P. C. Cheriyan Vs. Barfi Devi  INSC
209 (16 October 1979)
SARKARIA, RANJIT SINGH SARKARIA, RANJIT SINGH
REDDY, O. CHINNAPPA (J)
CITATION: 1980 AIR 86 1980 SCR (1) 961 1980
SCC (2) 461
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.
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
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
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, 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,  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.,  2 S.C.R. 257; applied.
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
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 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.
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 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
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 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 extended meaning by including in it "repairs",
For the foregoing reasons, the appeal fails
and is dismissed with costs.
N.V.K. Appeal dismissed.