TaxTMI 
TaxTMI 
1982 (4) TMI 299
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....parties was admittedly executed at Barreily and the work was to be executed at Moradnagar, both within the State of Uttar Pradesh. No part of cause of action arose within this jurisdiction. By 1. A. 697181, Union objects to the Award being made a rule of this Court, inter alia, on the above ground. Issues were framed on September 24, 1981 and the question of jurisdiction was tried as a preliminary issue. (3) On behalf of the Union, jurisdiction was sought to be ousted on two grounds. In the first instance, it was urged that on a combined reading of Sections 2(c) and 31(1) of the Arbitration Act, 1940, for short, the Act, it must be held that the situs of cause of action alone was determinative of the jurisdiction of a Court in matters of arbitration and since no part of the cause of action arose within jurisdiction, this Court could not entertain the present proceedings. Council for the Union was apparently relying on some of the earlier decision of this Court, as indeed, some of the other High Courts, based on the view that the test of situs of the defendant had been excluded from the criterion laid down in the Act for jurisdiction. This question has, for the present, been sett....
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....rth-stone" and that the defendant should not be put to the trouble and expense of traveling long distances in order to defend himself. (2). The three expressions used in the Section were intended to cover all possible eventualities in which a person, sued in a civil court, could be found, irrespective of whether a natural person, a juristic person, a body corporate, a statutory corporation, a constitutional or any other authority, capable of being sued. The expression "actually and voluntarily resides" was intended to cover the place where a natural person lives. Expression "personally works for gain" was intended to cover a place where a natural person may be gainfully employed. The expression "carries on busi- ness" is the widest of these expressions and appears to take within its sweep any person, whether a natural or a juristic person, who carries on business conducts his or its affairs or performs functions or discharges duties, which are entrusted to him or to it. It is interesting to notice in this context that the first two expressions were carried into the Code of 1885 from the English rules of practice where these expressions were used to define the jurisdiction of a coun....
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....xpression "carries on business" is much wider than what the expression in normal parlance connotes because of the ambit of a civil action within the meaning of Section 9 of the Code of Civil Procedure. If under Section 9 of the Code Courts have the jurisdiction to try "all suits of a civil nature excepting suits of which their cognizance is either expressly or impliedly barred" and if such suits may involve not only a natural person, irrespective of the relationship in which they can be sued, but also a juristic person, constitutional or other authorities and bodies, including governments, it is difficult to read into the expression "carries on business", any words of limitation on a true construction of the wide expression. To restrict the meaning of the expression "carries on business" to what is popularly understood by business would lead to a peculiar anomaly. If "carries on business" is to be confined to cover commercial activity, pure and simple, it would deprive persons and authorities engaged in non-commercial activities of the benefit of being sued only where they are conducting their affairs and if the anxiety was to ensure that a suit could be filed in a place where a de....
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....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 service clearly indicated that "the State can carry on business and can even exclude citizens completely or partially from carrying on that business." Running of railways, observed the Court, was a "business" and that there was no reason to hold that the running of railways, which was business when run by private companies and individuals, ceased to be so when run by Government, and that what was determinative was not who was carrying on the activity but what "the nature and character of the activity" was, and that the fact as to who ran it and with what motivation was incapable of affecting its nature or character. (9) In the case of Union vs. Laddu Lal Jain (supra), reliance was placed on an earlier decision of the Supreme Court in the case of State of Bombay vs. The Hospital Mazdoor Sabha (5), where the question was as to the true interpretation of the expression "Industry" defined by Section 2(j) of the Industrial Disputes Act in the context of a controversy if the group of hospitals run by the State of Bomba....
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....tate action in the constitutional scheme obtaining in India, as to the expanding horizons of judicial control of legislative as well as executive action, the shrinking islands of immunity of so-called regal or sovereign functions of the State, the impact of the expanding scope of the industrial, commercial and business activity of the State directly or through State-owned and managed corporations, authorities or other bodies, in the realm of administrative law, law relating to privilege against compulsory disclosure and industrial adjudication. It is being increasingly recognised that in a republic with a written constitution, incorporating the concept of rule of law, by and large, all state action is subject to judicial control and the fine distinction between regal functions of the State or the traditional governmental functions and the activities of the State pursuant to its commitment to welfarism and the mandate contained in the Directive Principles of State policy and other provisions of the Constitution is fast disappearing primarily because the whole concept of regal and sovereign functions had its genesis in the early institution of monarchy or of a government by a foreign....
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.... the Industrial Disputes Act was "intended to regulate these relations not between a master on the one hand and his cook, bearer, and sweeper on the other. This plain fact has been missed and all employment is considered as in an industry, all indications in the Act to the contrary notwithstanding. Today the list of industries includes from government to private domestic servants, through church, hospital, school, clubs, municipalities and all professions. The list will only come to an end when this enthusiastic but fallacious and populistic judicial activism gets tired. In interpreting written law one has to practice what Mac Dougall calls "negative self-feeling", an apt phrase not yet used." The near revolutionary decision, if I may say so with great respect, in the case of Bangalore Water Supply (supra) has both its strong supporters as well as opponents. Not unnaturally, a move is said to be already afoot to seek a review. of the decision as also a legislative review of the appropriate meaning to be attributed to the expression "industry". Bangalore Water Supply, (however, holds the field and if the expression "carries on business" in Section 20 of the Code could be legitimatel....
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....ke through Justice Subba Rao while the judgment in the other case is by Gajendragadkar, J. Nagpur Corporation, as in the case of Banerjee, involved a municipal body. It was held that if a service rendered by an individual or private person would be an industry, it would equally be an industry in the hands of a Corporation and if the service rendered by Corporation was an industry, the employees in the department connected with that service whether financial, administrative or executive, would be entitled to the protection of the Act and if a department of a municipality discharged many functions, some pertaining to industry as defined in the Act and other non-industrial activities, the predominant functions of the department would be the criteria for the purpose of the Act. It was, however. observed that the regal functions described as primary and inalienable functions of the State, though statutorily delegated to a Corporation, are necessarily excluded from the purview of the definition, and that, such regal functions shall be confined to "legislative power, administration of law and judicial power. As has been noticed above, the Hospital Mazdoor Sabha case was concerned with the....
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..... Although Section 2(j) uses words of the widest amplitude in its two limbs, their meaning cannot be magnified to overreach itself. (a) 'Undertaking' must suffer a contextual and associational shrinkage as explained in Banerji and in this judgment, so also, service, calling and the like. This yields the inference that all organized activity possessing the triple element in I (supra) although not trade or business, may still be 'industry' provided the nature of the activity, viz. the employer-employee basis, bears resemblance to what we find in trade or business. This takes into the fold 'industry' undertakings callings and services, adventures analogous to the carrying on of trade or business. All features, other than the methodology of carrying on the activity viz. in organizing the co-operation between employer and employee, may be dissimilar. It does not matter, if on the employment terms there is analogy. III. Application of these guidelines should not stop short of their logical reach by invocation of creeds, cutis or inner sense of incongruity or outer sense of motivation for or resultant of the economic operations. The ideology of the Act being indust....
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....ventures undertaken by Government or statutory bodies. (c) Even in departments discharging sovereign functions, if there are units which are industries and they are substantially severable then they can be considered to come within S. 2(j)(d) Constitutional and competently enacted legislative provisions may well remove from the scope of the Act categories which otherwise may be covered thereby. V. We overrule Safdarjung (1970)IILLJ266SC Solicitors' case (1962) ILLJ 241 SC Gymkhana (1967 ) IILLJ 720 SC Delhi University (1963) IILLJ 335 SC Dhanrajgirji Hospital (1975) IILLJ 409 SC and other rulings whose ratio runs counter to the principles enunciated above and Hospital Mazdoor Sabha (1960) ILLJ 251 SC is hereby rehabilitated." (15) While the larger controversy as to title meaning of the expression "industry" and as to the activities that would be within the expression may perhaps go on elsewhere, it is necessary for our present purpose to confine attention to the various activities of the government, both regal and non-regal, as Constituting "industry", "business" or undertaking, etc. The Industrial Disputes Act itself contemplates existence and reference of Industrial disput....
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.... It is not every employee who excluded but only certain categories primarily engaged and supportively employed in the discharge of the essential functions of constitutional government. In a limited way, this head of exclusion has been recognised throughout". In the summing up, however, the learned Judge ruled in favor of partial exclusion of such functions. In this way. the learned Judge brought back into the definition of "industry" not only the non-regal function of the State but even with respect to the departments discharging purely regal functions of the State the doctrine of severability was applied. Beg, C.J., however, in his concurring opinion made a few observations about what he described as the "so-called sovereign functions" which have been placed outside the field of "industry" and observed, that "the term "regal" from which the term "sovereign functions" appears to be derived seems to be misfit in a republic where the citizen shares the political sovereignty in which he has even a legal share, however, half, inasmuch as he exercises the right to vote. What is meant by the use of the term "sovereign" in relation to the activities of the State is more accurately brought....
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....ions whether regal or other- wise. Its functions are its legitimate business and would be within the Section." (17) In the case of Union vs. Ladu Lal Jain (supra) the Supreme Court was not concerned with the activities of the Union in relation to its traditional regal functions and the question that fell for determination had reference to the purely commercial activity of the Union in running the Railways. A wider construction of the expression "carries on business" so as to encompass activities in performance of its regal functions for the purpose of Section 20 of the Code was neither raised nor considered. In view, however, of the manner in which the expression "industry" as defined in the Industrial Disputes Act, has been considered'. by the Supreme Court in the various decisions culminating in its decision in the case of Bangalore Water Supply and Sewage Board (supra) it would be legitimate that the expression in the context of the Code of Civil Procedure would have a wider import and extend even to the regal functions of the State and if I were called upon to decide that larger question, I would have no hesitation in answering in the affirmative the question if the Unio....
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....he place where the activity is being carried on or at the regional supervisory level from where it is supervised under the over all superintendence and control of the Central Government. While in a fit case, it may be considered if the Union could be said to be carrying on business at the local or the regional level, there can be little doubt there it is carrying on the business at the place of the seat of the Central Government from where it exercises ultimate control over the conduct of the business. It would, Therefore, be legitimate to hold that in relation to the aforesaid activity. Union could be said to be carrying on business within the territorial jurisdiction of his Court and the Court would have undoubted jurisdiction to entertain the present proceedings. (19) Once it is conceded that the Government carries on business even though in relation to some of its activities and not necessarily in relation to all its affairs, the Court, in the place which is the principal place of its business, would have the necessary jurisdiction to entertain suits against the Government and such jurisdiction would not be dependent on any linkage between such principal place of business an....
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....rposes shall be subject and liable to the same Judgments and Executions as they would while vested in the said Company have been liable to in respect of Debts and Liabilities lawfully contracted and incurred by the said Company." The corresponding provision of Article 300 of the Constitution of India is in these terms : " 300. Suits and proceedings (1) The Government of India may sue or be sued by the name of the Union of India and the Government of a State may sue or be sued by the name of the State and may, subject to any provisions which may be made by Act of Parliament or of the Legislature of such State enacted by virtue of powers conferred by this Constitution, sue or be sued, in relation to their respective affairs in the like cases as the Dominion of India and the corresponding Provinces or the corresponding Indian States might have sued or been sued if this Constitution had not been enacted. (21) The question of extent of immunity of the Crown for the first time came up for consideration in India before the Supreme Court at Calcutta in 1961 in the case of Penninsula Oreintal Steam Navigation Company vs. Secretary of State in Council of India (15). This was a....
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....has any validity in this country, particularly after the Constitution and Therefore, it would be only recognising the old established rule, if the vicarious liability of the State is upheld by the Court. It was further pointed out that Article 300 of the Constitution itself had saved the right of the Parliament, or the Legislature of a State to enact such law as it may think fit and proper in this behalf. But so long as the Legislature has not expressed its intention to the contrary, it must be held that the law is what it has been ever since the days of the East India Company. The decision of the Supreme Court at Calcutta was approved. (23) In the case of Kasturi Lal Ralia Ram Jam (18) Supreme Court was called upon to construe the scope of Article 300 of the Constitution of India in the context of the immunity of the State from liability for damages. It was held that Article 300, inter alia, provided that the Union or the State may sue or be sued in relation to its affairs in like cases as the Central or the provincial Governments could have been sued if the Constitution had not been enacted. It was observed that when a question arose as to whether suit can be filed against the....
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....rner case of State of Rajasthan (supra) was relied on. By way of an aside, Gajendragadkar, C.J., as he then was regretted that the doctrine of immunity borrowed in India from the common law principle which prevailed in England continue to be operative, even though it has been substantially modified in the country of its origin by the Crown Proceedings Act, by virtue of the fact that Legislation envisaged by Article 300 of the Constitution of India was still to be of the state from certain categories of proceedings is wider than in the country from where it was borrowed. These observations where made by the highest court in the year 1965. The position continues to be the same. The executive response is still awaited. The distance that separates the executive wing from the judicial wing of the State is apparently much longer than was envisaged by the doctrine of separation of powers embodied in the Constitution of India. The result is that this area of immunity continues to constitutes an a cronistic relic of the old order. (24) It would thus be seen that Article 300 of the Constitution of India embodies, in the first instance, the principle that the Union and the State were legal....
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....es, there may be difficulties which would justify perhaps a second look at the Section so as to incorporate in it working rules to regulate jurisdiction of courts in relation to the various activities of the State. Would the Union and the other authorities be likened to Corporations so that they would be deemed to carry on business at their Central Offices and in their branch offices in relation only to the cause of action. If suits against Union and the States could be filed in courts within whose jurisdiction their central offices are located, even though, causes of action arose in different parts of the country, it may lead to difficulties in the proper conduct of the proceedings by these authorities. None of these would, however, justify a different construction of the expression even though they certainly point to the need for legislative action so as to regulate jurisdiction of civil courts to deal with State action. The other device would be an exclusionary provision in the contract which is often resorted to. (27) For all these reasons, issue regarding jurisdiction is answered in the affirmative and I hold that this Court has the necessary jurisdiction to entertain proce....