N. Nagendra Rao & Co. v. State of Andhra Pradesh

Facts

• Revenue authorities seized large quantity of fertilizer under Essential Commodities Act
• Fertilizer stored in government godown deteriorated due to negligent storage (exposed to rain, poor conditions)
• When the case concluded, the fertilizer was worthless
• Owner sued State for damages
• State argued: seizure under Essential Commodities Act is sovereign function (Kasturi Lal)

Issue

1. Whether the State is liable for negligent storage of seized goods by its revenue authorities.

Held

• Sovereign immunity must be confined to "primary and inalienable" functions: defense, foreign affairs, acts of State
• Storage and custody of goods is NOT an inalienable sovereign function; private parties also store goods
• Kasturi Lal's broad reading of sovereign immunity is restrictively interpreted
• In a welfare State, the distinction between sovereign and non-sovereign is increasingly thin
• State liable for negligent custody; must compensate owner for deteriorated goods

Ratio Decidendi

Sovereign immunity survives only for genuinely inalienable State functions: powers that by their very nature cannot be exercised by private persons (defense of territory, conduct of foreign affairs, maintenance of armed forces). Everything else, including seizure/custody under regulatory statutes, is non-sovereign. Where the State takes custody of citizen's property and negligently destroys it, liability follows.