(1) This appeal is directed against the order of the learned single Judge holding that the courts at Delhi had no jurisdiction to entertain the appllication filed by the appellant under section 33 of the Arbitration Act (hereafter called 'the Act').
(2) The appellant is a limited company with its registered office at Calcutta. The Director General of Supplies and Disposals which is a central purchase organisation of the Government of India entered into a contract with the appellant through the Director of Supplies and Disposals, Bombay for the purchase of 780 cwts. of pig-lead. According to the application the appellant fully executed this contract in the year 1959 and also received payments for the goods supplied but the Director of Supplies and Disposals, Bombay 'unilaterally altered a clause of the contract' in regard to payment of sales-tax and sent to the Company a demand for refund of the amount already paid to it and thus raised a dispute. By letter dated September 27, 1968 the Director of Supplies and Disposals, Bombay called upon the Director General of Supplies and Disposals, New Delhi to enter on the reference or to appoint some arbitrator in his place in terms of clause 21 of the General Conditions of the Contract to decide this dispute. The appellant, in these circumstances, filed the present application praying for a declaration that for reasons mentioned in the application no arbitration agreement subsisted between the parties to call for arbitration.
(3) In para 16 of the application, jurisdiction of the court at Delhi was invoked on the ground that 'in terms of the agreement between the parties, the sole named arbitrator is the Director General of Supplies and Disposals functioning in Delhi'. The application was opposed and the jurisdiction of the court was denied. The appellant made an application under Order 6 rule 17 Civil Procedure Code . (I.A. 1192 of 1969) lo amend para 16 of the application in substance to add the plea that because Union of India was carrying on business through the Director of Supplies and Disposals at New Delhi the court at Delhi had territorial jurisdiction in view of Section 20(a) of the Code of Civil Procedure to entertain the application. The learned single Judge by order dated September 12, 1969 held that the prayer for amendment could not be allowed until it was found that the court at Delhi had jurisdiction to entertain the application under Section 33. On the merits of the plca, by order dated September 12, 1969 the learned single Judge held that the court at Delhi had no jurisdiction and with this finding the application was returned to be presented at Bombay.
(4) The contention of Shri G. R. Chopra, learned counsel appearing lor the appellant, is that the decision of the application under Order 6 rule 17 should not have been held over and that as the Director General of Supplies and Disposals carried on the business of Union of India and had indisputably an office at New Delhi, courts at Delhi should have been held to have jurisdiction to entertain fhe application under Section 33.
(5) It is unnecessary to go into the merits of the grievance that the decision on the amendment application should not have been held over because the learned counsel for the respondent addressed arguments to us on the assumption that the pica sought to be raised by amendment did form part of the main application. The question ior decision, thereforee, is whether Delhi courts have jurisdiction, firstly, because the sole arbitrator named in the agreement functions at Delhi (as pleaded in the original application) and, secondly, because the Union of India carried on business at Delhi through the Director Gencral of Supplies and Disposals as sought to be added by amendment.
(6) According to Section 2(c) of the Act 'court' for purposes of the Act means a civil court having jurisdiction to decide the questions forming the subject matter of reference if the same had been the subject matter of a suit. Section 20 of the Code of Civil Procedure provides that subject to the limitations prescribed therein, every suit shall be instituted in a court where the defendant or the defendants at the time of the commencement of the suit in terms of clauses (a) and (b) of Section 20 actually and voluntarily reside or carry on business or personally work for gain or where in terms of clause (c) a cause of action wholly or in part arises. Reading these two provisions together, it is obvious that the court having jurisdiction under the Act would be the court competent to entertain a suit in regard to the subject-matter of reference i.e. the dispute which is sought to be referred to arbitration. In Inder Chand Jain v. Pooran Chand Bansi Dhar. the test for determining jurisdiction of the court under the Act was stated, in the following words :
'INorder to determine the question whether the Court betore which applications under Ss. 32 and 33 are filed has jurisdiction to entertain them, it must be ascertained what the questions arc, which form the subject matter of the reference to arbitration and then supposing those 'questions had arisen in a suit, which is the court which would have jurisdiction to entertain the suit, whether in fact any part of the cause of action in the suit, which the opposite party might have instituted arising out of the subject matter of reference arose within the jurisdiction of the court before which the applications are filed'.
THEsubject matter of reference in the instant case is the alleged unilateral alteration of the contract regarding the payment of sales-tax and the demand made in consequence of it. It is admitted before us that the contract between the parties was initially accepted at Bombay and was unilaterally altered by the Director of Supplies and Disposals at Bombay and the demand for the refund of the sales-tax was served on the appellant at Calcutta where its Head Office is situated. In para 16 of the unamended application, jurisdiction of the court at Delhi was invoked on the ground that in terms of the agreement between the parties the sole arbitrator named therein was functioning in Delhi. This obviously is not a question that can be the subject matter of the present reference. The averment is wholly irrelevant and cannot be relied upon to confer jurisdiction on the courts at Delhi.
(7) The next question is whether the Union of India carried on business or worked for gain through the Director of Supplies and Disposals, New Delhi to confer jurisdiction on the courts at Delhi. The answer has to be in the negative. The expression 'voluntarily resides' in section 20 is significant. It necessarily refers to natural persons and not to legal entities. Likewise, the expressions 'carries on business' or 'personally works for gain' do not refer to functions carried on by the Union of India in discharge of its executive powers conferred by Article 298 of the constitution. While Article 299 of the Constitution provides that all contracts made in the exercise of the executive power of the Union shall be expressed to be made by the President clause (2) of this Article states that the President shall not be personally liable in respect of any contract or assurance made or executed on his behalf. The President, thereforee, cannot be said to be personally working for gain within the meaning of Section 20 of the Code of Civil Procedure. Mr. Justice Prithvi Raj in suit No. 394 of 1967. insortex Pvt. Ltd. v. Union of India: decided on 4th May, J971('), relying on R. .1. Wyllie and Co. v. Secretary of State : A.I.R. 1930 Lah 81 Dominion of India v. M/s. R.C.K.C. Nath and Company Khulna : : AIR1950Cal207 and Azizuddin and Company by Managing Partner, P.M. Azizuddin v. Union of Indict : : AIR1955Mad345 has taken the same view.
(8) Rctcrcncc in this connection may also be made to the observations in Badrinarayan v. Excise Commissioner Hyderabad and others '. A.I.R. 1962 AP 382 with which we respectfully agree in so Car as thcy go in relation to suits other than suits against Railway. On page 383 of the report, the Bench observed :
'SECTION 20 Civil Procedure Code . lias in conternplation peopic dwelling within the territorial limits of a court and persons indulging in commercial activities within that area even if they do not dwell therein. This section in plain and unmistakable language conveys that idea. The words 'actually and voluntarily' cannot reasonably apply to legal entities. That being so. it is difficult to bring the Government within the import of the expression 'the defendant'...... ......actually and voluntarily resides'.
In this case the appellant was an 'abkari' contractor for certain villages in the district of Nalgonda. A penalty of Rs. 9,767/8.00 was imposed on him by the Excisc Superintendent for the alleged tapping of 14;) toddy and 500 sindhi trees without paying the excise duty. After he tailed in his appeal to the Collector and the Excise Cominis- sioner and his representation to the Minister, he filed a suit at Hyderabad impugning the levy of penality as ultra vires, illegal and void. It was urged that as the Government enjoyed monopoly in regard to 'abkari' business it should be deemed to be carrying on business at Hyderabad within the sweep of Section 20 Civil Procedure Code . The contention was rejected. The court said : 'We consider that in gathering the revenues from various sources, the Government acts in its sovereign capacity and not as a commercial body. The collection of Abkari revenue is not undertaken by a private corporation and much less by private individuals. thereforee, the concept of carrying on business cannot be imported into activities of this description'.
(9) Shri G. R. Chopra, placed strong reliance on Union of India and another v. Sri Ladulal Jain : 3SCR624 'I ins appeal arose out of a suit filed against the Railway for no delivery of goods. In para 7 on page 1683 of the report, the court observed that 'the expression 'voluntarily resides or personally works, for gain' cannot be appropriately applied to the case of the Govcmment' but having regard to the fact (as stated in para 11 on the same page of the report) that 'private companies and individuals carried on the business of running railway's, prior to the State taking them over' it was held that the running of railways would not cease to be a business when they were run by Government and so the court within whose jurisdiction the head-quarters of one of the railways run by the Union was situated had the jurisdiction to try the suit. In the instant case, we find that there is nothing on the record to show that the Director of Supplies and Disposals. New Delhi carried on business at Delhi. It is relevant in this context to refer to the observations of the Supreme Court in Director of Rationing anil Distribution v. The Corporation of Calcutta and other : 1960CriLJ1684 . In this case at the instance of the Corporation of Calcutta, summons under Section 488 of Bengal Act II! of 1923 as substituted by the later Act Xxxiii of 1951 were issued by the Director of Rationing and Distribution representing the Food Department of the Government of West Bengal. The offence complained of was the 'using or permitting to be used' certain premises for purposes of storing rice without a license. By way of preliminary objection the contention raised was that the prosecution was not maintainable in law. An argument was raised on behalf of the Corporation that the State as recognized by Article 300 of the Constitution was a legal person and was capable of having rights and was subject to obligations and, thereforee, the complaint was competent. In answer to the claim of immunity for the State as a sovereign Power it was urged that this immunity could not be claimed when it embarked on a business and in that capacity was subject to penal provisions of the statute equality with the other citizens. On page 1360 the Court said:
'THE question was not raised below and has not been gone into by the High Court, nor is it clear on the record, as it stands, that the Food Department of the Government of West Bengal, which undertook rationing and distribution of food on a rational basis had embarked upon any trade or business. In the absence of any indication to the contrary, apparently this Department of the Government was discharging the elementary duty of a sovereign to ensure proper and equitable distribution of available food-stuffs with a view to maintaining peace and good Government'.
This case was specifically noticed in Union of India and another v. Ladulal Jain : : 3SCR624 in para 15 of the report but was distinguished primarily on the ground that it concerned the sovereign activities of the State. We do not read the citied case, thereforee, to be laying down the rule that the courts at Delhi will have jurisdiction in regard to all disputes relating to all contracts executed by Union of India simply because the Union has its 'office' at Delhi.
(10) No part of Section 20 of the Code of Civil Procedure was thus attracted to the questions which formed the subject matter of reference in this case and the court at Delhi had no Jurisdiction to entertain the appellant's application under section 33 of the Act .
(11) The appeal consequently fails and is dismissed but in the circumstances of the case the parties arc left to bear their own costs.