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Report No. 27

Section 20

Certain changes have been suggested in the Explanations I and II. These have not been accepted. The matter is discussed below.

Explanation of the present position.-Explanation I.-This deals with the case of a person having a permanent dwelling place and a temporary residence. It provides that, (if the cause of action arises at the temporary residence), the person should be deemed to reside at both the places. This fiction of law created by the word "deemed" has the effect of treating his permanent dwelling place as his residence. It has also the effect of elevating his temporary residence, but that is not material, because the cause of action test would suffice to give jurisdiction in relation to the temporary residence.

The emphasis in the Explanation is on thepermanent dwelling place. Even though that dwelling is not his residence, it is deemed to be his residence within the meaning of section 20, clause (a). It was so held by B.R. Ghosh J. in one case1 There, the defendant had a permanent dwelling place in Gopalganj and carried on business and lived at Calcutta. He executed a promissory note at Calcutta in favour of the plaintiff. The plaintiff filed a suit on the pronote at Gopalganj (permanent dwelling place) and the suit was held to be properly instituted. The argument of the defendant's counsel was: "The mere fact that the defendant had his ancestral home within the local limits of the jurisdiction of a court, though he actually resided outside such local limits, would not give the court jurisdiction". This argument was rejected by the court, relying on Explanation 1 to section 20.

This view was followed in a Lahore case2. There the defendant had his original family residence in Tehsil Narowal, but was actually residing and carrying on business at Chapra. The plaintiff sold some goods to him at Chapra, and got him to execute some documents. On the basis of these documents he instituted a suit at Narowal. The court expressly agreed with the Calcutta decision cited above, and held that the Narowal court had jurisdiction since he had his ancestral or permanent dwelling at that place.

The Calcutta case was followed again in a latter case of the Lahore High Court.3 There the defendants had joint family property at Lahore, but were residing and carrying on business at Karachi. The grandsons of the defendant filed a suit for recovery of maintenance and for expenses of certain religious ceremonies. The suit was filed at Lahore, and the objection that the suit was not maintainable in Lahore was repelled. Besides holding that a part of the cause of action arose at Lahore, the court also took the view, that under theExplanation to section 20 the defendant must be deemed to be residing voluntarily and actually at Lahore. (Even though defendant had not for 13 years visited Lahore, Lahore was held to be his permanent dwelling because at one time defendant did reside in Lahore and had no intention to abandon that place).

Explanation II-The second Explanation can be split up into two parts, (i) a corporation is deemed to carry on business at its sole or principal office in India; (ii) it is deemed to carry on business at the place of subordinate office. The first half is obviously necessary, because it equates the sole or principal office with the place of carrying on business. This part of the legal fiction has nothing to do with the arising of the cause of action.

As regards the latter half of Explanation II, what it provides is that the corporation is deemed to carry on business at its subordinate office if the cause of action arises there. It is true that here the cause of action test and the business test coincide, so that the latter half does not primarily confer jurisdiction on a court which would not have jurisdiction in its absence. It has, however, got a secondary importance, in the sense that it fixes the place of business by legal fiction.

As has been pointed out by B.K. Mukherjea J.,4 once it is established that the corporation has got a branch office at a place, it should be deemed by law to carry on business at that place irrespective of the nature of the work that is actually carried on there. In that case, one Bidhu Bushan residing in the district of Dacca was insured by the insurance company having its insured office at Lahore and a branch office at Dacca. The insured died in Dacca district, and his heirs filed a suit in Dacca for the money due on the policy. The insurance company resisted the suit on the ground that the Dacca court had no jurisdiction.

It was held, that death was part of the cause of action and as the assured died within the jurisdiction of the Dacca court, a part of the cause of action arose in Dacca. It was further held, that as the company had a branch office at Dacca, the suit could be instituted in Dacca under Explanation II, to section 20. (Even though the Dacca office merely performed the function of collecting the premium and remitting them to the head office, it was held to be a subordinate office). The only point that arises is whether the Explanation is intended to expand the meaning or restrict it. The Nagpur High Court has observe& that the Explanationrestricts the meaning of "carries on business" in relation to corporations.

The court also observed, that the second part of the Explanation is obscure in view of the cause of action test contained in section 20(c). Further, the court said: "It is much to be regretted that an insurance company should not be amenable to the jurisdiction of the court at the place where it maintains a subordinate office irrespective of any question about the accrual of cause of action. But few policy holders realise the implications of the forms of the contract prepared by the insurance companies which, though operating all over the country by receiving proposals and premiums through their various subordinate offices, carefully undertake to pay only at the head office situated in many cases far away from the policy holder or his assignee or nominee.".

It has been suggested, that-

(1) in Explanation I the requirement that the cause of action should have arisen at the place of temporary residence is irrelevant and therefore is unnecessary and should be omitted, and

(2) in Explanation II, the requirement that the cause of action must have arisen at the place of subordinate office is not necessary and should be omitted.

The suggestion has not been accepted, as it has been considered that the omission of the requirement would unduly widen the scope of the section in both cases.

1. Sitanand v. Jatindranath, ILR 57 Cal 65: AIR 1930 Cal 3.

2. Nuruddin v. Jhairuddin, AIR 1933 Lah 130 (Jai Lal J.).

3. Ramdas v. Lachmandas, AIR 1936 Lah 53.

4. People's Insurance Co. v. Benoy Bushan, AIR 1943 Cal 199 (203).

Section 20 and suits against Government

A suggestion for defining the place where the Government can be sued has been made. It is considered that such a definition is not practicable. How far the test of "carrying on business" would apply to Government undertakings must depend on the facts of each case. As regards Railways, the matter is now settled by a recent decision of the Supreme Court1-2.

In any case, the "cause of action" test would always be there to fall back upon, and the absence of a specific provision need not cause any serious hardship, in practice.

1. AIR 1956 Nag 200 (204).

2. See Union of India v. Ladu Lal fain, AIR 1963 SC 1681.

3. For previous conflict of decisions, see

(i) Azizuddin v. Union of India, AIR 1945 Mad 345.

(ii) P.C. Biswas v. Union of India, AIR 1956 Assam 85.

Code of Civil Procedure, 1908 Back

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