Union of India & ANR Vs. Ladu Lal
Jain  INSC 132 (7 May 1963)
07/05/1963 DAYAL, RAGHUBAR
DAYAL, RAGHUBAR SUBBARAO, K.
CITATION: 1963 AIR 1681 1964 SCR (3) 624
D 1988 SC1003 (2,3) R 1990 SC 104 (4)
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.
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
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
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 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
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
 2 S.C.R. 866, The Corporation of the City of Nagpur v. Ito Employees,
 2 S. C. R. 942 and Satya Narain v. District Engineer, P. W. D., A. I. R.
1962 S. C. 1161.
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
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 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 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 heldquarters 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 headquarters 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 administratorin 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
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.
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 ownedor 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 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)  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)  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 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.
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
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 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)  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 accordingly dismiss the appeal