IN-Abs/test-data/summary/1762.txt

In 1947, the Dholpur State acceded to the Dominion of India.
Later on, it was merged with other States and as a result of that merger, the Matsya Union was formed on March 18, 1948.
One of the provisions of the merger agreement was that the existing laws in the Covenanting States were to be continued till such time as they were modified or repealed by the new State and that all the assets and liabilities of the Covenanting States were taken over by the new State.
Later on, the Matsya Union was merged with the United State of Rajasthan which had come into existence from April 7, 1949.
A similar provision with regard to the recognition of the liabilities of the Covenanting States by the new State was also provided.
On January 26, 1950, Part B State of Rajasthan came into existence.
In the four appeals the respondents secured permits from the Dholpur State for the export of certain commodities and they had to pay export duties in advance.
As the respondents could not export the full quantity for which they had secured permits they asked the appellant to refund the excess export duty and when the latter refused to do so, filed suits for refund of the same with interest.
The defence taken up by the appellant was that it was not bound by any liability which might have arisen against the former State of Dholpur.
It was a new Sovereign and was not bound by any liability of the former State of Dholpur unless it chose to recognise the obligation but no such obligation was recognised in the present case.
One suit was dismissed by the trial court and other three were decreed.
The appeals of the State to the District Judge were substantially dismissed while the appeal in the first suit by the plaintiff was substantially allowed.
The State filed appeals to the High Court.
After referring the matter to the Full Bench, a Division Ben oh of the High Court dismissed the appeals filed by the State.
The Appellant came to this Court after obtaining certificate of fitness from the High Court.
The only question raised before this Court was about the liability of the State of Rajasthan under article 295(2) of the Constitution in respect of the obligations of the former State of Dholpur which came to be included in the State of Rajasthan.
Dismissing the appeals, Held, that the new State by continuing the old laws without change till they were repealed or altered, recognised that it was liable in the same way as the merging State would have been in any case.
Throughout the process of integration from 1948 to 1950, the new Sovereign must be taken to have recognised the rights of the subjects and undertaken the liabilities 175 of the old State.
So under article 295(2) of the Constitution, the State of Rajasthan was liable to meet the liabilities of all old States which eventually were merged into it.
Moreover, there was nothing to show that the right to claim the refund was taken away by any law competently passed.
M/s Dalmia Dadri Cement Co. Limited vs The Commissioner of Income tax [1959], S.C.R. 729 and Maharaja Shree Umaid Mill Limited vs Union of India, A.I.R. 1953, S.C. 953 referred to.