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PETITIONER: P. C. CHERIYAN

       Vs.

RESPONDENT: BARFI DEVI

DATE OF JUDGMENT16/10/1979

BENCH: SARKARIA, RANJIT SINGH BENCH: SARKARIA, RANJIT SINGH REDDY, O. CHINNAPPA (J)

CITATION:  1980 AIR   86            1980 SCR  (1) 961  1980 SCC  (2) 461

ACT:      Transfer of  Property Act 1882 (4 of 1882) S. 106-Lease of Premises for carrying on business of retreading of tyres- Whether lease for ’manufacturing purposes’ within S. 106.      Words and  Phrases-’Manufacturing purposes’-Meaning of- Transfer of Property Act 1882, S. 106.

HEADNOTE:      The plaintiff (respondent) let out the accommodation in dispute at  a rent  of Rs.  850/- per annum to the defendant (appellant) who  was doing  the business  of  retreading  of tyres in  the said  premises.  The  defendant  defaulted  in payment of  rent, and  the plaintiff sent one month’s notice terminating   the   tenancy.   Thereafter,   the   plaintiff instituted a  suit for  recovery  of  arrears  of  rent  and ejectment against the defendant.      The suit was contested, on the ground that the premises in dispute  had been  let out for manufacturing purposes and in view of s. 106, Transfer of Property Act, the lease could be terminated  by the  landlady only  by six  months  notice expiring with  the end  of the year of tenancy and since the plaintiff had  served only  30 days’  notice, the  same  was invalid and ineffective to terminate the tenancy.      The  Trial   Court  and   the  First   Appellate  Court concurrently decreed the suit for arrears of rent as well as for ejectment which was confirmed by the High Court. All the Courts below  held that  the retreading  of tyres,  is not a ’manufacturing purpose’  and,  therefore,  30  days’  notice given by  the plaintiff to the defendant for terminating his tenancy was valid.      In the defendant’s appeal to this Court on the question whether a  lease of  a premises for carrying on the business of  retreading  of  tyres  is  a  lease  for  ’manufacturing purposes’ within  the contemplation  of s.  186 Transfer  of Property Act. ^      HELD :  1. The  Courts below were right in holding that the lease  in the  present case  was not  for ’manufacturing purposes,’ and  the tenancy  had been  rightly terminated by thirty days’ notice. [966 H]      2. The  expression manufacturing purposes’ has not been defined in  the Transfer  of Property Act. It has therefore,

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to be  construed in its popular sense. ’Manufacture’ implies a change but every change is not manufacture. Something more is necessary.  There  must  be  transformation.  a  new  and different article  must emerge  having a  distinctive  name, character or use. [964 A-B]      3. The  broad test for determining whether a process is a manufacturing process, is whether it brings out a complete transformation for the old components, 962 so  as  to  produce  a  commercially  different  article  or commodity. This question is largely one of fact. [966 F]      As a  result of retreading, an old tyre does not become a  different  entity,  nor  acquires  a  new  identity.  The retreading process  does not  cause the old tyre to lose its original character,  nor brings  into being  a  commercially distinct or different entity. The old tyre retains its basic structure, original  character  and  identity,  as  a  tyre, although   retreading    improves   its    performance   and serviceability.  Retreading   of  old  tyres  is  just  like resoling of  old shoes.  Just as  resoling of old shoes does not  produce   a  commercially  different  entity,  so  from retreading no new or distinct article emerges. [966 E-G]      4.  Definitions   of  ’manufacture’   given  in   other enactments, such  as, in the Factories Act or the Excise Act should not  be  blindly  applied  while  interpreting    the expression  ’manufacturing   purposes’  in  s.  106  of  the Transfer of  Property Act,  because in some other enactments such as  the Excise  Act, the  term ’manufacture’  has  been given an  extended meaning by including in it repairs, also. [967 A-B]      South Bihar Sugar Mills v. Union of India, [1968] 3 SCR 21. referred to.      Federal  Commissioner   of  Taxation  v.  Jack  Zinader Proprietary Ltd., (1948- 49) 78 C.L.R. 336; distinguished.      Allenbury Engineers  Ltd.  v.  Ramakrishna  Dalmia  and Ors., [1973] 2 S.C.R. 257; applied.

JUDGMENT:      CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1722 of 1969.      Appeal by  Special Leave  from the  Judgment and  Order dated 11-12-1968  of the  Allahabad  High  Court  in  Second Appeal No. 969/67.      M. M.  Abdul Khader,  R. Satis, Vijay K. Pandita and E. C. Agarwala for the Appellant.      Jitendra Sharma and V. P. Chaudhary for the Respondent.      The Judgment of the Court was delivered by      SARKARIA, J.-Whether a lease of a premises for carrying on the   business  of retreading  of tyres  is a  lease  for "manufacturing purposes" within the contemplation of Section 106, Transfer  of Property  Act, is  the only  question that falls for  consideration in  this appeal  by  special  leave directed against a judgment, dated December 11, 1968, of the High Court  of  Allahabad.  The  question  arises  in  these circumstances:.      The plaintiff-respondent  let out  the accommodation in dispute at  a rent  of Rs.  850/- per annum to the defendant who was  doing the  business of  retreading of  tyres in the said premises.  The defendant  defaulted in payment of rent. The plaintiff, therefore, sent one 963 month’s notice  to the  defendant terminating  his  tenancy. Thereafter, the  plaintiff instituted a suit for recovery of

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arrears of rent and ejectment against the defendant.      The suit  was resisted,  inter alia, on the ground that the premises  in  dispute  had  been  let  out  to  him  for manufacturing purposes  and in view of Section 106, Transfer of Property  Act, therefore, the lease cold be terminated by the landlady  only by  six months’  notice expiring with the end of  the year  of tenancy,  and since  the plaintiff  had served only  30 days’  notice,  the  same  was  invalid  and ineffective to terminate the tenancy.      The  trial   Court  and   the  First   Appellate  Court concurrently decreed  the   suit for arrears of rent as well as for ejectment.      The only  ground urged before the First Appellate Court and  the   High  Court   was  that  the  tenancy  being  for manufacturing  purpose,  could  not  be  terminated  by  one month’s  notice.   All  the   courts  below  negatived  this contention and have concurrently held that the retreading of tyres, is  not a  manufacturing purpose  and, therefore,  30 days’ notice  given by  the plaintiff  to the  defendant for terminating his tenancy, was valid.      Mr.  Khader,   learned  counsel   for  the   defendant- appellant, contends  that  the  process  of  retreading  old tyres, involves  the  use  of  sophisticated  machinery  and results  in   bringing  into  being  a  distinct  commercial commodity. It  is  argued  that  the  essential  test  of  a manufacturing process  is that  it must bring about a change in the  character, quality  or  user  of  the  old  material processed so  as to  produce a  distinct marketable article, but it  is  not  necessary  that  the  old  material  should completely lose  its identity.  It is  urged that  the  High Court was  in error in taking the view that from the process of retreading  old tyres  a commercially  different  article does not  emerge. In  support  of  the  proposition  that  a process by  which a  useless article  becomes useful and its character or  use is  changed is  a  manufacturing  process, counsel has  cited Commissioner  of Sales  Tax, U.P.  v. Dr. Sukh Deo;  Allenburry Engineers  Pvt.  Ltd.  v.  Ramakrishna Dalamia  &   Ors.;  State  of  Maharashtra  v.  The  Central Provinces Manganese  Ore Co.  Ltd.; North Bengal Stores Ltd. v. Member, Board of Revenue, Bengal; and an Australian case; Federal Commissioner of Taxation v. Jack Zinader Proprietary Ltd. 964      The expression  "manufacturing purposes"  has not  been defined in  the Transfer  of Property Act. It has therefore, to be  construed in  its popular  sense.  According  to  the Permanent  Edition   of  Words   and   Phrases,   Vol.   26, ’manufacture’ implies  a change  but  every  change  is  not manufacture and yet every change in an article is the result of treatment, labour and manipulation. But something more is necessary and  there  must  be  transformation;  a  new  and different article  must emerge  having a  distinctive  name, character  or  use.  This  construction  of  the  expression "manufacture" received the imprimatur of this Court in South Bihar Sugar  Mills v.  Union of India. But the case directly in  point   is  Allenburry  Engineers  Ltd.  v.  Ramakrishna Dalamia, ibid; wherein the question for consideration before this Court  was whether  the lease  in favour  of  Allenbury Engineers  was   for  "manufacturing  purposes"  within  the meaning of  Section 106,  Transfer of  Property Act.  On the facts of  that case, answering the question in the negative, this  Court   held  that   even  though   the  lessees  were manufacturing   some   spare,   parts   for   repairing   or reconditioning vehicles,  yet the  dominant purpose  of  the lease was  one of  the storage  and resale  of the  vehicles

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after  repairing   and   reconditioning   them;   and   that manufacturing of  spare parts  was merely  incidental to the main purpose of repairing or reconditioning the vehicles for disposal.      Since the  instant case  is covered  by  the  ratio  of Allenbury Engineers,  it is not necessary to discuss all the cases cited  by Mr.  Khader. Nevertheless, it will be proper to notice  briefly one case, namely, Federal Commissioner of Taxation v. Jack Zinader Proprietary Ltd, ibid; on which the counsel has staked a good deal in his argument.      In Jack Zinader (ibid), a furrier company received from customers fur  garments which  had become too badly worn and damaged to  be repaired,  and, after  removing the defective parts,  remodelled,  for  those  customers  respectively  by various processes,  what was  left  into  modern  styles  of coats, fur  capes, fur  collars, fur coats and stoles having regard to  the extent,  shape and  nature of  the  available materials. The  materials used by the company in remodelling were, except about five per cent of the linings, confined to those available  from the customer’s garment. If new linings were required  the customer  supplied them. The question for decision before  the High Court of Australia was whether fur coats, stoles,  capes and  collars formed by remodelling fur garments are  for the  purposes of  the Sales Tax Assessment Act (No. 1), 1930-1942, goods "manufactured sold". The Court by a  majority consisting  of Dixon and Williams JJ. (Web J. dissenting) answered 965 this question  in the  affirmative. Dixon  J. in his leading judgment (at p. 343), after quoting with approval the dictum of Darling  J. in  McNicol v.  Pinch, that  "the essence  of making or  of manufacturing  is that what is made shall be a different  thing  from  that  out  of  which  it  is  made", observed:           "The first  and, it  may be  thought, the decisive      question in the case, is therefore whether the garments      which  result  from  the  process  of  remodelling  are      different things, that is are different goods, from the      garments that  the customer hands over. This perhaps is      rather a  question of  fact than  of law........... The      Commissioner   distinguishes    between   repair    and      remodelling and  does not claim sales tax in respect of      repair even  although it  may mean  some change in, for      example, the length of the garment. We are told that an      old or  worn fur coat is remodelled into a modern style      of coat,  that a fur necklet is remodelled into a stole      and a  fur necklet  or fur  stole is  remodelled into a      cape. A  full length  fur coat  may be converted into a      saunter’ or  the somewhat similar ’swagger’ coats which      are considerably  shorter but  full and often flared at      the bottom.  But the  conversion may  be to  a  jacket,      which is  coatee, which  is less  than waist length and      fits more  closely  and  usually  is  not  fastened  in      front............."           "On the  side of the taxpayer it is contended that      these procedures  do not  change the  identity  of  the      garment but  only  some  of  its  characteristics.  The      customer hands  in a  fur garment  and takes away a fur      garment. It  is altered and renovated but it is still a      fur garment;  it is  her fur  garment; it  is  the  fur      garment she brought to the furriers. On the side of the      Commissioner it  is said  that a  different fur garment      has been  brought into  existence. The  old fur garment      has been  used only to provide the materials or some of      them from  which the  new fur garment has been made. It

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    is a thing of a different description both commercially      and from  the point  of view  of the  wearer. It  is  a      different entity  and has  a new  identity. Goods  have      therefore been produced.           "On the  whole, the Commissioner’s view appears to      be the  more correct. The work of the furrier is to use      skins to  form garments.  Fashion, commercial usage and      his cus- 966      tomer’s  tastes  combine  to  distinguish  the  various      descriptions of  garment he  makes and  to  compel  the      recognization of  them as separate categories of goods.      When he takes skins made up into the description of fur      garment and  produces another,  he cannot be treated as      having altered  an existing  thing without  producing a      new one. He has made a different article."      Williams J., agreed with Dixon J., that the question at issue was  one of  fact and  degree  and  that  the  process concerned involved manufacture of goods into different goods from  their   second-hand  components.   The  learned  Judge rejected the  argument on  behalf of  the taxpayers that the work could  be described as a mere repair or modification of the goods  which did  not affect  their original  character, with the  observation that  "once the  work done  causes the goods to  lose this character they become ’goods’ within the meaning of the Act."      It will  be seen  that Jack  Zinader’s  case  bears  no analogy with  the present  case. The facts of that case were materially different. There, from the serviceable components taken out  from old  garments the  furrier by  his skill and labour made  garments of  different design  and  description both commercially  and from the point of view of the wearer. But in  the instant case, by retreading an old tyre does not become a  different entity, nor acquires a new identity. The retreading process  does not  cause the old tyre to lose its original character. The broad test for determining whether a process is a manufacturing process, is whether it brings out a complete  transformation for  the old  components so as to produce a  commercially different article or commodity. This question as  rightly emphasised by the learned Judge in Jack Zinader, is  largely one of fact. In the case before us, all the courts below have concurrently answered this question in the negative.  In our  opinion, this  finding of  the courts below is  unassailable. The retreading of old tyres does not bring  into  being  a  commercially  distinct  or  different entity. The  old tyre  retains its  original  character,  or identity as a tyre. Retreading does not completely transform it into  another commercial article, although it improve its performance and  serviceability as a tyre. Retreading of old tyres is  just like  resoling of old shoes. Just as resoling of old  shoes, does  not produce  a  commercially  different entity having  a different  identity, so  from retreading no new or  distinct article  emerges. The  old tyre retains its basic  structure   and  identity.   The  courts  below  were therefore, right  in holding  that the  lease in the present case was not for manufacturing purposes, and the tenancy had been rightly terminated by thirty days notice. 967      Before parting  with this judgment, we may sound a note of caution, that definitions of "manufacture" given in other enactments, such  as, in the Factories Act or the Excise Act should  not   be  blindly  applied  while  interpreting  the expression "manufacturing  purposes" in  Section 106, of the Transfer of  Property Act.  In some enactments, for instance in the  Excise Act, the term "manufacture" has been given an

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extended meaning by including in it "repairs", also.      For the  foregoing reasons,  the appeal  fails  and  is dismissed with costs. N.V.K.    Appeal dismissed. 968