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PETITIONER: UNION OF INDIA AND ANOTHER

       Vs.

RESPONDENT: LADU LAL JAIN

DATE OF JUDGMENT: 07/05/1963

BENCH: DAYAL, RAGHUBAR BENCH: DAYAL, RAGHUBAR SUBBARAO, K. MUDHOLKAR, J.R.

CITATION:  1963 AIR 1681            1964 SCR  (3) 624  CITATOR INFO :  D          1988 SC1003  (2,3)  R          1990 SC 104  (4)

ACT: Civil  Procedure-Jurisdiction of Court-Railway  headquarters at a place within the jurisdiction of Court-Railway owned by the  Government  "if a business"-Code  of  Civil  Procedure, 1908  (V of 1908), ss. 20, 115-Constitution of India,  Arts. 19 (6), 298.

HEADNOTE: The  plaintiff respondent instituted a suit in the court  of the Additional Subordinate Judge, Gauhati, against the Union of  India and the Northern Frontier Railway  represented  by the  General  Manager,  having its  headquarters  at  Pandu. Pandu  is within the jurisdiction of the Subordinate  judge. The  claim was for the recovery of a sum of Rs.  8,250/-  on account of nondelivery of the goods which had been consigned to  the  plaintiffs firms, The consignment was  booked  from Kalyanganj  station  of  defendant No. 2  fair  carriage  to Kanki,  a station of the same defendant.  It was alleged  in the  plaint that the cause of action arose at  Pandu  within the  jurisdiction of the Court, where the defendant  railway had  its  principal  place  of business  by  virtue  of  its headquarters  being at Pandu.  The suit was resisted by  the defendants on the ground that the court bad no  jurisdiction to entertain the suit. Relying  on  the decision of the Assam High Court in  P.  C. Biswas v. Union of India, A. I. R. 1956 Assam 85, the  court of  first instance held that the principal place from  which the  railway administration in a particular area is  carried on  is  the principal place of business for the  purpose  of jurisdiction  under  s. 20 of the Code of  Civil  Procedure, 1908, and decided the issue in favour of the plaintiff.  The revision  petition filed by the appellants was  rejected  by the  High Court.  The present appeal was filed with  special leave granted by this Court. It  was contended in the appeal by the appellants  that  the running  of the railway by the Union of lndia could  not  be said to amount to carrying on of business and that therefore the fact that the headquarters of Northern Frontier  Railway

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Administration was at Pandu within the jurisdiction of the  625 Court at Gauhati did not give the Court jurisdiction under s.   20 of the Code of Civil Procedure. Held  that Arts. 19 (6) and 298 of the Constitution  clearly indicate  that the State can carry on business and can  even exclude  citizens completely or partially from  carrying  on that business. The running of railways which is a business when carried  on by  private companies or individuals does not cease to be  a business  when  they are run by the Government.  It  is  the nature of the activity which determines the character of  an activity.   The fact as to who runs it and with what  motive cannot  affect  it.   ’Profit element’ is  not  a  necessary ingredient  of  carrying  on  of  business,  though  usually business is carried on for profit. The fact that the Government runs the railways for providing cheap  transport for the people and goods and for  strategic reasons  will  not convert what amounts to  carrying  on  of business into an activity of the State as a sovereign body. The  Union  of  India carries on  the  business  of  running railways  and  can be sued in the court of  the  Subordinate judge  of Gauhati within whose territorial jurisdiction  the headquarters  of  one of the railways run by  the  Union  is situated. Case Law reviewed. State  of Bombay v. Hospital Mazdoor Sabha [1960]  2  S.C.R. 866, The Corporation of the City of Nagpur v. Ito Employees, [1960] 2 S. C. R. 942 and Satya Narain v. District Engineer, P. W. D., A. I. R. 1962 S. C. 1161.

JUDGMENT: CIVIL APPELLATE JURISDICTION: Civil Appeal No. 717 of 1961. Appeal  by special leave from the judgment and  order  dated April 10, 1961 of the Assam High Court in Civil Revision No. 10 of 1961. D.   R.  Prem,  P.  D. Menon for R.  N.  Sachthey,  for  the appellants. The respondent did not appear. 626 1963.  May 7. The judgment of the Court was delivered by RAGHUBAR  DAYAL  J.  -This  appeal,  by  special  leave,  is directed  against  the  order of the  High  Court  of  Assam rejecting the revision application, under s. 115 of the Code of  Civil  Procedure, hereinafter called the  Code,  of  the appellants against the order of the Additional  Subordinate, Judge,  Gauhati, in a money suit to the effect that  he  had jurisdiction to try the suit. The  contention of the appellants is that this view  of  the Subordinate judge, confirmed by the High Court, is wrong. To  appreciate the contention for the appellants, the  facts of  the case may be stated.  The suit was instituted by  the plaintiff  -respondent  against the Union of India  and  the Northern   Frontier  Railway  represented  by  the   General Manager, having its headquarters at Pandu.  It related to  a claim  for  recovery of a sum of Rs. 8,250/- on  account  of nondelivery  of  the goods which had been consigned  to  the plaintiff’s firm run tinder the name and style of M/s.  Ladu Lal Jain.  The consignment consisted of 134 bags of rice and was  booked from Kalyanganj station of defendant No.  2  for carriage to Kanki station of the same defendant on April 13, 1958.   The  goods  consigned  were  no,  delivered  to  the plaintiff  and hence the suit, after serving a notice  under

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s.  77 of the Indian Railways Act on the  defendant  railway and also serving a notice tinder s. 80 of the Code.  It  was alleged  in  the plaint that the cause of  action  arose  at Pandu  within the jurisdiction of the Court at Gauhati,  the place  where notice under s. 80 of the Code was duly  served upon  the defendant railway and that the suit was  filed  in the  Court  within the jurisdiction of which  the  defendant railway had  627 its  principal  place  of business by virtue  of  its  held- quarters  being at Pandu.  The two defendants filed a  joint written statement. Kalyanganj  is in West Bengal and Kanki is in the  State  of Bihar.  Gauhati is in the State of Assam.  It  was contended inter   alia   that  Gauhati  Court   had   no   territorial jurisdiction  to  try the suit as neither of  the  aforesaid railway  stations was within its jurisdiction and  that  the consignment never travelled within any part of the State  of Assam  and  therefore the cause of action  could  not  arise within the jurisdiction of any Court in Assam It was further contended  that  mere  service  of  notice,  which  was  not admitted,   on  the  defendants  at  a  place   within   the jurisdiction  of  the  Court,  could  not  vest  territorial jurisdiction  on it and that defendant No. 1, the  Union  of India,  had no principal place of business at Pandu  or  any other place within the jurisdiction of the Court, its  head- quarters office being at New Delhi.  It was also stated that defendant  No.  2 is owned and managed by defendant  No.  1, that  the office of defendant No. 2 at Pandu was also  owned and  controlled  by defendant No. 1 and that the  office  at Pandu  was a branch office of the Union of India  which  was controlled by defendant No. I from New Delhi. Relying  on  the case reported as P.C. Biswas  v.  Union  of India  (1),  the Trial Court decided the  preliminary  issue about  jurisdiction against the defendants holding that  the principal  place from which the railway administrator- in  a particular  area  is carried on is the  principal  place  of business  for the purpose of s. 20 of the (ode.  The  single judge  of the High Court rejected the revision also  on  the basis of the same decision of his Court. The  territorial  jurisdiction  of a  Court  is  in  general determined  by  the provisions of s. 20 of  the  Code  which reads :               "Subject  to the limitations  aforesaid,  ever               suit               628               shall  be  instituted in a  Court  within  the               local limits of whose jurisdiction -               (a)   the defendant, or each of the defendants               where there are more than one, at the time  of               the  commencement  of the suit,  actually  and               voluntarily  resides, or carries on  business,               or personally works for gain or               (b)   any  of the defendants, where there  are               more than one, at the time of the commencement               of   the   suit,  actually   and   voluntarily               resides,.   or   carries   on   business,   or               personally  works for gain, provided  that  in               such  case  either the leave of the  Court               is given, or the defendants who do not reside,               or  carry on business, or personally work  for               gain,   as   aforesaid,  acquiesce   in   such               institution ; or               (c)   the cause of action, wholly or in  part,               arises.

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             Explanation I : Where a person has a permanent               dwelling  at  one  place  and  also  temporary               residence at another place, he shall be deemed               to  reside  at both places in respect  of  any               cause of action arising at the place where  he               hag such temporary residence.               Explanation 11 : A corporation shall be deemed               to carry on business at its sole or  principal               office in India or in respect of any cause  of               action arising at any place where it has  also               a subordinate office, at such place." The principle behind the provisions of clauses (a) and (b)  of s. 20 is that the suit be instituted at a place  629 where the defendant be able to defend the suit without undue trouble. The expression ’voluntarily resides or personally works  for gain’  cannot  be appropriately applied to the case  of  the Government.   The Government can however carry on  business. The  mere fact that the expression ’carries on business’  is used along with the other expressions, does not mean that it would  apply  only  to such persons to whom  the  other  two expires  ions regarding residence or of  personally  working for gain would apply. The sole contention raised for the appellants in this  Court is that the running of railways by the Union of India cannot be  said  to  amount to its carrying on  business  and  that therefore  the  fact that the headquarters of  the  Northern Frontier  Railway  Administration  is at  Pandu  within  the jurisdiction of the Court at Gauhati does not give the Court jurisdiction under s. 20 of the Code. The   contention  is  based  on  the  reasoning   that   any undertaking run by the Government, even if it amounts to the carrying on of a business when run by a private  individual, would  not be the carrying on of business by the  Government if there was no element of profit making in it.  There is no allegation  in the written statement that the Government  is not running railways for profit.  No issue was framed  about it.  The Court below recorded no decision on the point.   It cannot  be  presumed  that the Government is  not  making  a profit  from its running the railways in the country  or  is not running it with a profit motive. The fact that the Government runs the railways for providing quick  and  cheap  transport for people and  goods  and  for strategic  reasons  will  not convert what  amounts  to  the carrying on of a business into an activity of the State as a sovereign body. 630 Article 298 of the Constitution provides that the  executive power  of  the Union and of each State shall extend  to  the carrying on of any trade or business and cl. (6) of Art.  19 provides  that nothing in sub-cl. s. (g) of cl. (1) of  that Article shall prevent the State from making any law relating 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.  These provisions clearly indicate that  the State can carry on business and can  even  exclude citizens  completely  or  partially from  carrying  on  that business.   Running of railways is a business. that  is  not denied.   Private companies and individuals carried  on  the business of running railways, prior to the State taking them over.   The  only question then is whether  the  running  of railways  ,ceases  to  be a business when they  are  run  by Government.  There appears to be no good reason to hold that

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it  is so.  It is the nature of the activity  which  defines its  character.   Running of railways is  such  an  activity which  comes within the expression ’business’.  The fact  as to who runs it and with what motive cannot affect it. This  Court bad occasions to detemine the nature of  certain activities of Government.  The rationale of those cases is a good guide for determining the point before us.  In State of Bombay  v. The Hospital Mozdoor Sabha(1)’ the  question  was whether  the relevant provisions of the Industrial  Disputes Act,  1947,  applied to the group of hospitals  run  by  the State  of Bombay and whether they are ’industry’ within  the meaning of that Act.  The decision of the question  depended on  the  interpretation  of  the  definition  of  ’industry’ prescribed  -by s. 2 (j) of the Act.  This section  provides that  industry means any business, trade, undertaking  etc., of  employers.   In  considering  the  question  it   became necessary  to  enquire  whether  that  activity,  i.e.,  the running of the (1)  [1961] 2 S. C. R. 866.  631 hospitals, would be an undertaking if it is carried on by  a private  citizen  or a group of private  citizens.   It  was field  that  if a hospital is run by  private  citizens  for profit, it would be an undertaking very much like the  trade or business in their conventional sense.  It was observed at p. 878 :               "Thus  the character of the activity  involved               in  running a hospital brings the  institution               of the hospital within s. 2.(j). Does it  make               any difference that the hospital is run by the               Government  in the interpretation of the  word               undertaking’ in s. 2 (j) ? In our opinion, the               answer  to  this  question  must  be  in   the               negative.  It is the character of the activity               which  decides the question as to whether  the               activity in question attracts the provision of               s. 2(j); who conducts the activity and whether               it is conducted for profit or not do not  make                             a material difference "               To similar effect were the observations in The               Corporation  of  the  City of  Nagpur  v.  Its               employees where it was said :               "If  a service rendered by an individual or  a               private person would be an industry, it  would               equally  be  an  industry in the  hands  of  a               corporation."               It was earlier said at p. 960               "Monetary   considerations  for  service   is,               therefore, not an essential characteristic  of               industry in a modern State."               "Barring    the   regal   functions    of    a               municipality, if such other activities of  it,               if  undertaken  by  an  individual,  would  be               industry, then they would equally be  industry               in the hands of a municipality, (1)  [1960] a S.C.R. 942, 962, 632 Lastly,  in Satya Narain v. District Engineer,  P.W.D.  (1), the  question  for determination was  whether  plying  motor buses  by  the  Government by  way  of  commercial  activity amounts  to  its  running  it  on  a  public  service.    In determining this question, this Court observed at p. 1163:               "It is undoubtedly not easy to define what  is               "Public  service’ and each activity has to  be               considered  by itself for deciding whether  it

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             is  carried  on as a public  service  or  not.               Certain   activities   will   undoubtedly   be               regarded as public services, as for  instance,               those  undertaken  in  the  exercise  of   the               sovereign   power   of   the   State   or   of               governmental functions.  About these there can               be  no  doubt.   Similarly  a  pure   business               undertaking  though  run  by  the   Government               cannot  be classified as public service.   But               where a particular activity concerns a  public               utility a question may arise whether it  falls               in the first or the second category.  The mere               fact  that that activity may be useful to  the               public would not necessarily render it  public               service.   An activity however  beneficial  to               the  people and however useful cannot, in  our               opinion,  be  reasonably  regarded  as  public               service  if  it  is of a  type  which  may  be               carried  on  by  private  individuals  and  is               carried  on  by  government  with  a  distinct               profit  motive.  It may be that  plying  stage               carriage  buses  even though for  hire  is  an               activity  undertaken  by  the  Government  for               ensuring  the  people  a  cheap,  regular  and               reliable  mode  of transport and  is  in  that               sense beneficial to the public.- It does  not,               however, cease to be a commercial activity  if               it  is  run with profit motive.   Indeed  even               private  operators in order to attract  custom               are  also  interested in  providing  the  same               facilities  to  the public as  the  Government               undertaking provides.  Since that is so, it-is               difficult               (1)   A, I, R. 1962 B. C. 1161.                633               to  see what difference there is  between  the               activity carried on by private individuals and               that  carried on by Government.  By reason  of               the  fact  that a  commercial  undertaking  is               owned  and run by the State it does  not  ipso               facto become a "public service’." This  case simply held that commercial activity  carried  on with  profit motive cannot be held to be  ’public  service’. It does not hold that such activity carried on by Government will not be "business’ if conducted without profit motive. We  are of opinion that ’profit element’ is not a  necessary ingredient of carrying on business, though usually  business is  carried  on for profit.  It is to be presumed  that  the Railways  are run on a profit basis, though it may  be  that occasionally they are run at a loss. The case reported as Director of Rationing & Distribution v. The   Corporation  of  Calcutta  (1),  relied  on  for   the appellants  is  really  of  no help  to  them.   It  was  in connection  with the sovereign activities of the State  that it  was  said that the State was not bound  by  any  statute unless the statute provided to that effect in express  terms or  by  necessary  implication.   The  contention  that  the Government  could  not  get  the  benefit  of  this  law  in connection with its business activities was neither repelled nor considered.  It was held to have no foundation as  there was  nothing on the record that the Food Department  of  the Government  of  West  Bengal by  undertaking  rationing  and distribution  of food on a rational basis had embarked  upon any  trade  or  business and, in the  absence  of  any  such indication, it appeared that the department was  discharging

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the  elementary  duty of a sovereign to  ensure  proper  and equitable  distribution of available foodstuffs with a  view to maintaining peace and good government. (1)  [1961] I. &.C. A? 158, 634 In view of what we have said above, we hold that the,  Union of India carries on the business of running railways and can be  sued  in the Court of the Subordinate Judge  of  Gauhati within  whose territorial jurisdiction the  headquarters  of one of the railways run by the Union is situated.  We accor- dingly dismiss the appeal with costs. Appeal dismissed.