Allenburry Engineers Private Ltd. Vs.
Ramakrishna Dalmia & Ors  INSC 221 (15 September 1972)
MATHEW, KUTTYIL KURIEN DWIVEDI, S.N.
CITATION: 1973 AIR 425 1973 SCR (2) 257 1973
SCC (1) 7
CITATOR INFO :
R 1980 SC 86 (5,6) R 1982 SC 127 (7) RF 1986
SC 662 (25) R 1988 SC1164 (4) R 1988 SC2237 (6) RF 1989 SC 79 (2)
Transfer of Property Act-S. 106 and
107-Meaning of the word 'Manufacturer'-Whether lease for reconditioning and
repairing vehicles is manufacture within s. 106.
In 1953, an open piece of land in the city of
Bombay belonging to Sir Sapurji Bhairucha Mills Co. Ltd., was purchased by
Bharat Insurance Co. Ltd. In 1947, the said piece of land was leased to
Allenberry & Co. on a monthly rent of Rs. 1800/-. In 1950, the appellant
Company was incorporated for the specific purpose of taking over the business
of Allenberry & Co. In 1954, the appellant Company occupied the said leased
land as tenant together with certain vehicles belonging to the said Allenberry
& Co. at an agreed rent of Rs. 1800/per mensem. A document of lease was
executed by the parties for ten years. The document was not, however,
registered with the result that it could not be tendered in evidence as one
creating a lease.
On January 20, 1960, the Bharat Insurance Co.
served a notice upon the appellant Company terminating the tenancy and called
upon the Company to hand over quiet and vacant possession of the said land or
part of it. Later, a suit was filed in the Court of Small Causes at Bombay, and
after nationalisation, the L.I.C. was substituted for that of the Bharat
Insurance Co. as the plaintiff in the said suit. It was contended by the
appellant that since the tenancy was for manufacturing purposes, one month's
notice terminating the tenancy was an invalid notice under s. 106 of the
Transfer of Property Act. All the three Courts below, however, concurrently
held that the tenancy was not satisfactorily proved to be for manufacturing
purposes as alleged by the appellant company and in the absence of any proof as
to the terms for which it was made, the notice terminating the tenancy,
although it was a month's notice, was a valid notice and on that footing,
decreed the suit.
Two questions were raised before this Court:
(1) That the tenancy being for manufacturing purposes, the presumption laid
down in S. 106, Transfer of Property Act under which such tenancy has to be
regarded as a tenancy from year to year, terminable 'by a six months' notice
and not by a month's notice, must apply. (2) The second question was that in
any event, the lease was for manufacturing purposes, and therefore, the said
notice was not valid. Dismissing the appeal.
HELD : (1) The expression "manufacturing
purposes" in S. 106 of the Transfer of Property Act is used in its popular
and dictionary meaning. The burden of proving that the lease was for
manufacturing purposes lie on the appellant company who claim,-, it to be so.
That burden is to establish that the exclusive or the dominant purpose of the
lease was the manufacturing purpose. [261D] C. Mackertich v. Sturt & Co.
Ltd., A.I.R. 1970 S.C. 889, referred to.
(ii)The word 'manufacturer, according to the
dictionary meaning, is the making of articles or material by physical labour or
mechanical power. "Manufacture" implies a change, but every change is
not manu18-L348Sup.Cf./73 258 facture and 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 and use. [261F] R. v. Wheeler, 2 R. ALD. 349
(iii)The disputed premises were used mostly
for storing the sal vehicles together with spare parts etc., acquired along
with them or purchased from the market for repairing and reconditioning and
making the said vehicle fit for resale. There is no evidence except the bare
word of' one witness that parts such as chassis and bodies etc.. were actually
manufacture and replaced for the old. No books of account or log books showing
the work carried on the premises or other documents were produced which would
throw light on the activities carried on the premises. Even if the evidence of
the said witness were accepted, in toto, and it is held that some spare parts
were being manufactured for repairing or reconditioning the vehicles, the
dominant purpose of the lease would still have to be regarded as one 'for
storage and resale ,of the vehicles and not for manufacturing purpose. Manufacturing
of spare parts would then be merely incidental to the main purpose of disposal
of these vehicles. Therefore, the appellants have failed to establish that the
dominant purpose of the lease was manufacturing purpose and therefore, the
appellants could not have challenged the legality of the notice. That being the
position, it is not necessary to go into the question whether S. 107 has ail
impact on S. 106 of the Transfer of Property Act. [265 D]
CIVIL APPELLATE JURISDICTION : Civil Appeal
No. 1072 of 1971.
Appeal by special leave from the judgment and
order.dated June 16, 1971 of the Bombay High Court in Special Civil Application
No. 1604 of 1969.
M. C. Chagla, R. R. Zaiwala, P. C. Bhartari
and Ravinder Narain, for the appellant.
V. M. Tarkunde, Madan Gopal Gupta R. S.
Sharma, Rameshwar,, Dial, P. N. Chadha and B. D. Sharma, for respondent No. 1
The Judgment of the Court was delivered by Shelat, J. This appeal, by special
leave, is against the judgment of the High Court of Bombay. When the special
leave was granted, it ",as confined to the question whether the tenancy in
favour of 'the appellant-company was one for manufacturing purpose, and if it
was so, whether the notice terminating the tenancy was inadequate ? The appeal
first reached hearing before a Division Bench of this Court. At that time, the
Parties were agreed that the relationship between them was that of landlord and
But 259 the case of the appellant-company was
that the lease in its favour was for a period of ten years, that such a lease
was for manufacturing purposes, and therefore, could not be validly terminated
by a month's notice. The respondents, on the other hand, contended that the
lease was by an unregistered document, and that it was not a valid lease by
reason of the provisions of ss. 106 and 107 of the Transfer of Property Act.
The Division Bench did not go into the question whether the lease was for
manufacturing purpose,,, or not. However, the Division Bench felt that the
appeal raised important questions as to the impact of s. 107 upon s. 106 of the
Act, and there being so far no decision of this Court upon such a question
referred the, appeal to a larger Bench. That is now the matter has come up
The premises with which we are presently
concerned consist of an open piece of land adjoining Haines Road in the city of
Bombay. Prior to 1963, the said piece of land belonged to a company called Sir
Shapurji, Bharucha Mills Co. Ltd.
In 1953, the said piece of land was purchased
by Bharat Insurance Co. Ltd. It appears that in 1947 they said piece of land
was leased to Allenbury & Co. on a monthly rent of Rs. 1800/where the
lessee kept a number of American vehicles used by the army during the Second
World War and purchased by that company from the Disposal Department of the Government
of India. In or about 1950, the appellant company was incorporated for the
specific purpose of taking over the business of Allenbury & Co. together
with all its assets and properties including the said vehicles. In 1954, the
appellant-company occupied the said leased land as tenant together with such of
the said vehicles remaining undisposed of till then at an agreed rent of Rs.
It is not in dispute that at ;that time a
document of lease was executed by the-parties, which according to the
appellant, company provided for a lease for ten years. The document was,
however, not registered with the result that it could not be tendered in
evidence as one creating a lease. There was, however, no dispute between the
parties that the appellant company paid and the respondents accepted all
throughout rent from the appellant-company at the aforesaid agreed rate of Rs.
1,800/a month. On January 20, 1960, the Bharat Insurance Co. Ltd. served a
notice upon the appellant-company thereby terminating the tenancy and called
upon it to hand over quiet and vacant possession of the said premises on the
ground that the appellant-company had sub-let the said land or part of it. The
appellantcompany having failed to abide, by that demand. a suit was filed in
the Court of Small Causes at Bombay. Oil the nationalisation of the Life,
Insurance Companies and on the 260 Life Insurance Corporation of India being
set up, the name of that Corporation was substituted for that of the Bharat
Insurance Co. as the plaintiff in the said suit. The suit was henceforth
continued by the Corporation.
Although the unregistered document could not
go in evidence, the suit as well as the appeal arising there from before the
Appellate Bench of the Small Causes Court proceeded on ,the basis that the
relationship between the parties was that of landlord and tenant as there was
no dispute that the occupation of the premises in question by the appellantcompany
was as a tenant irrespective of What the terms or the period of that tenancy
were, which terms could not be proved as the document in respect thereof could
not be brought on record by reason of its being an unregistered document. The
Special Civil Application under Art. 227 of the Constitution filed in the High
Court against the judgment of the Shall Causes Court and confirmed by its
Appellate Bench, also proceeded on the assumption that the relationship between
the parties was that of landlord and tenant. All the three courts concurrently
held that the tenancy, whatever its terms ware, was not satisfactorily proved
to be for manufacturing purposes as alleged by the appellant-company and in the
absence of any proof as to the term for which it was made, whether it was for
ten years or from year to year, the notice terminating the tenancy and calling
upon the appellant-company to deliver vacant possession, although it was a
month's notice, was not an invalid notice and on that footing decreed the suit.
In these circumstances, two questions were
sought to be raised by Mr. Chagla. The first was that there being no dispute
between the parties that the relationship between them was that of landlord and
tenant and the respondents having accepted all along the said rent of Rs. 1800/a
month, the Courtmust proceed upon the basis that the occupation of the premises
by the appellant-company was in the., capacity as a tenant. According to him,
if the appellant-company can establish that that tenancy was for manufacturing
purposes, the presumption laid down in s. 106 of the Transfer of Property Act,
under which such tenancy has to be regarded as a tenancy from year to year
terminable by a six months' notice and not by a month's notice, must apply. It
is true, said he, that under s. 107 of the Act a lease from year to year can be
made only by a registered instrument, but that provision in no way controls the
presumption laid down in s. 106 tinder which once it is proved that the parties
were in the position of a landlord and a tenant and the tenancy was for
has to be presumed to be 'one from year to
year. According to him, the two sections are independent of each other. the one
261 dealing with the user and notice, and the presumption arising from such
user, and the other dealing with compulsory registration for. a lease from year
to year, or for a term exceeding one year. Mr. Tarkunde, appearing for the
Corporation,, on the other hand, disputed the construction of these two
sections suggested by Mr. Chagla.
The second question raised by Mr. Chagla was
that in any event the lease was for manufacturing purposes, and therefore, the
said notice was not valid. Assuming that Mr.Chagla is right in the
interpretation of ss. 106 and 107 suggested by him, even then the
appellant-company has first to establish that the lease in its favour was for
manufacturing purposes and it is then only that it can take advantage of the
rule of presumption laid down in s. 106.
The expression 'manufacturing purposes' in s.
106 is used in its popular and dictionary meaning., the Transfer of Property Act
not having supplied any dictionary of its own for that expression. The burden
of proving that the lease was for manufacturing purposes, must for the purposes
of s.106 of the Transfer of Property Act, lie on the party who claims it to be
so, in. the present case the appellant company. That burden is to establish
that the exclusive or at least the dominant purpose of the lease was the
manufacturing purpose. [See C. Mockertich v. Steuart &., Co. Ltd.(1)].
The word 'manufacture', according to its
dictionary meaning, is the making,, of articles or material (now on large
scale) by physical labour or mechanical power. (Shorter Oxford English
Dictionary Vol. 1, 1203) 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. "The word 'manufacture"' saidAbbott, C.J., in
R. v. Wheeler(2) "has been generally understood to denote, either a thing
made which is useful for its own sake and vendible as such, as a medicine, a
stove, a telescope, and many others; or to mean an engine or instrument, or
some part of an engine or instrument, to be employed either in themaking of
some previously known articles or in some other useful purpose, as a stocking
frame, or a steam engine for raising water from mines; or, it may perhaps,
extend also to a new process to be carried on by known implements or elements
'acting (1) A.I.R. 1970 S.C. 839.
(2) 2 B & Ald. 349, cited in Stroud's
Judicial Dictionary (3rd ed.) Vol. p. 1734.
262 upon known substances, and ultimately
producing some other known substance but producing it in a cheaper or more
expeditious manner, or of a better or more useful kind. No more philosophical
or abstract principle can answer to the word 'manufactures'. Something of a
corporeal and substantial nature-something that can be made by man from the
matters subjected to his art and skill, or at the least some new mode of
employing practically his art and skill, is required to satisfy the word".
In South Bihar Sugar Mills v. Union of India,(1) the Act with which the Court
was concerned was the Central Excise and Salt Act, 1944, which furnished no
special definition of the word 'manufacture'.
The question. can canvassed there was whether
carbon dioxide, one of the constituents of kiln gas produced as one of the
processes necessary for refining sugar, could be said to have been
manufactured, quite apart from the manufacture of sugar itself. This Court held
that what was produced was kiln gas, a compound of different gases and not
carbon dioxide, though it was one of the different gases which made up kiln gas
and therefore did not attract item 14-H in the Schedule to the Act. Since the
Excise ditty was leviable under the Act on manufacture of goods, the Court
explained the connotation of the word 'manufacture'. In so doing, the Court
said that the word 'manufacture' implied a change, but that a mere, change in
the material was not manufacture.
There must be such a transformation that a
new and different article must emerge having a distinctive name, character or
use. This was also the meaning given to the word 'manufacture' in Union of
India v. Delhi Cloth & General Mills(2). A notification issued by the
Government of U.P. under s. 3A of the U.P. Sales Tax Act, 1948 declared that
the turnover in respect of medicine and pharmaceutical preparations would not
be liable to tax except.(a) in the case of medicine and pharmaceutical
preparations imported into U.P., and (b) in the case of medicines and
pharmaceutical preparations manufactured in U.P. The question was whether, when
in a dispensary medicines and pharmaceutical preparations, as prescribed by a
doctor, are mixed, the process of mixing results in manufacture of medicines.
The question was answered in the negative on the roundthat when a mixture of
different drugs, as prescribed by a doctor, is prepared by a medical
practitioner or his employee, especially for the use of a patient in the
treatment of an ailment or discomfort diagnosed by such a medical practitioner
by his professional skill, and which mixture is normally incapable of being
passed from hand to hand as a commercial commodity, the medical practitioner
supplying the medicine cannot be said to be a manufacturer of medicine and the
mixture can(1)  3 S.C.R. 21.
(2)  Stipp. 1 S.C.R. 586.
263 not be said to. be manufactured within
the meaning of the notification. In all these cases the statute or the
notification concerned did not furnish any artificial meaning to the expression
'manufacture' and the Court applied, therefore, the ordinary meaning as commonly
understood to that expression. The expression 'manufacturing purposes' in s.
106, thus, means purposes for making or fabricating articles or materials by
physical labour, or skill, or by mechanical power, vendible and useful as such.
Such making or fabricating does not mean merely a change in an already existing
article or material, but transforming,, it into a different article or material
having a distinctive name. character or use or fabricating a previously known
article by novel process.
The two cases cited by Mr. Chagla, viz.,
Sedgwick v. watliey Combe, Reid and Co.(1) and Action Borough Council v. West
Middlesex Assessment Committee(2), would not be of assistance as the question
there discussed was not as, to the meaning of the word 'manufacture', but
whether the premises in question were industrial hereditaments within the
meaning of s. 3 of the Rating and Valuation (Apportionment) Act, 1928.
Likewise, decisions given by courts on the word 'manufacture' occurring in
different statutes would not be of assistance where the statute concerned gives
an artificial meaning or a special definition.
Bearing in mind the connotation of the word
'manufacture' as understood in the decisions above-cited, we have to ascertain
whether the appellant-company could be said to be carrying on operations in the
premises in question which could properly be called manufacturing operations.
On this question, the evidence on record is general character and almost meager
in quantum. Wit. Choradia, who was the managing director of the Bharat
Insurance Co. between 1950 to 1954 and who used to reside in Delhi where the
company had its headquarters,. but occasionally used to visit its branch in
Bombay, deposed that after the premises in question were purchased in 1953 by
his company from Sir Shapurji Bharucha Mills, he visited them and found them to
comprise an open land with sheds and a godown. There were lying there army
automobiles, jeeps etc., but he did not notice at that time any manufacturing
process going on. He again, visited the premises in 1954 when also he found no
manufacturing operations going on Wit. V. G. Kannan was an accountant in
Allenbury. & Co. Ltd. He used to go to the premises in 1950 and 1951 to pay
wages to the workmen engaged "here by his company. The premises had a
workshop, a godown (1)  A. C.446 (2)  2 K.B. 10.
264 and a small office and the rest was open
land. The company wound up its business in 1950, but there were lying in the
premises steel racks belonging (to his company, to inspect which he had to go
there on several occasions. He also said that he did not see any manufacturing
processes going on except that the workshop was used for repairing the disposal
vehicles lying stored there. This was the position till July-August 1954 and till
then there was no change in the user of the premises. Wit. J. P. Jain examined
by the appellant-company was the Central Manager of the Bombay branch of
Allenbury & Co. from 1946 to 1950. Thereafter he became the managing
director of the appellant-company.
According to him, Allenbury & Co. Ltd.
had in 1948 purchased disposal vehicles which were stored for sale in the
premises in question. The vehicles were in a damaged condition when they were
purchased. In some cases chassis were missing or they were bent or broken; most
of the parts were broken and missing. These used to be repaired and then sold.
The company had put up a workshop where these vehicles were repaired,
reconditioned and painted before, they were sold.
The repairs, according to him, involved in
some cases making of new bodies and new parts. For that purpose, the appellant
company had to have in the workshop lathes, drill machines, velders etc. and
had employed some 200 to 250 workmen. When the appellant company took over the
business of Allenbury & Co. Ltd. in 195051, there were in all 189 vehicles
of different types in the suit premises. The working, he said, of overhauling,
reconditioning and repairing these vehicles went on until 1957 when
reconditioning of vehicles stopped presumably because the vehicles were sold
out. The premises had on them a servicing station also with a trench in the
centre for washing the vehicles and where spare part needed for repairs used to
be stored. There was also an office and a store room where spare parts, oils
and other stores purchased locally were kept. He denied that the premises were
used only for repairing the vehicles. Besides his oral testimony, there is one
letter on record written by this witness to Allenbury & Co. Ltd., dated
November 21, 1950 giving details of stocks lying on these premises when that
company's business was taken over by the appellant-company.
The schedule to' this letter gives
particulars of these stocks, viz., 182 vehicles of different types, stores,
accessories, spare parts purchased from the market or the Disposal Directorate,
tools and other workshop equipment and three cars under repairs. The schedule
shows that the premises were used till then for storing the Disposal vehicles,
together with spare parts etc. acquired along with them or purchased from the
market for repairing and reconditioning and making them fit for resale. There
is no evidence except the bare word of wit. Jain that parts such as chassis and
bodies etc. were actually manufactured and replaced for the old. No books of
account 265 or log books showing the work carried on the promises or other
documents were produced which would throw light on the activities carried on
the premises. Even if the evidence of Jain were accepted in to and we were to
find that some spare parts were being manufactured for repairing or
reconditioning the vehicles, the dominant purpose of the lease, would still
have to be regarded as one for storage and resale of the vehicles and not for
manufacturing purposes. Manufacturing of spare parts would then be, merely
incidental to the main purpose of disposal of these vehicles as without
repairing or reconditioning them, such disposal could hardly have been
possible. In our opinion, the appellants failed to establish that the dominant
purpose of the lease was manufacturing purpose. In that view. the appellants
could not have challenged the legality of the notice. The High Court,
therefore, was right in the conclusion it arrived at and no reason has been
shown justifying our interference with it. That being the,, position, it is not
necessary to go into the question whether s. 107 has any impact on s. 106 of
the Transfer of Property Act, a question which the Division Bench, while
referring this appeal to a larger Bench, though the appeal raised.
For the reasons stated above the appeal fails
and is dismissed with costs. Mr. Chagla appealed to us that Some time may be
given to the appellant-company for vacating the premises in question as,
according to him, there are some machines still lying on the premises which
will have to be removed. We give the company one month's time from today for
vacating and giving quiet possession to the respondent.
S.C. Appeal dismissed.