Court case(1994) 6 SCC 205

The appellant firm dealt in fertilisers, food grains and other essential commodities. In 1975 its stock was seized by the police and the Vigilance Cell under the Essential Commodities Act 1955 on suspicion of irregularities. The firm repeatedly asked for the release of the goods or their sale to prevent deterioration. The Collector eventually confiscated only a small part and directed the rest to be returned, but by then the goods, left in the open, had rotted and become worthless. The firm sued the State for the value of the goods. The trial court decreed the suit; the High Court reversed, relying on Kasturilal, holding that the seizure was in exercise of sovereign power.

Sahai J. allowed the appeal and held the State liable. Tracing the history of Crown immunity and its abolition in England by the Crown Proceedings Act 1947, the Court held that the doctrine of sovereign immunity "has no relevance in the present day context" of a welfare State engaged in a multitude of activities, and that Article 300 does not perpetuate the old common-law immunity. Sovereign functions are only "the primary and inalienable functions of a constitutional government": defence, maintenance of armed forces, making peace or war, foreign affairs, the administration of justice and the like. Everything else, including the exercise of statutory powers of seizure and the custody of seized goods, is a non-sovereign function for which the State is answerable like any other person. The duty to preserve the goods arose under s. 6A of the Essential Commodities Act, and negligence in its performance could not be excused as a sovereign act. Kasturilal was distinguished and its authority described as narrow.