Pratap Chandra Biswas vs Union of India (UOI)

Ram Labhaya, J.—This petition of revision is directed against an order of Shri R. Medhi, Subordinate Judge, Lower Assam Districts dated 29-10-1954 by which he directed an award to be returned to the arbitrator for presentation to a Court of competent jurisdiction.

The facts leading to the impugned order may be briefly stated. On 10-1-1945 the petitioner Pratap Chandra Biswas entered into, a contract with the Union of India represented by the Executive Engineer of the B.A. Railway which later merged into the North Eastern Railway. The contract was for the supply of lime ballast and concrete shingles at Dittockchera stone quarry in the North Cachar Hills. During the period of the contract the railway line between Lumding and Badarpur fell in the prohibited area.

The petitioner''s case is that the opposite party undertook to facilitate transport of labour from Gauhati by rail through the prohibited area. On this assurance he brought 635 labourers from Bihar and other places and asked for transport facilities to be made available to him for taking the labour to the site of the work, which the opposite party failed to provide. He had to keep labour at Gauhati and Lumding at considerable expense and finally this had to be sent away.

After sometime when ban on movement in the prohibited area was partially lifted, he could take only a small number of labourers to the site of the work. The Executive Engineer terminated the contract on 24-5-1945 without legal justification. He therefore claimed a sum of Rs. 54,364/- as compensation for the alleged breach of contract on the part of the opposite party.

The agreement between the parties contained an arbitration clause. The claim of the petitioner for compensation for the alleged breach on the part of the opposite party was referred to arbitration in conformity with the requirements of the arbitration clause. Shri I.L. Shome was the sole arbitrator. He filed the award in the Haflong Court. The matter came to this Court on appeal and it was found that the Haflong Court had no jurisdiction in the matter. The award was ordered to be returned to the sole arbitrator for filing it in the proper Court. The arbitrator declined to take and further steps in the matter.

The petitioner then appointed a fresh arbitrator. The opposite party did not appoint any arbitrator. The second arbitrator Shri S. Bhattacharjee after notice to both the parties gave his award and filed it in the Court of Subordinate Judge at Gauhati. He found the petitioner entitled to Rs. 26,548/10/- only on account of cost of the railway fare for the labour and the expenses incurred in feeding them. The opposite party contested the validity of the award on several grounds and pleaded inter alia that the Court had no jurisdiction in the matter. The petitioner urged that the objection of the opposite party to the validity of the award came after the time prescribed by law for filing objections and therefore these objections could not be entertained.

On the filing of the award by the arbitrator the case was registered on 9-2-1952 and notices were issued to the parties for filing objections. Parties were directed to show cause within 30 days from the date of the receipt of the notice why a decree may not be passed in terms of the award. The case was fixed for hearing on 29-4-1952. On behalf of the Union of India (now the opposite party) objections were put in on 29.44952.

A supplementary statement of objections was put in on 11-7-1952. It was averred in this statement that in order to speed up the work the railway agreed to issue necessary tickets for the transport of the labour. The freight was to be recovered from the contractor by deduction from his bills. On account of war the army took control of the transport at the relevant time. The railway administration was not responsible for the transport of labour and could not assist the contractor in the circumstances. There was thus a frustration of the contract and the administration was not responsible for any loss suffered by the petitioner on that account. The termination of the contract was on the ground that the petitioner had failed to complete the work within the stipulated period of time. In the earlier statement of objections the award was challenged on the ground of the misconduct of the arbitrator inasmuch as he, with full knowledge of the fact that an award had already been given gave his own adjudication. The Executive Engineer on receiving notice from Sri S. Bhattacharjee informed him that he had no jurisdiction to arbitrate in the matter and did not participate in the proceeding. The award was given after an ex parte hearing of the matter.

The learned Judge found that as the suit arising out of any dispute between the parties could not be instituted at Gauhati he had no jurisdiction to adjudicate on the award. In disposing of this issue the learned Judge also remarked that there was no question of compensation being claimed under the terms and conditions'' of the agreement by reason of the alleged failure on the part of the Railway to issue passes at credit notes for the transport of labour.

He even found that the opposite party was not at fault at all in view of the fact that the line in question was a prohibited area under the Defence of India Act and all transport was under military control. These are findings on the merits of the controversy. In his view the Courts at Calcutta or Haflong alone had jurisdiction in the matter.

After reaching a definite conclusion that the award could not be filed in any Court at Gauhati the iearned Judge proceeded to consider whether there, was a valid reference. His conclusion was that the matter in dispute was not covered by the agreement which contained the arbitration clause. In his view the reference or submission was itself invalid. As a consequence of this finding he also held that there was a previous award which had not been cancelled or remitted.

A second award in the circumstances was not possible in law. He also referred to the frustration of the original contract involving the annulment of the arbitration clause. On all these grounds his conclusion was that both the reference and the award were void ''ab initio�. The arbitrator was also found guilty of misconduct inasmuch as he knew about the existence of the previous award and the fate it had met in Courts. He even did not exclude the possibility of fraud in filing the award.

In regard to the question whether objections on behalf of the Union were put in within time, the learned Judge observed that the objections are out of time if the notice-was received on 20-3-1952. There was evidence to that effect. But in his view it was not shown that notice was actually sent under registered cover No. 420 as per Ext. 9.

It Was urged before him that the notice did not give the date of the award. He did not give any definite finding on this aspect of the case and observed that even if it be found that the objection is out of time it is of no avail (to the petitioner) in view Of the result of the finding that he had no jurisdiction to entertain the award. The question in these circumstances has to be regarded as having been left open.

On behalf of the petitioner all findings given by the Court below have been assailed. It is contended that the Court below had jurisdiction to adjudicate on the matter, the headquarters of the Railway administration whom the Union represents for the purposes of the suit being at Gauhati, the administration must be deemed to be carrying on business at its headquarters and therefore the proceeding could be initiated at Gauhati u/s 20, Civil P.C.

Mr. Sarrna has argued that part of the cause of action for a suit arising out of the contract would necessarily have arisen at Gauhati A notice u/s 80 would have been served on the administration at its headquarters and this would have constituted a part of the cause of action. He points out that u/s 31 Arbitration Act, the arbitrator could file the award at Gauhati since the suit relating to the subject-matter of the award could have been instituted here. He also argued that the breach of the contract on the part of the Railway for which compensation was claimed also occurred there. His second contention was that the objections on behalf of the Union which were put in were apparently out of time.

Valid notice was served and the statement of objections was put in more than 30 days after the receipt of the notice. Therefore no objections to the validity of the reference or the award could be considered and all that the Court had to do was to pass a decree in terms of the award. He has also challenged the correctness of the finding in regard to the validity of the reference and the award and the misconduct which has been attributed to the arbitrator.

The question that falls for determination first is whether the proceeding which gives rise to this petition for revision could be initiated at Gauhati. The learned Counsel for the petitioner has relied on the decisions of Lort-Williams, J. in--''Golab Rai Paliram v. Secy. of State'' ILR (1941) 2 Cal 160 (A) and of Abdul Rashid and Khosla, JJ., in the case of--''Mrs. Constance Zena Wells v. Governor General of India'' AIR 1946 Lah 50 (B). These authorities support his contention.

On the other side on behalf of the Union our attention has been invited to a series of decisions holding that the management of Hail-ways by the Government could not be regarded as commercial business or activity and therefore the expression "carry on business" whether it occurred in the Letters Patent or in Section 20, Civil P.C. did not apply to the Union of India even though it represented a railway administration managed and controlled by it.

According to Section 31, Arbitration Act, an award may be filed in any Court having jurisdiction in the matter to which the reference relates. The claim in the case arises out of the contract with the railway administration and if the Union can be said to be carrying on business at Gauhati where the head office of the N.E. Railway was situate at the relevant time the Court at Gauhati will have jurisdiction.

u/s 20, Civil P.C. suits can be instituted where the defendant actually and voluntarily resides or carries on business, or personally works for gain. Where there are more defendants than one a suit may be instituted at a place where any of the defendants actually resides or carries on business or personally works for gain, though in such cases permission of the Court has to be obtained unless the defendants who do not reside, or carry on business, or personally work for gain acquiesce in such institution. A suit also can be instituted where the cause of action wholly or in part arises.

In this case the defendant is the Union of India. The words "actually and voluntarily resides" or "personally works for gain" cannot apply to the Union of India. The learned Counsel for the petitioner has merely contended that the Union of (sic) should be deemed to be carrying on business where the headquarters of the railway administration to which the petitioner had agreed to supply ballast are situated. The words "carry on business" also occur in Clause 12 of the Letters Patent of the Calcutta High Court and have been interpreted in several decisions of the Calcutta High Court. All these decisions therefore are relevant.

In order to find out whether the Union of India can be said to be carrying on business of supplying rail transport through the railway administrations, a survey of the historical back-ground seems necessary.

In 1765, the East India Company acquired the Dewani from the Moghul Emperor. From that moment upto 1885 the Company had a dual character. It was trading and it also had sovereign powers, inasmuch as the right of administration including the fiscal part of it devolved on it under the Dewani grant. The result of the Charter Act of 1833 was that the Company began to govern India in trust for the British Crown.

It was in 1858 that the British Crown assumed direct sovereignty over India and took over the governance of the country from the hands of the Company. Section 65, Government of India Act, provided that every person shall have the same remedies against the Secretary of State in Council as he might have had against the East India Company, if the Government of India Act, 1858, had not been passed. This provision was later reproduced in. Section 32, Government of India. Act, 1915.

In the Government of India Act, 1935 the provision was continued though with modifications in two respects. It was provided by Section 176 that instead of the Secretary of State in Council the Federation of India and. the Provincial Governments themselves would be liable to be sued in cases where the Secretary of State could have been sued under the earlier Acts. The liability of the Government was made subject to any provisions of any Act that might be passed by the Federal Legislature or the Provincial Legislature, as the case may be.

Article 300 of the Constitution of India is on the same lines. It provides that

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 or 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.

Clause (2) of Article 300 provides for pending proceedings.

In all cases therefore in order that the Government may be liable in a suit brought by a citizen, it has to be shown whether the suit could lie against the East India Company if the dispute or the controversy had arisen before 1858.

Section 30, Government of India Act, 1919, and Section 175 of the Act of 1935 expressly empowered the Government to enter into contracts with private individuals. A corresponding provision is made in Article 298 of the Constitution. It provides that.

the executive power of the Union and of each State shall extend, subject to any law made by the appropriate Legislature, to the grant, sale, disposition or mortgage of any property held for the purposes of the Union or of such State as the case may be, and to the purchase or acquisition of property for those purposes respectively, and to the making of contracts.

The making of contracts is expressly permitted and this has been the law in all these Constitution Acts. There is also the provision that this individual making the contract on behalf of the Government shall not be personally liable in respect thereof. The liability of the Government under the contracts made on behalf of it can be enforced by suits against it. The suit may be against the Union or the State Government as the case may be. But a suit can be instituted where the claim arises out of a contract.

It follows therefore that subject to statutory conditions or limits the contractual liability of the State under the Constitution is not only enforceable but it is the same as that of any individual under the ordinary law of contract. No position of privilege has been given to the Government in respect of its contractual liabilities. It stands on the same footing as any other individual.

The East India Company as observed above had a dual function. It was engaged in trade and business. The Constitution Acts that followed did not take away the power of the executive Government to engage in trade commerce or business. That power has continued. It was on this basis that it has been held in-- Moti Lal and Others Vs. The Government of the State of Uttar Pradesh and Others, that the executive Government had the power to engage in transport and run its buses in competition with the citizens of the State. This view was followed in--Madhab Chandra Das v. Regional Transport Authority'' AIR 1954 Assam 212 (D) and it was held that

If the executive Government, by engaging in a commercial undertaking, is not encroaching on the powers of any other body like the legislature or the judiciary, if its act does not offend, against any provision of the law and does not infringe any rights, none can have any grievance against the Government.

The executive power of the Union may also be gathered from the text of the Constitution itself. Article 289 of the Constitution of India embodies an implied recognition of the position that the State Government may enter into trade or business. Clause (2) of the Article refers to trade and business of any kind carried on by or on behalf of the Government of the State. Clause (3) provides that Parliament may by law declare some trade or business as incidental to the ordinary functions of the Government. Similarly Article 19(6)(ii) refers to the carrying on by the State or by a corporation owned or controlled by the State of any trade, business, industry or service, whether to the exclusion, complete or partial, of citizens or otherwise. As observed by C.J. Malik, in Moti Lal and Others Vs. The Government of the State of Uttar Pradesh and Others,

as incidental to the ordinary functions of Government or merely as a trade or a business venture, the State has a right to hold and manage its own property and carry on such trade or business as a citizen has the right to carry on, so long as such activity does not encroach upon the rights of others or is not contrary to law.

When the executive Government engages in business and starts commercial undertakings, its rights are no more or less than that of the individual. It cannot enjoy any privilege that the individual does not have. It may not for instance create a monopoly. If a monopoly is to be created it will be necessary to obtain legislative sanction. But the power of the executive Government to enter into business does exist undeniably. By legislative enactments monopolies may be created and in the exercise of powers of sovereignty the Government may appropriate a certain specified field of industrial activity exclusively to itself.

The Constitution aims at a welfare State. A socialistic pattern of society is the goal of the national effort. This may involve nationalisation of industries on an increasingly large scale. During the last five years the Government engaged itself in projects with a view to accelerating production. Irrigation works, electricity, steel, fertilizers, drugs have-been produced by State owned or managed organizations.

Government has entered into the field of industry and commerce in a big way and this could not be avoided if a Welfare State is to be brought into being. Before independence also the Government was engaged in commercial undertakings, though by reason of the fact that the character of the State at that time was different, the commercial activity of the Government was very limited. We then had a police State not concerned so much with the welfare of the people. Railways formed the biggest commercial undertaking even then. In providing transport in the shape of railways the motive may not have been profit alone.

Transport was a necessity for purposes of defence and also for maintaining law and order. Still its main purpose was to provide transport for trade and commerce. Industry, trade and commerce in the modern world could not be conceived without transport. The existing network of railways may not be able to cope with production under the second Five Year Plan. State Governments are taking control of road transport at a fairly rapid pace. Air transport also is under Government control and the State is having an increasingly large share in transport by sea. The Central Government and the State Governments are thus looming large in the field of industry and commerce.

It seems to me therefore obvious that the Government is carrying on business, and railways in particular form one of its commercial undertakings.

The answer to the question whether railways form a commercial undertaking of the Union or not, depends not on how money earned by the railways is utilised. It is the nature of the activity that provides the determining factor. The biggest source of railway income is the goods traffic. The individual trader is getting transport from the Government on payment. Both goods and passengers are being carried on a colossal scale. If a private company provides this transport it is a commercial undertaking and I do not see why it should cease to be a commercial undertaking when the Government takes it over.

Several railways In the beginning were owned by private companies. These have been taken over. They are being controlled by railway administrations under the Government. The change in the ownership of the railways does not bring about any change in the nature of the activity. A Government owned railway is as much a commercial undertaking as a railway owned by a private company. The private company makes profits for itself. The Government also earns money from the transport it provides for passengers and goods. The profit is made from individuals and spent on public purposes in the interest of all.

The fact that the income made out of utility concerns ultimately goes to the revenues and is spent partly for carrying on the administration and partly for promoting welfare and well-being of the people also does not affect the nature of the undertaking. Government is doing business with the individual and it is immaterial whether a particular undertaking is yielding profit or resulting in loss.

It is also not material when determining the nature of the undertaking as to how the income made is spent. A trust may engage in business. If the income made is spent on educational, charitable or religious purposes the commercial activity of the trust does not cease to be so, nor is its complexion altered. The State in spending its earnings made from its commercial undertakings is very much like a trustee for the people taken as a whole. The railways therefore constitute a business undertaking of the Union.

In ILR (1941) 2 Cal. 160 (A) Lort Williams, J. considering the enormous increase in the business of railways in 1930 observed at p. 164 that

it is nonsense to suggest nowadays that they (railways) are kept up solely for the purposes of Government. 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 of the Letters Patent cannot be denied. It is the same kind of business as that carried on by railway companies in India, which clearly comes within the provision.

I find myself entirely in agreement with the observations of the learned Judge. What was true in 1930 is more true now and also more manifest.

In AIR 1946 Lah 50 (B) the sovereign activity of the Crown was distinguished from its commercial functions. A State railway was held to be a commercial organization standing on the same footing as any other organization of carriers. It was also held that in respect of the commercial activities of the Crown no special privilege could be claimed so far as suits for damages were concerned and therefore no specific enactment making the Crown specifically responsible for damages was necessary. This decision also supports the view which prevailed with Lort Williams, J. in the case referred to above.

The contrary view has been taken in--''Doya Narain Tewary v. Secretary of State'' 14 Cal 256 (E). In this case the plaintiff, a purchasing agent of the Government, sued the Secretary of. State for India in Council to re-cover certain sums of money alleged to be due to him for the purchase of stores for the Second Cabul Campaign. This suit was found to be time barred. When considering the question of jurisdiction the learned Judges came to the conclusion that Section 65 of the Act for the better Government of India, 21 and 22 viz c. 106

does not constitute the Secretary of State in Council a body corporate, but it simply laid down that the officer and the department are to be sued as a body corporate, the object of the suit being to obtain satisfaction of the plaintiff''s claim, if it should be decreed, out of the Indian Exchequer.

It was further found that

a suit of this kind is not really against, any person or any real body corporate. But it is allowed to be brought against the Secretary of State in Council as a body corporate. In other words, as a suit cannot be brought without a defendant, a nominal defendant is allowed to be put upon the record to enable the, plaintiff to obtain the remedy secured to him by this section.

The conclusion was stated in the following terms:

This being the nature of the suit contemplated by Section 65 of the Act for the better Government of India, and the defendant on the record being a mere name used for the purposes of prosecuting the suit, the words by which the second head of jurisdiction has been defined in Clause 12 of the Letters Patent are in my opinion inapplicable to it. The same view was taken by Wells, J. in--''Rundle v. Secy. of State'' 1 Hyde 37 (F). He says: The words ''carry on business and personally work for gain'' do not refer to an institution like the Government of India'', He further held that the carrying on of the business of the Government cannot be considered to be carrying on of business within the meaning of Clause 12 of the Letters Patent.

The ratio of this case appears to be that the Secretary of State in Council was not a body corporate and that he provided merely a name for obtaining satisfaction from the Government of India. The words ''carry on business'' could not therefore apply to such an entity. The business of governing the country was also not regarded as ''business'' within the meaning of Clause 12 of the Letters Patent.

Now I have no hesitation in saying that the business of governing the country in 1886 was not such business as was contemplated by Clause 12 of the Letters Patent. The dispute did not arise out of any contract with a commercial undertaking like the railway. It arose out of a relationship under which plaintiff claimed to have supplied goods to the Government when it was engaged in a campaign in Cabul. On facts therefore the case is distinguishable.

The suit then was against the Secretary of State in Council. The present suit is against the Union of India and if the Union of India is carrying on business then there is no reason why the words in Clause 12 of the Letters Patent and in Section 20 Civil P.C. should not apply to it if it can be shown that the Union of India is carrying on business apparently distinct from its business of governance within the jurisdiction of the Court in which the suit is instituted. The reasoning that prevailed in 14 Cal 256 (E) cannot apply to the Union of India.

It may be possible to say that the defendant (Secretary of State in Council) was not carrying on business with the plaintiff of 14 Cal 256 (E). But it does not follow from it that in the existing circumstances it can be said that the Union of India is not carrying on business through its different railway administrations.

In Rodricks v. Secretary of State'' 40 Cal 308 (G) Chaudhuri, J. who decided the case on the original side treated 14 Cal 256 (E) as an authority for the proposition that the Secretary of State could not be sued on the ground that he carried on business. He felt bound by it though he himself preferred the view of Pigot J. in--''Biprodas Dey v. Secretary of State'' Suit No. 357 of 1884 (Cal) (H) where it was held that for purposes of that suit the Secretary of State for India in Council was a corporate body and a person within the meaning of Clause 12 of the Letters Patent. The decision of Pigot, J. is reproduced in the report on page 262 in 14 Cal 256 (E). The relevant passage in the judgment of Pigot, J. is as, follows:

I own that it seems to me very difficult if the Secretary of State be, in this country, a legal person in any sense, to hold that he does not carry on business in Calcutta. He enters into contracts, as for instance, in the conduct of the opium business of the Government, institutes suits in respect of breaches of such contracts, and appears as a judgment-creditor in this Court and in the Insolvent Court. The State Railways are held and their affairs conducted in his name, and some of them have their Chief places of business here.

On appeal in 40 Clause 308 (G) Chief Justice Jenkins held that ''Doya Narain Tewary''s case (E) was an authority for the proposition stated by Chaudhuri, J, and ought to be followed in view of the fact that it was the decision not of a single Judge but of a bench of two Judges and he thought it to be wrong not to follow the decision. He said:

I regard it as important that matters of this kind should have all the certainty possible and that the Court should not lightly disregard a decision definitely settling a question of jurisdiction such as that which arises in this case. If the decision is wrong then it must be for a higher tribunal to correct it. For my own part, I prefer to follow it as being a decision of Bench of two Judges which has long been accepted as governing authority.

The learned Chief Justice did not lend the weight of his authority to the ratio of the decision in 14 Clause 256 (E). He thought it would not be right to disregard the decision in view of the fact that it had been followed for a long time.

In Dominion of India v. Firm Jagadish Prosad Panna Lal'' AIR 1949 Cal 622 (I) Harries, C.J. held that a company carries on business at its registered office and if a railway was treated as a separate entity, it would also carry on its business at its head office. The ratio of this decision was the same as that; which appealed to Lort-Williams, J. Chakravartti, J. (as he then was agreed with this view. But the previous decisions reported in 14 Cal 256 (E) and 40 Cal 308 (G) were not, referred to.

The decision in Rodricks'' case (G) was again followed in-- Dominion of India Vs. R.C.K.C. Nath and Co., Chief Justice Harries was a party to this decision and agreed to the adoption of the view which prevailed in Rodricks'' case (G). In Calcutta Motor Cycle Co. Vs. Union of India (UOI), Mukharji J. felt bound by the decisions in the cases of 14 Cal 256 (E) and 40 Cal 308 (G). He was not bound by the decision of Lort-Williams J. in ILR (1941) 2 Cal 160 (A). He also relied on a decision of the-Madras High Court reported in--''Govindarajulu Naidu v. Secretary of State'' AIR 1927 Mad 689 (L). Chief Justice Coutts-Trotter dealing with the question whether the State-could be said to carry on business within the meaning of Clause 12 of the Letters Patent observed as follows:

In my opinion the words of the section do not cover the case of government at all. The only doubt I had was with regard to the word "residence" occurring in that section. I was inclined to the view at one time that the government must be said to ''reside'' in the place-where its official headquarters are located, but on consideration I think that the word ''reside'' must be taken to refer to natural persons and not to legal entities such as limited companies or governments.

Beasley J. was in entire agreement with the view expressed in--''Doya Narain Tewary''s case (E)''. In his view the Government could not be said to be carrying on business within the meaning of the words in Clause 12 of the Letters Patent. But the two basic decisions in the cases of--''Doya Narain Tewary (E)'' and of--''Govindarajulu Naidu (L)'', are distinguishable. In--''Doya Narain, Tewary''s case (E) the claim was for goods purchased on account of the Government in connection with the Cabul expedition.

In ''Govindarajulu Naidu''s Case (L)'' the claim arose out of alleged illegal seizure and conversion of goods by custom authorities. The transactions from which the liability arose did not form part of any commercial undertaking of the Government like the railway. Both the transactions formed part of the business of the Government as distinguished from a commercial undertaking or a business.

Observations made therefore in those cases in regard to the inapplicability of the words ''carry on business'' ought to be limited to the circumstances found to exist in those cases. The proposition laid down in these cases may not be extended in scope and may not be applied to cases where the liability arises out of an undertaking which undoubtedly has got a commercial character.

Every judgment must be read as applicable to the particular facts proved, or assumed to be proved, since the generality of the expressions which may be found there are not intended to be expositions of the whole law, but governed and qualified by the particular facts of the case in which such expressions are to be found.... A case is only an authority for what it actually decides. I entirely deny that it can be quoted for a proposition that may seem to follow logically from it. Such a mode of reasoning assumes that the law is necessarily & logical code, where every lawyer must acknowledge that the law is not always logical at all.

The pronouncement reproduced above was made by Lord Halsbury in--''Quinn v. Leathern'' 1901 AC 495 at p. 506 (M). In view of its undoubted authoritative character there is no justification for extending the operation of the two cases on inferential reasoning. The learned Judges in these two cases were not dealing with a case arising from the contractual liability incurred on behalf of the Government in connection with any of its commercial undertakings.

Section 20 Civil P.C. provides that a suit may be instituted at a place where the defendant carries on business. The State is not excepted from the operation of any part of the section. The section therefore would apply where the defendant is Government or the State. In this case the Union is the defendant and if the Union is carrying on business the section would apply to it.

In a police State the Government has got no commercial activity. It merely carries on the business of the Government. That business is not the business referred to in Section 20, Civil P.C. or Clause 12 of the Letters Patent. The business referred to in the two relevant provisions is a commercial business. I have come to the conclusion that the Government has the right to embark on large commercial undertakings. It is actually engaged in huge projects which are commercial in nature.

A large field of industry has already been taken over by the Government. The public sector is emerging as the biggest producer. This is due to the change in the conception of the ''State''. The Constitution of India envisages a Welfare, State. Social justice is the declared aim. In order to achieve the objective, the Government has taken on itself the task of production particularly in industries which could not be suitably left to private enterprise wholly or in part. Transport by land, air and sea is one of its stupendous commercial undertakings. Therefore it cannot be said that so far as this field of activity is concerned the Government cannot be said to be carrying on business. It is doing so in fact.

Mukharji J. in Calcutta Motor Cycle Co. Vs. Union of India (UOI), thought that

by carrying on a business the State itself does not become a business concern. By carrying on an undertaking like the railways the State itself does not become a railway corporation. The State is not an arithmetical or mechanical conglomeration of functions so that by undertaking a venture of commercial nature it is to be regarded as a commercial institution. I cannot persuade myself to accept the idea that the State in India is to be regarded as a trading corporation. It is quite true that one of its functions or even one of its duties in a Welfare State might be to carry on an undertaking which formerly at any rate could only have been a private commercial enterprise.

The State may not be converted into a business concern by carrying on business. It still remains a State. It has got its governmental activity or business which is distinguishable from commercial business. But it has a legal entity and if in addition to ordinary governmental functions of the police State it takes on itself the duty or the obligation of starting commercial ventures, there should be no difficulty in law in holding that the State is carrying on business of a commercial nature.

I find it difficult to hold that even commercial ventures of the Government assume the colour of its ordinary administrative or govern mental functions. In its commercial Undertakings the Government is entering into con tracts with the citizen. These contracts are governed by, the ordinary law of the land and they are enforceable between the parties. The Government has got No. privileged position in regard to these contracts nor can it have any privileged position for purposes of Clause 12 of the Letters Patent or Section 20, Civil P.C. unless the law lays down expressly that these provisions or parts of these provisions have no application to business undertakings of the Government.

To say that the Government is not carrying on business for purposes of Section 20, Civil P.C. or Clause 12 of the Letters Patent, even who actually it is engaged in the business of transport is to introduce a legal fiction into the law. The legislature has the power to do so. But the Courts may not exercise that privilege. For, introducing a fiction involves reading something into the law which is not there. In fact the words ''carries on business'' in Section 20 would lose their meaning if they are not applied merely because the defendant happens to be the Government.

The change in the conception of the Government which the constitution has introduce ed creates no difficulty. On the contrary it facilitates their application. It brings out into bold relief the situation that Government is not merely for administrative purposes, for maintenance of law and order, for doing justice and providing security but also for promoting the welfare of its people by engaging in trade and industry. The two functions of the Government have to be kept apart and if we see them separately there is no difficulty in applying the provision of Section 20, Civil P.C., to the Union of India. It may not be said to reside in any particular place, nor may it be said that it is carrying on business for personal gain or profit. But it does carry on business.

This business is carried on with the individual whether the activity is transport or production of goods or commodities. Income made from that business is spent for purposes which advance the well-being of the society as a whole. The rights of the individual are distinguished from the rights of the society and the money made by the Government through its commercial undertakings forms part of the revenue of the Government. No individual has any claim to it and yet a great deal of it is made by business transactions with individuals.

Therefore it would be wholly unrealistic to say that the Government is not carrying on business when it is providing transport of all descriptions in a country so vast as India. With profound respect I find myself unable to adopt the view that the expression ''carry on business in Section 20, Civil P.C. or in Clause 12 of the Letters Patent cannot apply to the Government even when it admittedly is carrying on business of transport as in this case.

The next question is whether the Union of India, the defendant was carrying on business at Gauhati. The Union of India is carrying on the business of transport through State Railways. The North Eastern Railway which was operating in this region was also a commercial undertaking of the defendant. The principal place of the North Eastern Railway administration was Gauhati at the relevant time. The administrative business of the Railway was being carried on there.

The administrative authority at this office exercised delegated powers from the Government The business of the Railway was thus being carried on by the Government through its officers who exercised delegated authority and carried on the work of administration from Gauhati. That would be the principal place of business of the defendant. For purposes of suits the Union of India and the Governments of States are juristic personalities just as the Secretary of State in Council was prior to the Government of India Act, 1935. The suit therefore could be instituted at Gauhati the principal place where the defendant carried on the business of transport in the Eastern Region.

If a private corporation were carrying on the business of transport, the head office from which it carried on the administration would have been its principal place of business. It could not be said to be carrying on business at any place in the entire area to which its operations extend. The same rule would apply to the defendant. It cannot be argued with any show of reason that the Union of India should be taken or be deemed as carrying on business at all places where any activity connected with transport by rail is carried on.

The principal place from which the Railway administration in a particular area is carried on is the principal place of business for purposes of Section 20, Civil P.C. On this point Mukharji J. in Calcutta Motor Cycle Co. Vs. Union of India (UOI), at p. 9 expressed himself as follows:

Assuming that the State carries on a business, why can it not be said that it carries on the railway business throughout the length and breadth of the country wherever the railway lines run? There it also does carry on Basiness of railway undertaking in running the railway and carrying freight and passengers over the rails. What is the result? If this proposition is right then this suit could have been filed in Madras, or Bombay etc. etc.

As I have indicated above, the rule that would apply to the defendant in this case is the same that applies to private corporations. The same argument could be advanced in respect of private corporations but considering this difficulty it was provided expressly that corporations shall be deemed to carry on business where the principal place of business is situate.

Another difficulty pointed out by Mukharji J. is that if a company resides or carries on business where its control resides, the control in the case of the State should be said to reside at its capital viz., Delhi in this case. But the brains which carry on the administration of the railways are located in different regions. These brains have delegated authority and the places where they function can appropriately be regarded as the principal places of business. The day to day administration of different railways is not being carried on from Delhi.

For purposes of administration the authority of the Union is being exercised by offices working in the headquarters of the different railways. Here in this case a contract was entered into not at Delhi but at offices situate in different regions. The theory that the principal place of business is the place where the control resides may not be pushed to a length chat the state of affairs actually obtaining is completely disregarded or lost sight of My conclusion therefore is that the Court of the Sub-Judge at Gauhati had jurisdiction to hear and dispose of the suit as the defendant carried on business with its principal place of business at Gauhati.

Mr. Sarma has also argued that a suit in respect of any matter or dispute arising put of the contract in question could have been instituted at Gauhati only after a notice u/s 80, Civil P.C., had been given. It was also imperative that a statement to that effect should have appeared in the plaint. In the absence of such a notice the Court would not; have been competent to take cognizance of the suit. Notice u/s 80. Civil P.C. would therefore have been an essential part of the cause of action.

If reference to arbitration had not been obligatory and a suit had been instituted part of the cause of action would have arisen at Gaushati. The Court at Gauhati would have had jurisdiction in the suit and therefore even though no notice u/s 80 was necessary so far as the proceeding giving rise to this petition of revision is concerned, it is necessary to assume when determining the question of jurisdiction that a valid notice u/s 80 would have been issued before the institution of the suit.

The suit could have been instituted at Gauhati as part of the cause of action would have arisen there. The notice on the administration would have been served there. If the suit could be instituted at Gauhati the arbitrator could also file his award there u/s 31, Arbitration Act.

There is no doubt some force in this contention, though the question whether a notice u/s 80 forms part of the cause of action or not, is not wholly free from difficulty. In Raj Kumar Shaw Vs. Dominion of India, it was held that when the notice u/s 80 for action against the Dominion of India representing the East Indian Railway was both issued at and served in Calcutta it formed part of the cause of action for purposes of jurisdiction and the High Court of Calcutta was competent to try the suit.

As at present advised I am inclined to agree with the view which prevailed with Bachawat J. in this case, though it is necessary to base the decision of the case on this point in view of the conclusion reached by me above that the Union of India must be deemed to be carrying on business at Gauhati.

The next question that arises in the case is whether statements of objections put in on behalf of the opposite party were within time. The contention raised on behalf of the petitioner was that the notice was delivered to the addressee on 20-3-1952 and the first statement of objection was put in on 29-4-1952. A further statement of objections was put in after obtaining time on 17th July. Both these statements were put in after the time allowed by law had expired.

Article 158, Limitation Act, applies and the objections had to be put in within 30 days of the receipt of the notice. The learned Sub-Judge remarked that it was not shown whether notice (Ext. 9) was sent under registered cover No. 420. He also noticed that Ext. 5 did not give the date of the award. He also considered the argument advanced on behalf of the Union of India to the effect that in the circumstances of the case it could not be held that notice (Ext. 9) was served on 20-3-1952 and that in any case it was not a valid notice. The learned Judge however did not decide the point. He observed that

if this view be accepted, the issue cannot be affirmed and even if it be found that the objection is out of date, it is of no avail in view of the result of the above finding that this Court has no jurisdiction to entertain the award.

The question whether the Union of India, the defendant in the case had the right to have the objections determined has been left u decided and the reason for not deciding the question given by the learned judge is that he had no jurisdiction in the matter. This would be a valid reason for not deciding whether the objections were barred by time or not. For the same reason the learned Judge may have avoided giving findings on the validity of the reference and the award and also about the alleged misconduct of the arbitrator. These questions could only be determined if the Court had jurisdiction which the learned Sub-Judge found himself incapable of exercising.

It is not possible for us to decide these questions finally without first deciding whether the objections raised on behalf of the Union of India to the validity of the award were put in within time. The question is not purely one of law. It is a mixed question of law and fact and it has not been determined by the Court below. It has been contended before us that in the circumstances of the case the objections could not be regarded as out of time and in any case the circumstances were such that the Court could extend time u/s 5, Limitation Act, if it came to the conclusion that the objections were put in after time. It would have been possible for the defendant no doubt to pray for the condonation of delay if the Court had come to the conclusion that objections were put in after time; In that contingency the Court would have been bound to exercise judicial discretion in the matter on facts placed before it. These matters may not be appropriately decided by us at this stage. A remand of the case to the Court below thus becomes necessary.

The conclusion of the learned Subordinate Judge was that his Court was not the proper forum for filing the award. He therefore directed the award to be returned to the arbitrator. It is not an order refusing or setting aside an award and it does not fall under any head of the appealable orders enumerated in Section 39, Arbitration Act. We have found that the learned Subordinate Judge had jurisdiction in the matter and that he has wrongly declined to exercise jurisdiction with which he was vested. The order could be challenged by a revision petition.

The petition of revision in the circumstances cannot be regarded as incompetent. The decision is vitiated by a defect of jurisdiction and is open to challenge u/s 115, Civil P. C, inasmuch as the Court failed to exercise jurisdiction which it possessed. It has also acted irregularly in the exercise of its jurisdiction by giving findings on objections without determining whether statements of objections were put in within the time or not.

The learned Judge has also gone into the merits of the claim. u/s 17, Arbitration Act if the Court sees no cause to remit the award or any of the matters referred to arbitration for reconsideration or to set aside the award, the Court must, after the time for making an application to set aside the award has expired, or such application having been made, after refusing it, proceed to pronounce judgment according to the award, and upon the judgment so pronounced a decree must follow. The award may be set aside on grounds given in Section 30. It may be remitted for reconsideration on grounds given in Section 16 and may be modified if the case falls u/s 15. These provisions bear on the scope of the enquiry when an award is filed.

If an award is not modified u/s 15 or remitted u/s 16, it shall form the basis of the judgment u/s 16, unless set aside on grounds given in Section 30. The learned Judge has exceeded his jurisdiction in determining whether any breach of contract had been committed by defendant which gave rise to a liability for compensating the petitioner for any loss that he may have suffered. There was no need for going into this question.

For the reasons given above we allow this petition and set aside the order of the learned Subordinate Judge. The case shall go back to him for disposal according to law. He may first determine whether the objections were within time and if he comes to that conclusion or if he decides to condone delay, if any, he shall proceed to determine objections to the validity of the reference and the award.

The costs of the petition shall abide the result of the proceeding.

Sarjoo Prosad, C.J.

I agree.