S. Jaswant Singh Dugal vs V.V. Purt

Kapur, J.—This is a pltf.''s appeal against an order of the Senior Subordinate Judge of Simla, returning the plaint for presentation to Court of proper jurisdiction.

The pltf. brought a suit for the recovery of Rs. 10,500/ -, principal and interest, on the allegation that the deft, offered to get for the pltf. a permanent lease of a cinema site in Lahore Cantonment and paid the pltf. Rs. 10,000/ - as premium which he had to return if he was not successful in getting the cinema site for the pltf. The deft, was not able to get this lease and therefore this suit has been brought for the recovery of that money.

The only point for determination in this appeal is whether the Simla Court has jurisdiction to try the suit. On 3-8-1948, the pltf. sent a notice to the deft, demanding repayment of the money and on 9-8-1948, he brought the present suit. The Subordinate Judge has held that: (1) the deft, does not reside in Simla; (2) he does not carry on business personally at Simla; (3) the pltf. does not reside at Simla; and (4) the deft, is a displaced person.

In view of the fact that the plff. does not reside at Simla and the deft, is a displaced person the suit will be governed by the provisions of Section 20, CPC which provides that every suit shall be Instituted in a Court within the local limits of whose jurisdiction the deft, "actually and voluntarily resides or carries on business or personally works for gain". In support of his contention the learned Advocate for the Appellant has relied on three things; firstly, that the deft, is a Managing Director of Davico''s Limited which company is carrying on business of restaurants in Simla, secondly, the deft, made a declaration u/s 87, Companies Act, in which he gave as his usual residential address Davico''s Limited, Simla (see Ex. P.W.1/A), and thirdly, a liquor license was issued in the name of the deft. V.V. Puri, as Managing Director of the Company.

The deft''s learned Advocate has submitted that he has been residing at Bombay since the partition and the documents which he has produced show that he is living in a flat there and is registered for the purposes of rationing in Bombay and has been drawing his rations there.

5a. On the evidence which has been produced It may be taken that the deft, does not "actually and voluntarily reside" in Simla. There is no proof that he personally works for gain in Simla. The only point is whether he comes within the phrase "carries on business in Simla." In ''Kripa Ram Sita Ram v. Mangal Sen Bhishan Mal AIR 1922 All. 367, it was held that "carrying on business" was used in Section 20 as distinct from personally working; a man might carry on business: in a place where he did no personal work of any kind and a firm might be carrying on business at a particular place either through an agency or through a manager or by its servants without ever having left his or its own town. At p. 369 it was observed:

....Of course a man personally working in a particular place is carrying on business, but a man may carry on business, and thousands of people do, in a place where he does no personal work of any kind, and these defts. may be carrying on business at Cawnpore....

''Carrying on business'' means, in this section, having an interest in the business transactions at the particular place; a voice in what is done; a share in the gain or loss, as the case may be; and some control, if not over the actual method of working, at any rate, upon the existence of the business.

Mr. Manchanda on the other hand submitted that carrying on business must mean personal business and he relied on Graham v. Lewis (1889) 22 Q.B.D. 1. where it was held that a clerk employed in a solicitor''s office in London did not carry on his business there. Lord Esher M.R. said at page 3:

I am of opinion, looking at this Act of Parliament, that we ought to give the words their primary business sense, already well known in the City, namely, the carrying on of business, by the person whose business it is." At p. 5 Pry, L.J. observed:

In my opinion it imports that the person has control and direction with respect to a business, and also that it is a business carried on for some pecuniary gain. If that be so, it seems evident that this solicitor''s clerk does not carry on business in that sense." And Lopes, L.J. said at page 6:

A solicitor''s clerk cannot, in my opinion, be said to be carrying on his business by assisting in carrying on the business of the solicitor. It is not the clerk''s business, but the solicitor''s which is carried on.

This judgment, in my opinion, is not of much assistance to the Respondent. No doubt a clerk does not carry on the business of his master, but, as Pry, L.J., observed, this phrase imports: "that the person has control and direction with respect to a business, and also that it is a business carried on for some pecuniary gain." A clerk may not carry on business in that sense but can it not be said that a managing Director can? It has not been shown to me that this Managing Director has not the usual powers which the other Managing Directors of companies have.

The next case relied upon by the Respondent is Firm Kirpa Ram Sita Ram Vs. Firm Mangal Sen Bishan Mal, There a pronote was executed by three partners after the dissolution of a partnership but the plff. did not know of this when he accepted the pronote from the partnership, nor when he brought the suit. It was held that Eduljee Cowasjee who was residing in Bombay could not be said to be carrying on business within Clause 12 of the Letters Patent, since after the dissolution of partnership Eduljee was taking no part nor any interest in the business. Learned Judges relied on a judgment of Scotland, C.J., in Subbaraya Mudali v. The Govt. 1 Mad. H.C.R. 286, which lays down that the carrying on of business must be personal on the part of the deft. This case also does not help the deft. very much, because in Section 20, Code of Civil Procedure, the words used are "carries on business, or personally works for gain". The two phrases are disjunctive and in the one part the word "personally" has been used but not in the other.

''Doya Narain Tewary v. Secy, of State 14 Cal. 256, was then relied upon. That was a case against the Secretary of State for India and it was held that the word "business" in C1. 12, Letters Patent, was used in a restricted sense, because in the next part the phrase "personally work for gain" was used.

The next case relied upon is Goswami Shri 108 Shri Girdhariji Maharaj v. Shri Govardhanlalji Girdhariji 18 Bom 294 (P.C.), where the question was whether an Acharaya of a vaishnav community who was the head of a Nathdwara in Udepur was carrying on business in Bombay because he had a treasurer in an establishment for the collection and entry of gifts made by devotees and also because donations were made in that establishment and were transmitted to the Nathdwara in Udepur. This case, in my opinion, does not apply to the facts of the present case. Lord Morris had said there:

The phrase ''carry on business'' as has been often said is a very elastic one, and is almost incapable of definition. The tribunal must in each case look to the peculiar circumstances.

It cannot be said that the head of the Nathdwara carries on any kind of business, and collection of gifts from devotees cannot be called business.

In Re: Reloomal Tolaram AIR 1929 Sind 24, was also relied upon, but that does not carry the matter any further.

Finally, the learned Advocate relied upon Gain v. Butler (1916) 1 K.B. 759, where it was held that for the purposes of the phrase "carries on his business" in Section 74, County Courts Act, 1888, the business of a joint company was not the business of a director and that the mere fact such a company carried on business within the district of a particular County Court did not render a director of a company liable to be sued in that Court in respect of a cause of action arising outside the district. But there reliance was mainly placed on the word "his business" and it was held by Lush, J. at p. 761:

....that a man must be treated as carrying on business at the place where he is to be found during the business hours of the day, even though the business that he is then engaged in is not his own. But here the words are, not ''carry on business'', but ''carry on his business''. If the mere fact of a man being a director of a company and attending the board meeting at the registered office of the company amounted to a carrying on by him of his business there.... I think that what the County Courts Act meant was that a man who is carrying on a business of his own is usually to be found at the place where it is carried on. Whereas a director of a company may not go near the company''s place of business more than two or three times in the year.

It is significant that the learned Judges thought it unnecessary to decide whether a director could not be sued in the district in which his company''s business was carried on if it were shown that the company was a private one and that he held all the shares. Shankey, J., who agreed also reserved this question for determination in a proper case.

In the present case the Davico''s Limited, Simla, is a private limited company of which the deft, is the managing Director. According to P.W.1/A, return made u/s 87, Companies Act, his usual residential address is shown as ''Davico''s Limited. Simla. A managing director is not a clerk or a servant of the company. He is an agent of the company for carrying on its business: see ''Gulab Singh v. Punjab Zamidara Bank Ltd., Lyallpur AIR 1942 Lah. 47.

It was next argued that a private company is really a partnership which has by the Companies Act been given the garb of a limited company and which has all the attributes of a partnership so much so that its winding up is governed by the principles of dissolution of a partnership. And reliance was placed by counsel on a judgment of the Court of Appeal in ''In Re: Yenidja Tobacco Co., Ltd. (1916) 2 Ch. D. 426. There Lord. Cozens -- Hardy M.R., said at p. 431:

I have treated it (a private limited company) as a partnership, and under the Partnership Act of course the application for a dissolution would take the form of an action; but this is not a partnership strictly, it is not a case in which it can be dissolved by action. But ought not precisely the same principles to apply to a case like this where in substance it is a partnership in the form or the guise of a private company?

And Warrington, L.J., said at P. 435:

....the company ought to be wound up if there exists such a ground as would be sufficient for the dissolution of a private partnership at the suit of one of the partners against the other. Such ground exists in the present case. I think, therefore, that it is just and equitable that the company should be wound up.

About "Directors of Companies" Palmer has said at p. 362 of Palmers Company Law, 1949 Edition, "but in the case of ''Private Companies'' the shareholders manage the business and trade with their own money". If the position of a private; limited company is that of partnership in disguise and even the shareholders manage the business and do trade then it cannot be said that the Managing Director of this company (Davico''s Limited) is not covered by the phrase "carries on business."

The deft, is a Managing Director of Davico''s Limited, and according to the Lahore judgment that I have referred to above he is in the position of an agent of the Company. Can it be said that an agent does not carry on business?

It was contended with a certain amount of emphasis that "carrying on business" connotes something in the nature of personally carrying on business and therefore the deft, could not be held to be within that phrase used in Section 20, CPC The statute itself has used ''personally'' in connection with working for gain and not with carrying on of business and therefore the intention of the legislature itself was to distinguish between the two parts of the statute which are disjunctive. Their Lordships of the Privy Council have held the words too elastic which are incapable of definition. But this much is certain that the meaning of these words does not necessarily imply the business being personal to the deft. Indeed, as was said in the Allahabad case (Supra) people can carry on business at many places without doing personal work of any kind. I am therefore, of the opinion that the word ''personal'' is not necessarily applicable to the carrying on of business as used in Section 20, Code of Civil Procedure

For all these reasons, I am of the opinion that the learned Senior Subordinate Judge was in error in holding that the deft. is not carrying on business within the phrase used in Section 20, Code of Civil Procedure

I therefore allow this appeal and direct that the suit should be tried in the Court of competent jurisdiction at Simla. The Appellant will have his costs in this Court and in the Court below.

The parties are directed to appear in the Court of the Senior Subordinate Judge, Simla, on 7-5-1951.