# [1964] 3 S.C.R. 624

- **Citation:** [1964] 3 S.C.R. 624
- **Court:** Supreme Court of India
- **Decided:** 1964
- **Bench:** K. SmrnA RAo, Raghubar Dayal, J. R. Mudholxar
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/1964-3-s-c-r-624-3011
- **Pages:** 11

## Headnote

Oivil Proudure-Jurisdiclion of Oourt-Railw'ay hwdquorters al a p/au within the jurisdiction of Court-Railway
oimed b'V the Go•ernment "if a bu1ineB1"-0od1 of Oi•il Proeedure, 1908 (V of 1908), ... 21, 115-0on1titution of India,
Arts. 19 (6), fl!i8.
The plaintiff' respondent instituted a suit in the court of
the Additional SubordinateJudire, Gauhati, against the Union
of India and the Northern Frontier Railway
by
the General Manager, having its headquarters at Pandu.
Pancu is within the jurisdiction of the Subordinate Judge. The
claim was for the recovery of a sum of Rs. 8,250/- on account of
non-delivery of the goods which had been consig-ned to the
plaintiff• firms. The consignment was booked from Kalyanganj
station of defendant No. 2 for carriae:e to Kanki, a station of
the same
defendant. It was alleged in the plaint that the
cause of action arose at Pan du within the jurisdiction of the
Court, where the defendant railway had its prindpal place of
business by virtue of its headquarters being at Pandu. The
suit
was resisted by the defendants on the ground that the
court had no jurisdiction to entertain the suit.
Relving on the decision of the A"am High Court in
P. 0. 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
in a particular area i!i: carried on
is the principal place of business for the pnrpo•e of juri•diction
under•. 20 of the Code of Civil Procedure, 1908, and decided
the i8'ue in favour of the plaintiff." The revision p;.tition filed
by the appellant• was rejected by the Hi•h Court. The present
appeal was filed with special leave granted by this Court.
Jt was contendod in the app•al hy the appellants that
the running of,th• railway by the Union of India could not be
said· to amount to carrying on of- bnsiness and that therefoi:c
the fact that the headquarters of Northern Frontier Railway
Administration was at Pandu within the jurisdiction of the
3 S.C.R.
SUPREME COURT REPORTS
!525
Court at Gauhati did nnt
the Court juri<diction under
s. 20 of the Code of Civil Procedure.
Hold that Art•. 19 (6) and 298 of the Constitution clearly
indicate that the State can carry on business and can even e•
dude citizens completely or partially from carrying on that l
businets.
The running of railways which is a business when r.arried
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 or an
activity. The fact as to who runs it and with what motive
cannot af!'ect it. 'Profit element' is not a necessary ingredient
of carrying- on of businrss, though usually business i1 carried
on for profit.
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 busine.s of running
railways and can be sued in the court of the Subordinate Judge
of Gauhati within whose territorial jurisdiction the headquar•
ters of one of the railways run by the Union is situated.
Case Law reviewed.
Stall! of Bomb!J1! v; Hospital Mazdoor Sabha [1960]
. 2 S.C.R. 866, Tho Oorporati<m of tho Oily of Nagpur v. Its Il!mflloyeu, [1960] 2 S. C. R. 942 and 8a!ya Narain v. Di1tricl
Enginur, P. W. D., A. I. R. 1962 S. C. 1161.
CxvrL APPELLATE JURISDICTION : Civil Appeal
No. 717 of 1961.
Appeal by special leave from the judgmeni
and order dated April IO, 1961 or the Assam High.
Court in Civil Revision No. IO of 1961.
D. R. Prem, P. D. Menon for R. N. Sachthey,
for the appellants.
The respondent did not appear.
.. 1961
" ..... of /Mia
y,
· .... Uleitr
IHI
Union of /r11/is
...
Lafu l•I l•in
Ra:liubar li-va' J.
626 SUPREME COURT REPORTS [1964] VOL.
1963. Mav 7.
The Judgment of the Court was
delivered by
'
RAGHUBAR DAYAL J. -This appeal, by special
leave, is directed aga

## Text

196'
Moy 7;
624
SUPREME COURT REPORTS [1964] VOL.
UNION OF INDIA AND ANOTHER
'/).
LADU LAL JAIN
(K. SmrnA RAo, RAGHUBAR DAYAL and
J. R. MUDHOLXAR JJ.)
Oivil Proudure-Jurisdiclion of Oourt-Railw'ay hwdquorters al a p/au within the jurisdiction of Court-Railway
oimed b'V the Go•ernment "if a bu1ineB1"-0od1 of Oi•il Proeedure, 1908 (V of 1908), ... 21, 115-0on1titution of India,
Arts. 19 (6), fl!i8.
The plaintiff' respondent instituted a suit in the court of
the Additional SubordinateJudire, Gauhati, against the Union
of India and the Northern Frontier Railway
by
the General Manager, having its headquarters at Pandu.
Pancu is within the jurisdiction of the Subordinate Judge. The
claim was for the recovery of a sum of Rs. 8,250/- on account of
non-delivery of the goods which had been consig-ned to the
plaintiff• firms. The consignment was booked from Kalyanganj
station of defendant No. 2 for carriae:e to Kanki, a station of
the same
defendant. It was alleged in the plaint that the
cause of action arose at Pan du within the jurisdiction of the
Court, where the defendant railway had its prindpal place of
business by virtue of its headquarters being at Pandu. The
suit
was resisted by the defendants on the ground that the
court had no jurisdiction to entertain the suit.
Relving on the decision of the A"am High Court in
P. 0. 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
in a particular area i!i: carried on
is the principal place of business for the pnrpo•e of juri•diction
under•. 20 of the Code of Civil Procedure, 1908, and decided
the i8'ue in favour of the plaintiff." The revision p;.tition filed
by the appellant• was rejected by the Hi•h Court. The present
appeal was filed with special leave granted by this Court.
Jt was contendod in the app•al hy the appellants that
the running of,th• railway by the Union of India could not be
said· to amount to carrying on of- bnsiness and that therefoi:c
the fact that the headquarters of Northern Frontier Railway
Administration was at Pandu within the jurisdiction of the
3 S.C.R.
SUPREME COURT REPORTS
!525
Court at Gauhati did nnt
the Court juri<diction under
s. 20 of the Code of Civil Procedure.
Hold that Art•. 19 (6) and 298 of the Constitution clearly
indicate that the State can carry on business and can even e•
dude citizens completely or partially from carrying on that l
businets.
The running of railways which is a business when r.arried
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 or an
activity. The fact as to who runs it and with what motive
cannot af!'ect it. 'Profit element' is not a necessary ingredient
of carrying- on of businrss, though usually business i1 carried
on for profit.
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 busine.s of running
railways and can be sued in the court of the Subordinate Judge
of Gauhati within whose territorial jurisdiction the headquar•
ters of one of the railways run by the Union is situated.
Case Law reviewed.
Stall! of Bomb!J1! v; Hospital Mazdoor Sabha [1960]
. 2 S.C.R. 866, Tho Oorporati<m of tho Oily of Nagpur v. Its Il!mflloyeu, [1960] 2 S. C. R. 942 and 8a!ya Narain v. Di1tricl
Enginur, P. W. D., A. I. R. 1962 S. C. 1161.
CxvrL APPELLATE JURISDICTION : Civil Appeal
No. 717 of 1961.
Appeal by special leave from the judgmeni
and order dated April IO, 1961 or the Assam High.
Court in Civil Revision No. IO of 1961.
D. R. Prem, P. D. Menon for R. N. Sachthey,
for the appellants.
The respondent did not appear.
.. 1961
" ..... of /Mia
y,
· .... Uleitr
IHI
Union of /r11/is
...
Lafu l•I l•in
Ra:liubar li-va' J.
626 SUPREME COURT REPORTS [1964] VOL.
1963. Mav 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 suit.
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 non·
delivery of the goods which had been consigned to
the plaintiff's firm run under 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 nor 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 under
80 of the Codi'.
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 with·
in the jurisdiction of which the defendant railway had
3 S.C.R..
SUPREME COURT REPORTS 627
its principal place of business by virtue of
heodquarters 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 11/ia that Gauh:i.ti 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. l, 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. I and that the office at Pandu was a
branch office of the Union of India which was controlled by defendant No. 1 from New Delhi.
Relying on the c:ise reported as P.O. Biswas v.
Unio11 of India ('), the Trial Court decided the preliminary issue about jurisdiction against the defendants
holding that the principal place from which the rail·
way administr"tior. in a particular area is carried on
is the principal place of business for the purpose of
s. 20 of the Code. The single Judge of the High
Court rejected the revision also on the
of the
same decision of his Court.
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, every suit
(I) A. I. a. 1956 lusam 85.
196J
Union of b;clia
••
Ladu Lall am .
Razhubar D•y•l J.
IHJ
U11i°" of /Ui•
"' ..
Loi.u LAI J•i11.
&;lbiO,. DOJol /.
628
SUPREME COURT REPORTS [1964] VOL.
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, 01 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 com·
mencement 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,
?rises.
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 has such temporary residence.
Explanation II : A corporation shall be deem·
ed 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) aiid
(b) of s. 20 is that the suit be instituted at a place
3 S.C.R.
SUPREME COURT REPORTS
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 expreuions 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
Cob.rt at Gauhati does not give the Court jurisdiction
under s. 20 of the Code.
The contention is based on the
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 he 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 oii of a business into
II.II activity of the State as a sovereign body.
1963
Uriion of /ntli1
Y.
Ladu Ltd l•ift
ll41hu6"' DOJ•l I.
1963
Un,ion of lndia
v.
Latiu Lal Jain
Ir.azh11.ba_r .. Doyal J.
630 SUPREME COURT REPORTS [1964] VOL.
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 owned or controlled by the State, of any trade, business, industry
or 1e.rvice, 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 or 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 had 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 Hoapital Mozdoor Sabha(')' the question was whether the
relevant provisions of the Industrial Disputes Act,
194 7, 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 defini.
tion of 'industry' prescribed bys. 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
(I) [IV69J l S, C. a, 166.
I
3 $.C.R.
SUPREME COURT REPORTS 631
hospitals, would be an undertaking if it is carried on
by a private citizen or a group of pnvate citizens. It
was held 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 withins. 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 con·
ducts 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. I ts employees (1),
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 f'unctions 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."
(I) lliOOJ Z S.0.&, i1ia, Ma,
1969
lfnfo,. of J,,JitJ
••
Ladu Lal .r ailt
Rotbbar Da)ol J.
1163
Uni•n oj l•ii•
••
L•iw Lt1l J •in
R•gb6•; D•.Y•I J,
632 SUPREME COURT REPORTS (1964] VOL.
Lastly, in Satya Narain v. District Engineer,
P.W.D. (' ), 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
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 i& ·difficult
II) A, LR. 1962 8, C. 1161.
(
\
I
3 s.c.R.
SUPREME COURT REPORTS
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 car·
ried 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 motive.
We arc 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 Ratiatting ch
Di&tribution 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 distribu.
tion of available foodstuffs with a view to
ing peace and good goverimicn t. ' ' ' ' .
(II [1961) J, 8, C, 11.,
1963
Union of lniifl
••
i:,.a,, Lal Jain
D•.1111 J,
1963
Union of India
'.
La du Lal Jain
1963
634
SUPREME COURT REPORTS (1964) VOL.
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
tlie Subordinate Judge of Gauhati within whose territorial jurisdiction the headquarters of one of the
railways run by the Union is situated. We accordinily dismiss the appeal with costs .
..4 ppwl lliami1aed.
llUNJU KESA VAN
"·
M. M. PHILIP I. C. S. AND ORS.
(A. K. SARKAR,
M. HIDAYATULL.lH
and J. C. SHAH JJ.)
Travancort JJlzlava Act-Jlakkathayam properly-Nature
and incidenta-Partibility-Tht meani11g of lht t:i:pm•iOll •contrary inttntion' in•· 32 of tht Act-The righla of 'i8'uea' whtn
there is exemption ui1dtr •· 33 of the Act-Queabon of tteemption
not rai•td in written atatement-No i83ue framed-But evidtn.u
led-Not objected by plaintif/1-Whtther vitiat.. the trial-Val•
ation of tho •uil below twt'llly thousand-Certificate granted by tht
High Court under Art. 133 of the Constitution valid-Constitution of India, Art. 133-Travancore Ezhaw Act, 1100 (Act,
III of 1100), ••· 2, 18,19,32,33.
The property in the •nit originally belonged to one Bhagavathi Parameswaram who created an otti in favour of one
Krishnan Marthandam for 3500 fanama (about Rs. 500/-),
Subsequently the latter created a chittoti, Bhagavathi Parameswaram some years later (in 1163 M.E.) made a gift of the
property to his wife Bhagavathi Valli. Bhagavathi Valli died
in 1105 M.E. She bad an only son Sivaraman who was married to Parvathi Meenaksbi and had a son named Vasudevan.
Sivaraman left Travancore in 1096 M.E. Both sides are
agreed that he died thereafter. But there is no agreemeat aa
10 the date of hb death. Mccnakllhi a.id
claimiD1
I