Azizuddin and Co. vs Union of India (UOI)

Rajamannar, C.J.

1.These four revision petitions arise out of four suits instituted in the Court of Small Causes, Tiru-chirapalli, against the Union of India (Central

Government) owning the South Indian Railway, represented by the General Manager, Tiruchirapalli, ""for recovery of damages for non-delivery of

goods consigned by the plaintiff from Nellikuppam to different, places outside the State of Madras. In the plaints. the cause of action is stated to

have arisen at Nelliknppam on the dates of dispatch and on the dates when the goods ought to have been delivered and on subsequent dates of

claim and suit notices to the defendant. The plaintiff further stated that the defendant was liable to be sued at Tiruchirapalli, as he was residing and

carrying on his usual course of business, having his offices at Tiruchirapalli on behalf of the Central Government. Objection was raised to the

territorial jurisdiction of the Court to entertain the suits.

Nellikuppam is not within the jurisdiction of the Small Causes Court at Tiruchirapalli. The jurisdiction of the Tiruchirapalli Court was sought to

be sustained, therefore, on two grounds, namely, (1) that the defendant carried on business at Tiruchirapalli the headquarters of the South Indian

Railway, and (2) that a part of the cause of action arose within the territorial jurisdiction of the Tiruchirapalli Court, because notice u/s 80, Civil P.

C. was served on the Manager of the railway at Tiruchirapalli. The Court of Small Causes held that no part of the cause of action arose within the

jurisdiction of that Court and the defendant could not be said to be carrying on business within the local limits of its jurisdiction, and therefore,

directed the plaints to be returned for presentation to the proper Court. The plaintiffs seek a revision of this order.

The material provision of law is Section 20, Civil P. C. It provides that every suit shall be instituted in a Court within the local limits of whose

jurisdiction the defendant at the time"" of the commencement of the suit ""actually and voluntarily resides, or carries 011 business, or personally

works for gain"", or the cause of action arises, wholly or in part. Explanation II to the section runs as follows:

A corporation shall be deemed to carry on business at its sole or principal office in British India, or, in respect of any cause of action-arising at any

place where it has also a subordinate office, at such place.

The first question is, whether the Union of India can be said to reside or carry on business or personally work for gain within the limits of the

jurisdiction of the Tiruchirapalli Small Cause Court. It was not contended that the Union Government actually resides within the Court''s

jurisdiction.. Nor was it seriously suggested that the Union Government personally works for gain within the Said limits. It may be taken as now

well established that the word ""resides"" must be taken to refer to natural persons and not to legal entities, such as limited companies or

Governments. (Vide--''Govinda-rajulu Naidu v. Secretary of State'', AIR 1927 Mad 689 (A)). It is equally clear that the Union of India cannot be

said to personally work for gain. That description cau properly apply to an individual or individuals, and not to a corpo-rate body, still less to the

Government of a State It, therefore, remains to consider whether the Union of India can be said to carry on business within the limits of the

Tiruchirapalli Court, ''

When these revision petitions first came on for disposal, before Pauchapakesa Aiyar J., the learned Judge, after a full discussion of the case law on

the point, was inclined to hold that the Union Government cannot be said to be carrying on, business within the meaning of. that expression in

Section 20 of the Code. He thought it was desirable that there should be a decision on the .point by a Division Bench of this Court, particularly in

view of the fact that Venkatarama Aiyar J. had taken a contrary view on the Very point in -- ''Azizuddin and Co. v. Union of India'', C. R. P. Nos.

1573 and 1574 of 1950 (Mad) (B).

In. discussing the authorities referred to by Panchapapakesa Aiyar J. and cited at the Bar, a distinction must be kept in mind between the

determination of the liability of the Union Government to be sued for a particular relief and the determination of .the question as to which is the

Court which has jurisdiction to entertain, a suit to enforce that liability. On the first question, the governing provision today is Article 300(1) of the

Constitution, which runs thus:

The Government of India may sue or be sued by the name of the Union of India and the Government of A State may sue or be sued by the name

of the State and may, subject to any provisions which may be made by Act of Parliament of the Legislature of such State enacted by virtue of

powers conferred by this Constitution, sue or be sued in relation to their respective affairs in the like cases as the Dominion of India and the

corresponding provinces or the corresponding. Indian States might have sued or been sued if this Constitution had not been enacted."" That fakes

us back to Section 65 of 21 and 22 Vict. Ch. 106, which provided that the Secretary of State for India in Council as a body corporate may sue

and be sued to the extent to which the East India Company, could sue or be sued, and to the corresponding sections in the Government of India

Act of 1915 and the Government of India Act of 1935. It is in considering the applicability of this provision that Courts have drawn a distinction

between the two functions exercised by Government, namely, one in the carrying out of their duties as sovereign, and the other in the carrying out

of works of a nature which could be undertaken by private individuals or by trading corporations. It has been held time and again that when an act

of the Government is complained of and that act is done in the exercise of sovereign powers, no action will lie even if by that act injury is caused to

a subject (Vide-- ''Secretary of. State v. Cockraft'', AIR 1915 Mad 993 (C) and -- ''P. & O. S. Co. v. Secretary of State'', 5 Bbm HC App 1

(D)). It was not seriously. argued on behalf of the Government that the Government would not be liable in this case for damages for non-delivery

of the goods on the ground that in running the railways the Government were exercising sovereign functions which would not give rise to any legal

liability for any act done in the exercise of such functions. But this does not decide the question as to the Court in which the action should be

brought to obtain relief against the Government,

The real question appears to us to be whether by reason of the fact that Government is engaged in activities and transactions which could be

undertaken by private individuals or corporations, it could be said that the Government are carrying on a business within the meaning of Section

20, Civil P. C. or the corresponding expression in Clause 12 of the Letters Patent. One of the earliest cases on the point is -- ''Rundle v. Secretary

of State'', 1 Hyde 37 (E). That was a suit for the specific performance of an agreement. The facts were ELS follows: The plaintiff applied to the

Superintendent of Darjeeling for a grant of wet lands under Resolution of the Government. 500, acres of uncleared lands were allotted to him at

Rs. 2-8-0 per acre. The plaintiff ''paid the purchase money to the Superintendent and entered into possession of the land. Instead of executing a

deed of grant to the plaintiff the land was again advertised for sale, and in spite of the plaintiff''s protect, the land was put up for sale by auction.

The plaintiff, to prevent the land being sold to other parties, became the highest bidder at the auction. He brought a suit for a declaration that the

resale was void, and for an injunction restraining, the Government from proceeding to enforce payment of the bid price and for the execution and

delivery of an instrument of grant of the land.

The suit was brought in the Calcutta High Court. The question was whether that Court had jurisdiction under Clause 12 of the Letters Patent to

entertain the suit. Wells J. held that it did not have. The learned Judge, after stating that it was clear that u/s 65 of 21 and 22 Vict. Ch; 106, the

Secretary of State as representing the Government of India could be sued, proceeded to discuss the question whether the Secretary of State could

be said to carry on business of work for gain within the local limits of the Ordinary Original Jurisdiction of the Calcutta High Court. After holding

that the Secretary of State in Council as representing the Government could not be said to be dwelling within the limits of the Court, the learned

Judge observed thus;

Then, can the Secretary of State in Council be said to carry on business or work for gain within the local limits of the Ordinary Original jurisdiction

of the Court? It is true the business of the Government is carried on as well within the local limits of the Ordinary Original Jurisdiction of the Court

as elsewhere; and it is equally true that the Government obtains revenue, to a large amount, from various sources within such local limits; but the

business so carried on, and the agency employed in collecting the revenue so obtained, cannot be said to be business carried on, and work done

for gain, within the meaning of Section 12 Letters Patent. The words ""carry on business, and personally works for gain"", do not refer to an

institution like the Government; and the words ""personally works for gain"" were in-tended to give the Court jurisdiction over individuals who,

though dwelling out of the local limits of the ordinary original jurisdiction of the Court, might .be personally working for gain within such local limits.

In -- ''Subbaraya Mudali v. The Government'', 1 Mad HCR 286 (F), Scotland C. J. expressed the view that the words ""carry on business"" in the

Letters Patent could reasonably be applied to the Government as a deliberative body and to the locality where its members meet and exercise all

the functions of Government. In -- ''Doya Narain Tewary v. Secy, of State'', 14 Cal 256 (G), Mitter and Trevelyan JJ. did not approve of this

view. Referring to the above observation of Scotland C, J, Mitter J. said:

It seems to me that quite apart from the question whether the business of governing the country is business within the meaning of Section 12,

Letters Patent, it was overlooked in that case that u/s 65 of 21 and 22 Vict. Ch. 106, the suit should have been considered as brought against the

Secretary of State for India in Council."" '' . In that case, the suit was brought against the Secretary of State for India in Council for the recovery of

money alleged to be due to the plaintiff in respect of various purchases made and various .acts done as purchasing agent and clerk of the

Commissariat Department of the Government of India in connection with the second Kabul Expedition. The suit was brought in the High Court of

Calcutta. It was held that the Court had no jurisdiction to entertain the suit. The learned Judges quote with approval the observations of Wells J. in

I Hyde 37 (E), referred to earlier in the judgment. It was contended before them that even supposing the business of governing the country is not

business within the meaning of Section 12, Letters Patent, still the Government in this country carried on various trades such as the trades in opium

and salt . and the principal places of business of these trades were located in Calcutta. In answer to this, Mitter J. who delivered the judgment of

the Bench, said: ""But these trades are not carried, on by the defendant in this case. As akeady observed the words carrying on of a business or

trade are inapplicable to this case. These trades, if they can be properly called trades, are carried on in one sense by the Government Officers in

charge of them, but they are so carried on for the benefit of the Indian Exchequer. For these reasons I am of opinion that this Court has no

jurisdiction to entertain the suit.

The question came up again in -- ''Rodricks v. Secretary of State'', 40 Cal 308 (H), before the Calcutta High Court in a suit instituted in the

High Court for recovery of damages for malicious prosecution against the Secretary of State for India in Council on the allegation that when the

plaintiff was employed as an inspector on the Eastern Bengal State Railway, he was falsely and maliciously and without reasonable or probable

cause prosecuted for criminal breach of trust by the defendant, through his servants and agents, certain railway officials. The cause of action arose

outside the ordinary civil jurisdiction of the Court, but it was contended that the Secretary of State for India in Council could be said to carry on

business within Calcutta. The suit was tried by Chaudhuri J. who felt himself bound by the decision in 14 Cal 256 (G), but expressed a contrary

view. He said:

However differently the word ''business'' may have been construed at different times, I do not think, there is any question whatever that a

''carrying on business'' is ""business'' within the meaning of Section 12, Letters Patent......

And again, at p. 314:

It seems to me difficult to say that the Government does not dwell in its own capital and that a Government engaged in trades, though it may be for

purposes of the State, does not. ''carry on business'', if Sir George Jessel is right that where the. ''Brain Power'' is, there a trade or business is

carried on, the assumption that the Brain Power of the Government of India is at its seat of Government, is not an unjustifiable assumption."" There

was an appeal against the judgment of Chaudhuri J., which came up before Jenkins C. J., and Hamngton J. The learned Judges affirmed the view

taken in 14 Cal 256 (G)''. The learned. Judges adverted to the fact that the decision in 14 Cal 256 (G)'', had never been questioned or doubted.

The next reported case in Calcutta is -- ''Golab Rai Paliram v. Secretary of State'', 1LR (1941) Cal 160 (I), in which Lort-Williams J. struck a

different note. He held that carriage by railway is a business and the. Government of India can be said to carry on the business of running the

Eastern Bengal Railway and the Secretary of State for India in Council could be sued, at the head office of the railway in Calcutta. The learned

Judges referred tiJ the decisions in 14 Cal 256 (G)'', and 40 Cal 308 (H)'', and attempted to distinguish them on the ground of change of

circumstances which had taken place since those decisions. The reasoning was as follows:

The business of the railways has changed and has increased enormously in the interval. It is nonsense to suggest nowadays that they are kept up

solely for the purposes of. Government. The fact that a business ""of carriage by railway is being carried on in India by some one is notorious. The

fact that such a business called the Eastern Bengal Railway is being carried on in Bengal and that its head office is situated at 3 Kaila Ghat Street in

Calcutta is admitted. That such a business is a business'' within the meaning of Clause 12, Letters Patent cannot be denied In India certain railway

carriage businesses are carried on either as owners or lessees, by railway companies, whilst others, of which the Eastern Bengal railway is one,

belong to Government and are administered by them. S, 3(6) of the Indian Railways Act provides that ''railway administration'' or ''administration''

in the case of a railway administered by the Government means the manager of the railway and includes the Government ...............It follows that it

is the Government who carry on the business of railway carriage under the name of the Eastern Bengal railway amongst other places, at the head

office in Calcutta.

With great respect to the learned Judge, his decision runs directly counter to the earlier Bench decisions, which he was- bound to follow. This

view of his, however, was expressly dissented from and overruled in later decisions of the Calcutta High Court. In -- Dominion of India Vs.

R.C.K.C. Nath and Co., , where the plaintiff sued the Dominion of India for damages for short delivery of goods which he had entrusted to the

railway administration at Aligarh, in the District Munsif''s Court of Sealdah, it was found that no part of the cause of action arose within the

jurisdiction of that Court, but its jurisdiction was sought to be supported by a notification of the East Indian Railway administration, in which it was

announced that claims against the Bengal and Assam railway would be disposed of by an officer of the East Indian Railway at Sealdah, and

therefore the Dominion of India could be deemed to be carrying on business within the limits of the Court''s jurisdiction. The learned Judges,

Harries C. J. and Banerjee J., expressly followed the ruling in 40 Cal 308 (H)''. In -- Dominion of India Vs. Gopal Chandra Tapadar and Others, ,

the suit was in respect of a consignment despatched from a station on the East Indian Railway. The plaintiff instituted the suit in the Presidency

Small Cause Court, Calcutta against the Dominion of India on the ground that the East Indian railway and Bengal and Assam railway had their

offices at Calcutta. It was held by a Division Bench that the Dominion of India could not be said to carry on business in Calcutta. The learned

Judges expressly dissented from the view expressed by Lort-Williams J. in ILR (1941) 2 Cal 160 (I). In view of the three Division Bench

judgments in 14 Cal 256 (G), 40 Cal 308 (H) and Dominion of India Vs. R.C.K.C. Nath and Co., , they found it impossible to foll the decision of

Lort-Williams J. Recently the question was elaborately discussed by P. B. Mukharji, J. in -- Calcutta Motor Cycle Co. Vs. Union of India (UOI),

, and after an exhaustive consideration of all the relevant decisions on the question, the learned Judge held that the Union of India cannot be said to

carry on business by reason of the fact that it owns and runs the railways in the country.

The only reported case in Madras on the point is AIR 1927 Mad 689 (A), to which reference has been made earlier. In that case, it was held

that the Government could not be said to carry on business within the meaning of Clause 12, Letters Patent, The case related to the seizure of

certain goods by a customs officer on the ground that they were being smuggled into British India. The suit was for conversion, by the owner of the

goods, against the Secretary of State for India. The learned Judges approved the decisions of the Calcutta High Court in 14 Cal 256 (G) and 40

Cal 308 (H). Beasley J. as he then was observed;

In my view the Government cannot be said to be carrying on business within the meaning of'' the word in that clause of the Letters Patent (Clause

12).

In -- ''R.J. Wyllie and Co. v. Secretary of State'', AIR 1930 Lah 818 (M), Hilton J. and in -- ''Nagi Bros. v. Dominion of India'', AIR 1951

P&H 92 (N), Kapur J. accepted the Calcutta view expressed in 14 Cal 256 (G) and 40 Cal 308 (H). The latter case related to a claim for

damages against the Dominion of India in respect of goods consigned on a Government Railway. The same view has been taken, by a Division

Bench of the High Court of. Bombay in -- Bata Shoe Co. Ltd. Vs. Union of India, . That was also a suit against the Union of India representing the

B. B. and C. I. Railway, having its head office at Bombay, in respect of goods sent from Agra Fort to Bikaner, to be carried over the said railway.

The following observations in the judgment of Gajendragadkar J. answer the argument based on the fact that the private railway companies were

held to be carrying on business at their headquarters.

It is well known that the Union of India and the Govts. of respective states in India have set before themselves the ideal of a welfare State and for

. achieving this ideal Governments have inevitably to carry on many undertakings which in the hands of private agencies partake of the character of

commerce or trade. If a private person starts a hospital for patients, it may, in a sense, be business in his hands, because the primary object of the

private individual is to make a profit. But if the State starts hospitals to render service to the invalid and the sick, the dominant intention is to render

social service, and ""the motive of profit making is totally absent. If a merchant conducts a grain shop, it is a business. But if the State undertakes the

supply of essential foodstuffs to its citizens to enforce its policy of controls, that is not business,

It seems to us that activities or undertakings which may properly be treated as commercial in the hands of private agencies would not necessarily

continue to partake of the same character when they are undertaken by the Government of the State in pursuit of its welfare policies. In our

opinion, therefore, the fact that the running of the railway would have been treated as a business in the hands of the railway company would not

necessarily show that it is business when it is undertaken by the Government of the State, Indeed, in regard to the running of the railway itself as

such, it is possible to take the view that it forms an important part of the governance of the State. The State naturally requires the lines of transport

of keeping internal peace and for the purpose of defending the borders of the country in case of emergency.

It only remains to consider the unreported judgment of Venkatarama Atyar J. in C. R. P. Nos. 1573 and 1574 of 1950 (Mad) (B). The

learned Judge begins the discussion of the point as to jurisdiction by an analysis of the distinction, owing to historical reasons, made between the

acts of the Government in its sovereign capacity and its commercial activities. That distinction has a materal bearing only on the question of the

liability of the Government to be sued in a Court of law. The rulings in 5 Bom HCR App 1 (D), AIR 1915 Mad 993 (C), -- ''Mrs. Wells v.

Governor. General of India'', AIR 1946 Lah 50 (P) and -- ''Secy, of State for India v. Moment'', 40 Cal 391 (Q) related to a determination of the

liability of the Government, and were not concerned with the jurisdiction of the Court in which the action was brought against the Government. But

with great respect to the learned Judge, we are unable to follow that because the Government would be liable to be sued in a court of law for acts

done in a capacity not of a sovereign character, the Government can be held to ""carry on a business"" with reference to such acts. It may well be

that any act or omission of the Government in the course of carrying on activities like the running of a railway may give rise to a civil liability. The

Government may not be able to claim immunity from liability in respect of such activities.

The learned Judge followed the decision of Lort-Williams J. in ILR (1941) 2 Cal 160 (I). We have already referred to decisions of the

Calcutta High Court in which the view of Lort-Williams J. was expressly dissented from. The learned Judge whose judgment was delivered in

September 1951 did not have before him the subsequent rulings of the Calcutta High Court, including the latest decision of P. B. Mukharji J. in

Calcutta Motor Cycle Co. Vs. Union of India (UOI), , which, if available to him, might have influenced him to take a contrary view. With respect

to the learned Judge, we are unable to agree with him. We agree with the preponderating view on the point in the High Courts of Calcutta,

Bombay, Lahore and Punjab, which is in consonance with the view taken in our Court in AIR 1927 Mad 689 (A). We hold that the Union of India

cannot be held in this case to be carrying on business at Tiruchirapalli within the meaning of Section 20, Civil P. C.

It was next contended that a part of the cause of action arose within the local limits of the Tiruchirapalli Court because a notice u/s 80, Civil P.

C. was delivered to the Manager of the railway at Tint chirapalli. Reliance was placed on the decision of a single Judge of the Calcutta High Court

in -- Raj Kumar Shaw Vs. Dominion of India, . The learned Judge --plied upon an unreported decision of Sinha J. and the decision in -- Dominion

of India v. Jagadishprosad Pannala AIR 1949 Cal 622 (S). The Full Bench decision in -- Bansi and Others Vs. Governor-General of India in

Council, , was cited before him, but he distinguished that decision as being confined to notice u/s 77, Railways Act, which was held In that case as

not being a part of the cause of action for the purpose of jurisdiction. The learned ""Judge evidently overlooked the following statement of Harries

C. J. in that case, namely,

I desire to add that I am satisfied that the view taken in the case of AIR 1949 Cal 622 (S) a decision to which I was a party, is erroneous."" '' The

question was considered in a recant decision of the Bombay High Court in Bata Shoe Co. Ltd. Vs. Union of India, . It was held that a statutory

notice required by the provisions of the Railways Act as well as the Code of Civil Procedure, though no doubt ah essential preliminary step for the

valid institution of a suit, would not make such a notice part of the cause of action for the suit itself. The reason which the learned Judge gave for

this conclusion appears to us to be conclusive; If it is borne in mind that such a notice is required to state amongst other facts the cause of action on

which the proposed suit would be based and the ''relief intended to be claimed, it would he clear that the notice follows the cause of action and it

merely paves the way for the institution of the suit itself. That is why it is an essential preliminary step and no more.

The Court of Small Causes at Tiruchirapalli would have no jurisdiction merely because notices u/s 80 of the Code were delivered to the Manager

of the Railway at that place.

In the result, the civil revision petitions are dismissed with costs, in one petition.