In Peninsular and oriental steam navigation company v. Secretary of State for India, (1861) 5 Bom. H.C.R. App. I, it was held that, if the act was done in the exercise of sovereign functions, the East India Company would not have been liable, but if the function was a non sovereign one, i.e, which could have been performed by a private individual without any delegation of power by the Government, the company would have been liable.
In state of Rajasthan v. Vidyawati, A.I.R 1962 S.C. 933, the Supreme Court held that the State is no longer a police state, it has become a welfare state and slowly becoming a full fledged socialistic state. The state actions have such wide ramifications involving not only the use of sovereign powers but also its powers as employers in so many public sectors, it would be too much to claim that the state should be immune from the consequences of tortious acts of its employees committed in the course of employment.
However, In Kasturilal v. State of U.P, AIR 1965 S.C. 1039, the state was not held liable on the grounds that the public officials were acting in discharge of sovereign powers.. If the 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 public servant was in discharge of statutory functions which are referable to and ultimately based on , the delagation of sovereign powers of the state of such public servant?If the answer is in affirmative, the action for damages for loss caused by such tortiuos act would not lie.
In Shyamal Baran Saha v. State of West Bengal, A.I.R 1998 Cal 203, it has been noted that an act done by a Government servant in exercise of statutory powers is a defence, provided that such act can also be termed as ‘in exercise of sovereign powers’ or functions of the State. In case discussed above, the State was held liable as the necessary conditions from exemption from liability were not satisfied.
In State of M.P. v. Shantibai, 2005 ACJ 313 (MP), it was held that the police officers have duty of care and do not enjoy sovereign immunity if their act is negligent (open firing), and State was held liable for such act.
Although the decision of the Supreme Court in Kasturilal’s case still holds good, it can be fairly concluded that for practical purpose its force has been considerably reduced by a number of decisions of the Supreme Court. Without expressly referring to Kasturilal or distinguishing or overruling this case, a deviation from this decision has been made. Under the circumstances in which state would have been exempted from liability if Kasturilal had been followed, state has been held liable in respect of loss or damage either to the property or to a person.