3. Liability of the State and Sovereign Immunity

This is the third topic in Unit 2 — the previous one covered vicarious liability in general. This one covers what happens when the "employer" is the State itself, and the defence of sovereign immunity that has historically limited it.

The Problem This Topic Solves

The State, through its millions of servants, performs an enormous range of activities — running hospitals, transport corporations and factories, but also maintaining armed forces, collecting revenue, and administering criminal justice. If ordinary vicarious liability applied without qualification, the State would be liable, exactly like any private employer, for every tort committed by any government servant on duty. English common law, however, had developed the maxim "the King can do no wrong," treating the Crown as immune from being sued in tort. India inherited a version of this, and courts have had to work out, case by case, how far a modern constitutional democracy should let the State shelter behind that inherited immunity.

Historical Background

Even before Independence, Indian courts had begun distinguishing between two categories of governmental activity. In P. and O. Steam Navigation Co. v. Secretary of State for India (1861), the Calcutta Supreme Court held that where the East India Company undertook an activity a private individual could equally undertake — there, the negligent driving of a company servant's carriage — liability followed the ordinary rules of tort. But where the act was one only a sovereign government could perform — waging war, maintaining armed forces, administering criminal justice — no action in tort would lie, since these were treated as acts of state, immune from the ordinary courts. This sovereign/non-sovereign distinction, framed over a century and a half ago, remains the starting point for this topic even today.

Constitutional Basis — Article 300

Article 300 of the Constitution provides that the Government of India and each State Government may sue and be sued in the same manner as the Dominion of India and the corresponding Provinces could have sued or been sued immediately before the Constitution came into force — subject to any law Parliament or a State Legislature may make. Article 300 does not itself create or define the scope of the State's tortious liability; it simply carries forward the pre-constitutional position until Parliament legislates a comprehensive scheme. Since Parliament never has, courts have continued to apply and refine the inherited sovereign/non-sovereign test through case law.

Sovereign Functions v. Non-Sovereign Functions

Sovereign functions are those only the State, as a sovereign authority, can perform — legislation, the administration of justice, maintaining the armed forces and police, foreign affairs, and statutory powers of a coercive nature no private individual could lawfully exercise. For torts committed while performing genuinely sovereign functions, the State has historically enjoyed immunity. Non-sovereign (commercial or proprietary) functions, by contrast, are activities any private person or company could equally undertake — running a transport service, a factory, a hospital, or maintaining official vehicles for ordinary administrative use. For torts in the course of such activity, the State is liable exactly like any other employer.

Criticism of Kasturi Lal and the Later Trend

Kasturi Lal has been widely criticised — including by the Supreme Court itself in later decisions — for letting a government's sovereign character shield it from liability even where the harm was a straightforward case of negligence or dishonesty by an identifiable government servant, leaving an innocent citizen without any remedy. In N. Nagendra Rao and Co. v. State of Andhra Pradesh (1994), the Supreme Court confined Kasturi Lal to its own facts and moved decisively toward holding the State liable for the negligence of its officers even while exercising statutory powers, observing that in a modern welfare state, sovereign immunity could not be stretched to cover ordinary negligence unconnected with any genuine exercise of sovereign discretion.

Alongside this erosion of Kasturi Lal through ordinary tort law, the Supreme Court also developed a separate constitutional route to compensation — a public-law remedy under Articles 32 and 226 for violation of the right to life and personal liberty under Article 21, independent of whether the underlying act would also qualify as sovereign for private-law tort purposes. That constitutional-tort jurisprudence is covered in this course's later unit on remedies.

Foreign Sovereign Immunity and Act of State

Two related but distinct ideas are sometimes confused with the sovereign/non-sovereign test above. Foreign sovereign immunity is the principle that a foreign State generally cannot be sued in another country's domestic courts without its consent — a rule about jurisdiction over another sovereign nation, not about whether a government is liable in tort to its own citizens. An "act of state," in tort law's narrower technical sense, refers to an act done by a sovereign government in its dealings with another state or the subjects of another state — such as an act of annexation, or an act done in war or diplomacy — which, being a matter of high policy between nations, is treated as wholly non-justiciable in ordinary courts, regardless of the sovereign/non-sovereign test that applies between a government and its own citizens.

A Practical Example

A government-owned road transport corporation bus, driven negligently by a corporation employee on an ordinary passenger route, knocks down a pedestrian. Applying Vidyawati's reasoning, running a bus service is not a sovereign function — any private company could operate one — so the corporation (and the State through it) is vicariously liable exactly as a private operator would be. Contrast this with customs officials, acting under statutory search powers, seizing suspected smuggled goods, which a departmental clerk later loses while they remain in official custody. Following Kasturi Lal's reasoning, the seizure and custody under statutory power would traditionally be treated as sovereign — but after N. Nagendra Rao, a court today would scrutinise far more closely whether the loss reflects genuine, ordinary negligence rather than any true exercise of sovereign discretion, and would be considerably more willing to hold the State liable regardless of the sovereign label on the underlying power.

Quick Revision Points

• Article 300 continues the pre-constitutional position on suits by/against government, pending legislation that has never come
• Sovereign functions: only the State can perform them (legislation, justice, defence, statutory coercive powers) — historically immune
• Non-sovereign functions: any private person could equally perform them (transport, hospitals, official vehicles) — ordinary vicarious liability applies
• P. and O. Steam Navigation Co. (1861): earliest Indian articulation of the distinction
• Vidyawati (1962): government vehicle use — non-sovereign — State liable
• Kasturi Lal (1965): statutory seizure/custody of property — sovereign — State not liable, widely criticised
• N. Nagendra Rao and Co. (1994): confined Kasturi Lal, expanded State liability for negligence in exercising statutory powers
• Foreign sovereign immunity and "act of state" are distinct doctrines, not a citizen's ordinary tort claim against their own government