Supreme Court Upholds State Immunity in Police Negligence Case Involving Seized Gold

Despite Police Negligence Leading to Loss of Gold, State of Uttar Pradesh Not Liable for Compensation Under Sovereign Immunity Doctrine

In a landmark judgment dated September 29, 1964, the Supreme Court of India, in a larger bench comprising Chief Justice P.B. Gajendragadkar and four other judges, dismissed the appeal filed by M/s. Kasturi Lal Ralia Ram Jain against the State of Uttar Pradesh. The case centered around the loss of gold seized by police officers which was subsequently misappropriated by a Head Constable who absconded to Pakistan.

The appellant firm, dealing in bullion, had its partner Ralia Ram arrested at Meerut on suspicion of carrying stolen property, with gold and silver seized and kept in police custody. While the silver was eventually returned, the gold weighing over 103 tolas was never recovered. The appellant claimed compensation for the value of the gold and interest, alleging negligence by the police in safeguarding the seized property.

The trial court initially found the police negligent and ruled in favor of the appellant, awarding damages. However, the Allahabad High Court reversed this decision, finding no negligence and holding that even if negligence existed, the State was not liable to compensate for such loss.

The Supreme Court meticulously examined the facts, relevant statutory provisions under the Code of Criminal Procedure (Sections 51, 54(1)(iv), 523, and 550), and the Uttar Pradesh Police Regulations (Regulations 165 and 166). The Court agreed that the police officers had been negligent in failing to properly list, weigh, and securely store the seized gold — specifically, the property was not kept in the Treasury as mandated by the regulations but remained in the Malkhana under insufficient control.

Despite establishing negligence, the Court turned to the crucial constitutional question of State liability under Article 300 of the Constitution of India. The Court extensively reviewed historical precedents dating back to the Government of India Acts and the 1861 Calcutta Supreme Court judgment in Peninsular and Oriental Steam Navigation Co. v. Secretary of State for India-in-Council. The principle arising from these authorities distinctly separates tortious acts committed by public servants exercising sovereign powers from those acts arising out of non-sovereign functions.

In the present case, the police exercise of powers to arrest, search, and seize property was held to be sovereign in nature — functions that cannot be delegated to private individuals. The Court held that under the doctrine of sovereign immunity, the State cannot be held liable for tortious acts done in the exercise of such sovereign powers even if there was negligence.

While acknowledging the harshness of this legal position, the Court urged the Legislature to consider enacting laws akin to the English Crown Proceedings Act, 1947, which modifies the common law doctrine of sovereign immunity and allows claims against the Crown in tort. The Supreme Court recognized that citizens whose property is lost due to official negligence deserve redress but emphasized that remedy must come from legislative reforms rather than judicial expansion of liability.

The appeal was thus dismissed, with the Court directing the parties to bear their own costs.

This judgment clarifies the contours of State immunity in tortious claims against public servants exercising statutory sovereign powers, reaffirming the principle that the State is not liable for losses caused by such acts, even when negligent.

Statutory provisions

Code of Criminal Procedure 1898 Sections 51, 54(1)(iv), 523, 550; Uttar Pradesh Police Regulations 165, 166; Constitution of India Article 300

M/s. Kasturi Lal Ralia Ram Jain v. State of U.P., (SC) : Law Finder Doc Id # 110619