Andhra Pradesh High Court: State Liable for Stolen Seized Goods; Compensation Ordered for Police Negligence

ORDER

R. Raghunandan Rao, J.- Heard Sri G. Narendra Chetty learned counsel, appearing for the petitioner, Smt. Jayanthi, the learned Government Pleader for Home and the learned Government Pleader of Commercial Tax, appearing for the respondents.

2. The petitioner is doing business of Gold and Silver Bullion Metals and was registered as a registered person under the CGST and SGST Acts, 2017, at Salem, in the State of Tamilnadu. On 27.01.2021, 105 kgs of pure Silver Lumps, being transported from Hyderabad to Salem, were seized, by the officials of the 2^nd respondent-police station. Apart from this, cash of Rs.2,05,000/- had also been seized. Subsequently, said silver and cash were ordered to be confiscated and an option of paying a fine of Rs.35 lakhs in lieu of confiscation, was also given to the petitioner. The aforesaid fine, was calculated by taking the rate of silver at Rs.66,667/- per kg. This order of confiscation was challenged by the petitioner, by way of W.P.No.4782 of 2021 before this Court. This Writ Petition came to be disposed of, on 21.06.2021, with liberty to the petitioner to seek appropriate appellate remedy. The appeal filed by the petitioner, came to be dismissed on 24.11.2022 and further appeal to the GST Tribunal was not filed as the GST Tribunal has not yet come into existence. In view of these developments, the petitioner paid a sum of Rs.39,20,000/- which was the tax, penalty and fine levied by the 1st respondent. This payment was made on 21.03.2023. After such payment, the 1^st respondent issued a release order requesting the 2^nd respondent to release the goods i.e., 105 kgs Silver and the seized cash to the petitioner.

3. The 2^nd respondent, informed the petitioner, when he was approached for release of the silver and cash, that both the silver and cash had been stolen from the custody of the 2^nd respondent, by the staff of 2^nd respondent, and certain quantities of silver and cash had been subsequently recovered from these persons and were, at that stage, in the possession of the First Class Judicial Magistrate, Special Mobile Court, Kurnool. The petitioner then approached the First Class Magistrate, Kurnool, under the provisions of the Criminal Procedure Code, and the silver lumps and cash of Rs.10 lakhs which had been recovered from the accused persons were directed to be released, in favour of the petitioner. However, the petitioner was given only 81.567 kgs of silver and cash of Rs.10 lakhs, against the quantity of 105 kgs of silver and cash of Rs.2,05,000/- which had been seized. The petitioner has also raised a contention that the silver seized from his son was 100% pure silver while 54.567 kgs of the silver returned to the petitioner contained only 60% silver and 27 kgs was 100% silver. The petitioner, initiated legal notices against the official respondents for being compensated for the lost of silver, on account of the theft carried out in the police station.

4. As the petitioner was not being compensated for the said losses, the petitioner has approached this Court, by way of the present Writ Petition, seeking a direction to the respondent to return 44.123 kgs of pure silver or to pay market value of such silver. The petitioner calculated the balance silver that has to be returned to the petitioner at 44.123 kgs by fixing the impurity in 54.56 kgs at 40% and calculating the total extent of silver that would be needed to be replaced.

5. Sri G. Narendra Chetty, learned counsel for the petitioner, relying upon the judgments of Achutrao Haribhau Khodwa v. State of Maharashtra (1996) 2 SCC 634 (SC), UOI v. Sancheti Food Products Ltd. (2015) 15 SCC 447 (SC), State of Rajasthan v. Vidyawati 1962 SCC Online SC 144, State of Maharashtra v. Kanchanmala Vijaysing Shrike (1995) 5 SCC 659 (SC) and N. Nagendra Rao & Co. v. State of Andhra Pradesh MANU/SC/0530/1994 contends that the silver seized from the son of the petitioner which had been lost by the 2nd respondent, on account of the theft of such silver would have to be compensated.

6. The learned Government Pleader, on the other hand, relies upon the Judgment of the Hon’ble Supreme Court in the case of Kasturi Lal Ralia Ram Jain v. State of U.P. AIR 1965 SC 1039 to contend that the seizure of silver by the officials of the 2^nd respondent was in exercise of the sovereign power of the State and no claim for compensation, on account of any loss suffered on account of such exercise of sovereign power, would be maintainable before a Court.

7. In Kasturi lal Ralia Ram Jain (supra) case, the partner of a firm was detained in Meerut, along with gold, silver and other goods that he had brought with him to sell in Meerut. However, the gold seized from him was not returned even after he had obtained bail and was entitled for such return of the gold. Thereafter, a suit was filed for damages and interest on account of the lost gold. The appeals filed against the orders of this case, reached the Hon’ble Supreme Court. In the Hon’ble Supreme Court a defense was taken that the arrest of the person and seizure of the gold and other goods was in pursuance of a sovereign power and held that the claim cannot be sustained.

8. In the case of Challa Ramakrishna Reddy v. State of A.P. AIR 1989 AP 235/(1989) 1 AP LJ (HC) 398 this issue had come up for consideration again. In this case, the prisoner who was in the custody of the police in sub-jail, Koilakuntla was killed within the jail. The sons and wife of the deceased person filed a suit for damages on the ground that the death of the deceased person had occurred on account of the negligence, malfeasance and misfeasance of the State and its subordinates. One of the Issues framed in the suit and subsequent appeal was whether compensation can be denied on the ground that guarding the jail is a sovereign function of the State. The judgment of the Hon’ble Supreme Court in Kasturi lal Ralia Ram Jain (supra) case was also pressed into service in favour of this proposition. A Division Bench, of the erstwhile High Court of Judicature of Andhra Pradesh, had held that though the principle laid down in the said judgment would be binding, the same would not come into play when there is violation of Article 21 of the Constitution of India which guarantees every citizen the right to life and liberty. The said observations are extracted below:

17. So far neither the Legislature of this State nor the Parliament has made any law as contemplated by clause (1) of Art. 300. The position today, therefore, is that the State Government would be liable for damages in this case if such a suit could be filed against the corresponding Province which inevitably brings in the previous enactments on the subject, and the dual nature of the East India Company. In short, the position obtaining today, in the words of the Supreme Court in Kasturi Lal v. State of U.P. (4) AIR 1965 SC 1039 is “(there is) a material distinction between acts committed by the servants employed by the State where such acts are referable to the exercise of sovereign powers delegated to public servants and acts committed by public servants which are not referable to the delegation of any sovereign powers. If a tortious act is committed by a public servant and it gives rise to a claim for damages, the question to ask is; was the tortious act committed by the public servant in discharge of statutory functions which are referable to and ultimately based on, the delegation of the sovereign powers of the State to such public servant ? If the answer is in the affirmative, the action for damages for loss caused by such tortious act will not lie. On the other hand, if the tortious act has been committed by a public servant in discharge of duties assigned to him not by virtue of the delegation of any sovereign power, an action for damages would lie. The act of the public servant committed by him during the course of his employment is in this category of cases, an act of a servant who might have been employed by a private individual for the same purpose.”. The Court emphasized the distinction between Sovereign functions’ and „non-sovereign functions’ particularly at the present time when in pursuit of the welfare ideal, the Central and State Governments are entering into many commercial and other undertakings and activities “which have no relation with the traditional concept of governmental activities in which the exercise of sovereign power is involved”. The Court observed that it is necessary to limit the area of these affairs of the State in relation to the exercise of sovereign power, so that if acts are committed by Government employees in relation to other activities which may be conveniently described as non-governmental or nonsovereign citizens who have a cause of action for damages should not be precluded from making their claim against the State. It is equally relevant to notice the facts of this case. One Ralia Ram, a partner of the appellant firm was taken into custody by three Police Constables while he was passing through a street in Meerut. His belongings were searched, he was taken to Police Station and detained there. Certain quantity of gold and silver was seized from him and kept in police custody. On the next day he was released and though the other articles seized from him were returned to him the gold seized from him was not returned. A suit was accordingly instituted for recovery of the said gold or its value. The defence was that the gold seized from Ralia Ram was kept in the Police Malkhana under the charge of the Head Constable who misappropriated the same and fled to Pakistan. It was pleaded that even if it is found that the Police Officers were negligent in discharge of their duties, the State could not be held liable for the loss resulting from such negligence inasmuch as the negligence on the part of the police officers occurred while they were discharging their statutory duties, relatable to sovereign functions of the State. The Supreme Court found that the police officers were negligent but held that the State is not liable inasmuch as the power to arrest a person to search him and to seize the property found with him is a power conferred upon the officers by statute, and that the said power can be properly characterized as a sovereign power Having so held, the Supreme Court observed that it is high time the Legislatures in India seriously consider whether they should not pass legislative enactments to regulate and control their claim for immunity in cases like the one before the Supreme Court on the same lines as has been done in England by the Crown Proceedings Act 1947. We note with regret that to this day no such Act has been made though more than 23 years have passed by since the said observations were made by the Supreme Court.

20. Now there can be little doubt that the deceased and P.W.1 were arrested by the police officers of the State in the course of investigation into an alleged crime, and they were detained in jail under the orders of a Magistrate. All this is referable to the sovereign power, or function, as may be called, of the State. The obligation to ensure the safety of the prisoners, enjoined upon the State by Rule 48 of the Madras Prisons Rules, is incidental to the said sovereign power. If we apply the principle of Kasturi Lal (supra), it is evident that the suit must fail notwithstanding our finding of negligence on the part of prison officials. Indeed, that is what the trial Court has done. The question, however, arises whether this immunity of the State overrides the right to life and liberty guaranteed by Art. 21 of the Constitution? In short, whether it is open to the State to deprive a citizen of his life and liberty otherwise than in accordance with the procedure prescribed by law and yet claim an immunity on the ground that the said deprivation of life occurred while the officers of the Slate were exercising the sovereign power of the State?

28. It is contended by the learned Addl. Advocate-General, appearing for the respondents-defendants, that in the three cases before the Supreme Court, referred to above, the State did not put forward the defence of sovereign functions, and that, moreover, they were cases of writ petitions under Article 32 of the Constitution, which clothes the Supreme Court with very wide powers. He submitted that what can be done by the Supreme Court under Art. 32 cannot be done by a Civil Court, We are not impressed by this argument. It is true that in none of the three cases was the defence of sovereign functions pleaded. We must presume that the said defence was advisedly not put forward. Moreover, we see no distinction in principle. We are equally of the view that the concept of immunity in respect of sovereign functions, implicit in clause (1) of Art. 300, cannot be recognized as an exception to Article 21. The fundamental rights are sacrosanct. They have been variously described as basic, inalienable, and indefeasible. The founding-fathers incorporated the exceptions in the Articles themselves – wherever they were found advisable, or appropriate. No such exception has been incorporated in Article 21, and we are not prepared to read the archaic concept of immunity of sovereign functions, incorporated in Art. 300(1), as an exception to Art. 21. True it is that the Constitution must be read as an integrated whole; but, since the right guaranteed by Art. 21 is too fundamental and basic to admit of any compromise, we are not prepared to read any exception into it by a process of interpretation. We must presume that, if the founding-fathers intended to provide any exception, they would have said so specifically in Part-Ill itself.

29. We are perfectly aware that the principle adumbrated herein opens up a new vista for individual claims for damages against the State. It may add to the present, day difficult financial position of the State. But we are of the opinion that such a remedy is not only. salutary but essential for. Good Government and for ensuring Rule of law. The officials of the Government act in the name of, and for and on behalf of the State it is but just that State is made liable for their acts and defaults. It is no answer to say that the aggrieved person, can proceed against the official concerned that is neither a practicable nor efficacious remedy, Firstly, the official does not act in his individual capacity, but as an agent or representative of the State. A civil remedy against an official may very often be a case of chasing a mirage and a criminal action is no solace. Just as it is necessary to check „evasion and violation of law on the part of citizens, it is equally necessary to ensure that the State officials do not act with gross negligence and do not abuse their powers, to the detriment of life and liberty of the citizens. Both are equally important. State power does not confer a licence upon its officials to act contrary to law, or to grossly negligent in their duties, to the detriment of life and liberty of the citizens- So long as the officials act fairly and with reasonable care, no action can lie. Only where they abuse their powers, act with gross negligence, resulting in deprivation of life and liberty of the citizens, does the State become liable for compensation.

9. There have been a number of judgments, of the Hon’ble Supreme Court, wherein the concept of “Constitutional tort” was invoked and compensation had been granted, even in cases where the interests of private persons had been affected. A Constitution bench, of the Hon’be Supreme Court in Kaushal Kishor v. State of U.P. (2023) 4 SCC 1 : 2023 SCC OnLine SC 6 at page 140 had held as follows:

160. The judicial journey actually started off on a right note with the decision in State of Bihar v. Abdul Majid [State of Bihar v. Abdul Majid, (1954) 1 SCC 177 : AIR 1954 SC 245], where a government servant who was dismissed but later reinstated, filed a suit for recovery of arrears of salary. Though the State raised a defence on the basis of the doctrine of pleasure, this Court rejected the same on the ground that the said doctrine based on the Latin phrase “durante bene placito” (during pleasure) has no application in India. This decision was followed in State of Rajasthan v. Vidhyawati [State of Rajasthan v. Vidhyawati, AIR 1962 SC 933], which involved a claim for compensation by the widow of a person who was fatally knocked down by a jeep owned and maintained by the State. When sovereign immunity was pleaded, this Court observed in Vidhyawati [State of Rajasthan v. Vidhyawati, AIR 1962 SC 933] : (Vidhyawati case [State of Rajasthan v. Vidhyawati, AIR 1962 SC 933], AIR p. 940, para 15)

(emphasis supplied)

161. On the question of the liability of the State, for the tortious acts of its servants, this Court opined in Vidhyawati [State of Rajasthan v. Vidhyawati, AIR 1962 SC 933], as follows : (Vidhyawati case [State of Rajasthan v. Vidhyawati, AIR 1962 SC 933], AIR p. 938, para 10)

162. But despite the decisions in Abdul Majid [State of Biharv. Abdul Majid, (1954) 1 SCC 177 : AIR 1954 SC 245] and Vidhyawati [State of Rajasthan v. Vidhyawati, AIR 1962 SC 933], this Court fell into a slippery slope in Kasturi Lal [Kasturi Lal Ralia Ram Jain v. State of U.P., AIR 1965 SC 1039]. It was a case where the partner of a firm dealing in bullion and other goods was arrested and detained in police custody and the gold and silver that he was carrying was seized by the police. When he was released later, the silver was returned but the Head Constable who effected the arrest misappropriated the gold and fled away to Pakistan in October 1947. The suit filed by Kasturi Lal for recovery of the value of the gold, was resisted on the ground that this was not a case of negligence of the servants of the State and that even if negligence was held proved against the police officers the State could not be held liable. While upholding the contention of the State, this Court said : (AIR p. 1046, para 21)

163. In fact, it was suggested by this Court in Kasturi Lal [Kasturi Lal Ralia Ram Jain v. State of U.P., AIR 1965 SC 1039] that the Legislatures in India should seriously consider making legislative enactments to regulate and control their claim for immunity. Before proceeding further with the journey in the chronological sequence, it must be mentioned that the decision in Kasturi Lal [Kasturi Lal Ralia Ram Jain v. State of U.P., AIR 1965 SC 1039] was diluted to some extent after nearly 30 years which we shall take note of at the appropriate stage.

166. After Rudul Sah [Rudul Sah v. State of Bihar, (1983) 4 SCC 141 : 1983 SCC (Cri) 798], there was no looking back. Instead of providing elaborate details, we think it is sufficient to provide in a tabular form, details of the cases where this Court awarded compensation in public law, invoking the principle of constitutional tort, either expressly or impliedly.

167. It will be clear from the decisions listed in the Table above that this Court and the High Courts have been consistent in invoking constitutional tort whenever an act of omission and commission on the part of a public functionary, including a Minister, caused harm or loss. But as rightly pointed out by the learned Attorney General in his note, the matter pre-eminently deserves a proper legal framework so that the principles and procedure are coherently set out without leaving the matter open ended or vague. In fact, the First Report of the Law Commission submitted a draft Bill way back in 1956. This Court recommended a legislative measure in Kasturi Lal [Kasturi Lal Ralia Ram Jain v. State of U.P., AIR 1965 SC 1039] in 1965 and a Bill called the Government (Liability in Torts) Bill was introduced in 1967. But nothing happened in the past 55 years. In such circumstances, the courts cannot turn a blind eye but may have to imaginatively fashion the remedy to be provided to persons who suffer injury or loss, without turning them away on the ground that there is no proper legal framework.

10. In the present case, the loss of silver can only be attributable to the negligence of the respondents as the silver was stolen from the police station itself. The loss of such a large amount of silver and cash would absolutely impinge on the right of the petitioner, under Article 19(1)(g) to carry on his trade or business. In such circumstances, the petitioner is entitled to compensation for the loss suffered by him on account of the sheer negligence on the part of the officials of the State in protecting the property which has been seized from the son of the deceased.

11. The undisputed facts are that 105 kgs of pure silver was seized from the son of the petitioner along with cash of Rs.2,50,000/- weighting 81.567 kgs and cash of Rs.10 lakhs was handed over to the petitioner. The contention of the petitioner that only 27 kgs out of the aforesaid 81.567 kgs was pure silver and the remaining 54.567 kgs contained only 60% silver. It would not be possible for this Court to go into the question of the purity of the silver, handed over to the petitioner. There is also no material, on the basis of which this Court would be able to ascertain the impurity contained in 54.567 kgs of silver lumps. In the circumstances, this Court can only take into account the short fall of silver as the differences between 105 kgs of silver seized from the petitioner and 81.567 kgs of silver returned to the petitioner. This would mean there was a short fall of 23.433 kgs of silver. This Court would however leave it open to the petitioner, to demonstrate his claim that 54.567 kgs of the silver returned to him was impure silver consisting of only 60% silver with balance being made up of copper/nickel.

12. The cash of Rs.2,05,000/- has been seized from the son of the petitioner and cash of Rs.10 lakhs has been returned to the petitioner. It is stated that the aforesaid Rs.10 lakhs was the cash recovered from the persons who had stolen the silver and cash, as these persons had sold away some part of the silver and some of the proceeds of such sale, were recovered from these accused persons.

13. In the circumstances, this writ petition is allowed, with the following directions:

As a sequel, pending miscellaneous petitions, if any, shall stand closed. There shall be no order as to costs.