dealt in fertiliser and foodgrains under licence. On 11 August 1975 large stocks, including non-essential goods, were seized from its premises under the Essential Commodities Act, 1955. The fertiliser was placed with the Assistant Agricultural Officer for distribution, but he took no steps to dispose of it despite the appellant's repeated requests. In June 1976 the Collector confiscated only a nominal part and released the rest, but delivery was offered only in March 1977, by which time the stock had deteriorated in quality and quantity. The appellant sued for its value. The trial court found the officer negligent and decreed the suit in part. The High Court did not disturb the finding of negligence but dismissed the suit, relying on Kasturi Lal and holding that the seizure was an exercise of sovereign and statutory power.

Questions before the Court

Whether the State is vicariously liable for the negligence of its officers in discharging statutory duties under the Essential Commodities Act, or can plead sovereign immunity.
Whether seizure in exercise of statutory power, and confiscation of part of the goods, frees the State from liability for loss to the goods directed to be returned.

What the Court held

Once goods are seized, their proper maintenance and early disposal is a statutory duty. In Section 6-A(2) 'may' is to be read as 'shall', and the Collector must order sale of goods that fall within the sub-section.
Under Section 6-C(2) the duty to return seized goods is not discharged by offering them in whatever condition they are. Confiscation of part does not affect the owner's right to the rest; goods rendered useless by negligence cease to be an essential commodity and the owner is entitled to their price with interest.
Sovereignty and acts of State are different concepts. The defence of act of State is not available where the State or its officers act negligently in discharge of statutory duties.
Apart from primary and inalienable functions such as administration of justice, maintenance of law and order and repression of crime, the State cannot claim immunity. If a suit lies against the negligent officer personally, it lies against the State.
Kasturi Lal applies only to rare and limited cases where the authority acts as a delegate of a function for which it cannot be sued. Search and seizure under the Essential Commodities Act is not such a function, so the trial court's decree was restored.

Why it matters

The judgment confines Kasturi Lal to rare and limited cases involving primary and inalienable functions of the State, and holds that the distinction between sovereign and non-sovereign functions no longer gives immunity for negligence of officers in discharging statutory duties. It treats sovereignty as vesting in the people and brings to the attention of the appropriate authority the need for a law on the vicarious liability of the State.

In the Court's words

Copied from the official judgment; each passage links to its page.

“'Sovereignty' and 'acts of State' are thus two different concepts. The former vests in a person or body which is independent and supreme both externally and internally whereas latter may be act done by a delegate of sovereign within the limits of power vested in him which cannot be questioned in a Municipal Court.”

R.M. Sahai, J.Page 32 of the judgment

“The liability of the officer personally was not doubted even in Viscount Canterbury (supra). But the Crown was held immune on doctrine of sovereign immunity. Since the doctrine has become outdated and sovereignty now vests in the people, the State cannot claim any immunity and if a suit is maintainable against the officer personally, then there is no reason to hold that it would not be maintainable against the State.”

R.M. Sahai, J.Page 37 of the judgment

“The Act deals with persons indulging in hoarding and black marketing. Any power for regulating and controlling the essential commodities and the delegation of power to authorised officers to inspect, search and seize the property for carrying out the object of the State cannot be a power for negligent exercise of which the State can claim immunity. No constitutional system can, either on State necessity or public policy, condone negligent functioning of the State or its officers.”

R.M. Sahai, J.Page 38 of the judgment

“If the commodity ceased to be of any use or is rendered waste due to its deterioration or rusting, it ceases to be commodity much less essential commodity. Therefore, if the commodity of the appellant which was seized became useless due to negligence of the officers it ceased to be an essential commodity and the appellant was well within its rights to claim that since it was not possible for the authorities to return the essential commodity seized by them, it was entitled to be paid the price thereof as if the essential commodity had been sold to the Government.”

R.M. Sahai, J.Page 40 of the judgment

Provisions interpreted

Section 6-A(2), Essential Commodities Act, 1955
Section 6-C(2), Essential Commodities Act, 1955
Article 300, Constitution
Section 65, Government of India Act, 1858

Related judgments

Explains Kasturilal Ralia Ram Jain v. State of Uttar Pradesh (1964)“Ratio of Kasturi Lal (supra) is available to those rare and limited” (page 38)

Case and bench

Parties: N. Nagendra Rao and Co. v. State of Andhra Pradesh
Case: Civil Appeal No. 3856 of 1988
Decided: 6 September 1994
Bench: R.M. Sahai, J, B.L. Hansaria, J
Opinions: Unanimous. The Judgment of the Court was delivered by R.M. Sahai, J.

Questions on this case

From free Law Maker papers. Try each one before you open the answer.

Question 1 · Law of Torts Practice Set 1
Assertion (A): In N. Nagendra Rao & Co. v. State of A.P. (1994), the State was held liable for loss caused to the owner by the negligence of its officers in dealing with goods seized under the Essential Commodities Act, 1955. Reason (R): The Court observed that, barring primary and inalienable functions such as administration of justice, maintenance of law and order and repression of crime, the State cannot claim immunity.
1. A. Both A and R are true, and R is the correct explanation of A
2. B. Both A and R are true, but R is not the correct explanation of A
3. C. A is false, but R is true
4. D. A is true, but R is false
Show the answer
A. Both A and R are true, and R is the correct explanation of A
In Nagendra Rao ((1994) 6 SCC 205) the Supreme Court reversed the High Court, which had applied Kasturilal, and held the State liable for the negligence of its officers in the discharge of statutory duties. Its reasoning was that, apart from functions such as administration of justice, law and order and repression of crime, the State cannot claim immunity.