Case Note & Summary
The case concerned a civil suit for recovery of money due to non-delivery of goods, involving a dispute over territorial jurisdiction of a court under Section 20 of the Code of Civil Procedure, 1908. The plaintiff, Ladu Lal Jain, instituted a suit in the court of Additional Subordinate Judge, Gauhati, against the Union of India and the Northern Frontier Railway, represented by its General Manager, whose headquarters were at Pandu within the jurisdiction of the Gauhati court. The claim was for recovery of Rs. 8,250/- on account of non-delivery of 134 bags of rice which had been consigned from Kalyanganj station in West Bengal to Kanki station in Bihar on April 13, 1958. The plaintiff alleged that the cause of action arose at Pandu, where the railway had its principal place of business, and that notice under Section 80 CPC was served there. The defendants contested jurisdiction, arguing that neither station was within the Gauhati court's jurisdiction, the consignment never travelled through Assam, mere service of notice could not confer jurisdiction, and the Union of India's principal office was in New Delhi, with Pandu being only a branch office. The trial court, relying on P.C. Biswas v. Union of India, held that the principal place from which railway administration in a particular area is carried on is the principal place of business for purposes of Section 20 CPC, and decided the jurisdiction issue in favour of the plaintiff. The High Court rejected the revision petition. The appellants then appealed to the Supreme Court by special leave. The sole contention before the Supreme Court was that running of railways by the Union of India could not amount to carrying on business, and therefore the headquarters at Pandu did not confer jurisdiction under Section 20 CPC. The Supreme Court examined Articles 19(6) and 298 of the Constitution, which clearly indicate that the State can carry on business and can even exclude citizens completely or partially from carrying on that business. It held that running of railways, which is a business when carried on by private companies or individuals, does not cease to be a business when run by the Government. It is the nature of the activity which determines its character, and the fact as to who runs it and with what motive cannot affect it. Profit element is not a necessary ingredient of carrying on business, though usually business is carried on for profit. The fact that the Government runs railways for providing cheap transport for people and goods and for strategic reasons does not convert what amounts to carrying on business into an activity of the State as a sovereign body. The Court reviewed earlier decisions in State of Bombay v. Hospital Mazdoor Sabha, Corporation of the City of Nagpur v. Its Employees, and Satya Narain v. District Engineer, P.W.D., which similarly held that the character of an activity is determined by its nature, not by who conducts it or for what motive. Accordingly, the Supreme Court held that the Union of India carries on the business of running railways and can be sued in the court of the Subordinate Judge of Gauhati within whose territorial jurisdiction the headquarters of one of the railways run by the Union is situated. The Court thus affirmed the lower courts' view and rejected the appellants' contention.
Headnote
A) Civil Procedure - Territorial Jurisdiction - 'Carries on business' under Section 20 CPC includes Government-run railway business - Code of Civil Procedure, 1908, Section 20, Section 115, Section 80; Constitution of India, Articles 19(6), 298 - Suit for non-delivery of goods was instituted at Gauhati where Northern Frontier Railway headquarters at Pandu was situated; defendants contended Gauhati court lacked territorial jurisdiction as consignment never travelled in Assam and Union of India's principal office was New Delhi - Trial court and High Court held railway headquarters is principal place of business for jurisdiction - Supreme Court held that running of railways by Union of India amounts to carrying on business, and hence court within whose jurisdiction railway headquarters is situated has jurisdiction under Section 20 CPC - Held that Union of India carries on business of running railways and can be sued at place of railway headquarters (Pages 625-631). B) Constitutional Law - State Trade and Business - State can carry on trade/business; activity's nature not motive determines character - Constitution of India, Articles 19(6), 298 - The Union argued that Government undertakings without profit motive are not business - Court reasoned Articles 19(6) and 298 expressly extend executive power to carrying on trade or business, including exclusion of citizens; profit element is not necessary ingredient though usually business is carried on for profit - Held running railways is business irrespective of Government providing cheap transport or strategic reasons (Pages 629-631).
Issue of Consideration
Whether running of railways by Union of India amounts to carrying on business within the meaning of Section 20 of the Code of Civil Procedure, 1908, thereby conferring territorial jurisdiction on the court within whose jurisdiction the railway headquarters is situated; and whether absence of profit motive changes the character of the activity from business to sovereign function.
Final Decision
The Supreme Court held that Articles 19(6) and 298 of the Constitution indicate the State can carry on business; running of railways is business irrespective of who runs it or motive; profit element is not a necessary ingredient; therefore the Union of India carries on the business of running railways and the Gauhati court had territorial jurisdiction under Section 20 CPC. The Court affirmed the lower courts' view and rejected the appellants' contention.
Law Points
- Running of railways by Government is business
- nature of activity determines character
- profit motive not necessary
- State can carry on trade or business under Constitution
- territorial jurisdiction under Section 20 CPC includes principal place of business of Government-run railway
