H.L. Anand, J.
(1) Whether the Union could be said to be 'carrying on business', within the meaning of Section 20 of the Code of Civil Procedure, at the principal seat of the Central Government, in New Delhi so as to give territorial jurisdiction to this Court to entertain proceedings on an arbitral award made in the dispute arising in connection with the execution of civil work for modernisation and augmentation of an ordnance factory, is the only question that calls for decision at the present stage of the proceedings.
(2) Plaintiff prays for a decree in terms of the Award. made on October 28, 1980, by Brig. Joginder Singh, in the dispute between the plaintiff and the Union, arising out a contract entered into between them in connection with the execution of civil work for modernisation and augmentation of an ordnance factory at Moradnagar. The contract between the 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 settled with the decision of the Full Bench of this Court in the case of Shri Ram Rattan Bhartiya vs. The Food Corporation of India & another (1). The question, if the scheme of the Act incorporates both the tests with regard to jurisdiction of a Court to my mind, is not free from difficulty primarily because reading into the Act, the test of situs of the defendant would introduce an indeterminate factor depending on which of the parties may initiate proceedings, forming subject matter of the reference, but I am bound by the decision of the Full Bench, and I say so with utmost respect.
(4) The second contention urged on behalf of the Union to justify exclusion of jurisdiction is that clause (a) of Section 20 of the Code of Civil Procedure, sought to be invoked, would be inapplicable to the Union, in that, neither of the three expressions 'actually and voluntarily resides', 'carries on business' or 'personally works for gain' in the said clause could be considered to be appropriate to the Union, having regard to its composition and functions.
(5) This is how Section 20 runs : '20. Subject to the limitations aforesaid, every suit 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, as the time of the commencement of the suit, actually and voluntarily resides, or carries on business or personally works for gain; or (b) any of the defandants, where there are more than one, at the time of the commencement 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; an aforesaid, acquiesce in such institution; or (c) the cause of action, wholly or in part, arises. Explanationn A corporation shall be deemed 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.
(6) The Section embodies the two-fold test of jurisdiction, the situs of the cause of action and of the place where the defendant resides or carries on business or works for gain. The Section is designed to secure that justice might be brought as near as possible to 'every man's hearth-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 country court. (4). The expression 'carries on business' had been construed by the English Court in some cases as excluding a person who was in service and it was held that a person who merely works for another for gain or was employed about the business of another, could not be said to be carrying on 'business' within the meaning of the expression 'carries on business' because such a person was merely working for gain for another. It is probably for this reason that in adopting the language of the English practice, the third expression 'personally works for gain' was added in an anxiety to cover even a person who was available at a place because he was working for another person.
(7) The expression 'business' has a very wide import and is understood in different senses in varying contexts. In its generic sense, 'business' is any purposeful activity, any activity directed towards some end, an activity engaged in as normal, logical or inevitable and usually extending over a period of time. It has been used in that sense as being synonymous with 'role' or 'function'. While in its narrow sense, it is confined to activity of a commercial nature with a profit motivation, in its wide sense, it is used to denote conduct of his or its affairs by any person, body or authority. There has been considerable difficulty in defining the expression 'business' and while the meaning to be attributed to the expression would depend largely on the context, there is, by and large, unanimity that the expression has a very wide import and would encompass in the words of Lindlay, L.J. (3) 'almost anything which is an occupation, as distinct from a pleasure-anything which is an occupation or duty which requires attention is a business.' These words have since found their echo in the subsequent decisions on the interpretation of the expression 'business' and of analogous terms both in England and in this Country. The expression 'carries on business' has the connotation of permanence and of regularity to distinguish it from an isolated act or activity. The amplitude of the expression 'carries on business', however, could not possibly be construed as having been restricted merely because it is used in conjunction with 'personally works for gain' nor is it possible to read into the expression 'carries on business', the element of gain or of profit in the activity that is carried on. The expression '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 defendant was either because he was living there or it was the place from where he operated, there would be an unjustifiable discrimination between a person carrying on commercial activity and a person carrying on non-commercial activity, which could. not have been the intention of the legislature. There would, thereforee, be no justification to read into the expression 'carries on business', any words of limitation either because of the conjunction in which the expression is used or otherwise from the context. Section 20 embodies a common treatment of all defendants, whether a natural person or a juristic person. There is a common treatment qua the test of cause of action so must there be a common treatment qua the presence of the defendant in a particular place, whether with reference to the residence or the activity in which he or it may be engaged.
(8) That the expressions 'actually and voluntarily resides'' and 'personally works for gain' are inapplicable to the Union, is no more in doubt in view of the decision of the Supreme Court in the case of Union vs Laddu Lal Jain (2). That cannot, however, be said of the expression 'carries on business', even though this expression is used in clause (a) along with the other two expressions. This again is what the Supreme Court said in that case. Negativing the contention that the Government could not be said to 'carry on business', it was observed that such an expression was appropriate to the Government and the mere fact that it was used in the Section along with the other expressions did not mean that it would apply only to such persons to whom the other two expressions, regarding residence or of personally working for gain, apply. The contention of the Union that the running of Railways by the Union could not be said to amount to its carrying on business was repelled and it was observed that the fact that the Government ran the Railways for providing quick and cheap transport for people and goods and for strategic reason 'will not convert that amounts to the carrying on a business into an activity of the State as a sovereign body'. It was further observed that Article 298 of the Constitution, which extends the power of the Union and of each State to the carrying on of any trade or business, and clause (6) of Article 19, which provides that nothing in sub-clause (g) of clause (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 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 Bombay could be said to be 'industry' in spite of the non-profit motivation for the activity. The expression 'industry' was defined as meaning 'any business, trade, undertaking, manufacture or calling of employers and includes any calling, service, employment, handicraft, or industrial occupation or avocation of workmen.' Answering the question in the affirmative, it was observed that it was the character of the activity which determined as to whether the activity would attract the provision of Section 2(J) and that who conducted the activity and for what motive made no material difference. Reliance was also placed on similar observation of the Supreme Court in the case of City of Nagpur vs. Its Employees (6) where also the said Section fell for construction and it was observed that '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 further observed that monetary consideration for service was not an essential characteristic of an industry in a modern State and that 'barring the regal functions 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 hand of a municipality.' The Supreme Court also considered the case of Satya Narain vs. District Engineers (7) and explained that the case simply held that the Commercial activity carried on with profit motive cannot be held to be public service and observed that there was not holding in that case that such activity carried on by government will not be business if conducted without profit motive. The Supreme Court also distinguished an earlier decision of that Court in the case Director of Rationing and Distribution vs. The Corporation of Calcutta (8), which was relied on, on behalf of the Union as really being of no help to them in determining the question as to the interpretation of the expression 'carries on business' in relation to the Union. It was consequently held that the Union carried on the business of running the Railways and could. thereforee, be sued in the Court within whose territorial jursidiction the headquarters of one of the Railways, run by the Union, was situated.
(10) During the last two decades, there has been considerable juristic, judicial and legislative thought as to the nature and legal incidents of State 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 power directly or through the instrumentality of what was known as the East India Company. There is a distinct line of thinking that such a concept would have no relevance where sovereignty resides in the people who are recognised by the constitution itself as its fountain and who periodically exercise that right at the hustings. Even so, some very restricted areas of exemption with major policy and political content are still recognised. It is also recognised that pursuant to its commitment to bring about socio-economic transformation of Society, the governments Central as well as State, have in addition to their traditional governmental functions entered in a big way, in the field of industry, business, commerce and even trade, including international trade to the exclusion of others and even in competition with private sector. The State today functions in these areas directly or through statutory bodies created for the purpose. A series of decisions of the Supreme Court that these statutory and other authorities are 'State' within the meaning of Article 12 of the Constitution and, therfeore, subject to all the constraints to which the traditional State action is subject, have lent an entirely new dimension to the nature of State action and its legal consequences.
(11) The recent decision of the Supreme Court in the case of Bangalore Water Supply and Sewage Board vs. A. Rajjappa and others (9) which marks, for the present a culmination of the controversy with regard to the expression 'industry', which started with the decision of the Supreme Court in the 50s in the case of Bannerjee (10) has, while settling large number of controversies as to the definition of the expression 'industry' raised some pertinent questions, which may have wide impact on a number of constitutional concepts regarding State action as also throwing considerable further light on the decision of the question as to the construction of 'carries on business' in the context of the Union. It is not doubt true that the decision in the case of Bangalore Water Supply (supra) has been severely and, if I may say with respect, even harshly criticised in juristic circles and has provoked a sharp reaction, among others, by an eminent former Chief Justice of India, who observed in the course of a foreword to the recent edition of a commentary on Industrial Law by an outstanding author (II) that 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 popylistic 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 express sion 'industry'. Bangalore Water Supply, (however, holds the field and if the expression 'carries on business' in Section 20 of the Code could be legitimately construed in the light of the decision of the Supreme Court in the case of Hospital Majdoor Sabha (supra) a corresponding extension of the meaning in the context of the construction adopted in the case of Bangalore Water Supply, and in the light of recent juristic thinking could not be resisted. It may, thereforee, be appropriate to analyze the decision in that case in the context of the development of law from Bannerjee( supra) to Bangalore (supra) spanning a period of almost 30 years.
(12) The task of interpretation of the expression 'industry' from Banerjee (supra) in 1953 to Bangalore Water Supply and Sewage Board (supra) in 1978, proved an unhill task and has had a zig-zag course in spite of the fact that the expression had been legislatively defined. The examination of the question quite naturally produced considerable judicial conflict in the highest court representing not only the difference of opinion but even of basic approach both to the question of interpretation and the development of industrial jurisprudence. The conflicting decisions, to an extent represented different phases of the development of the law. The case of Banerjee (supra) involved a local body. Chandrasekhara Aiyar, J, who spoke for the Court, expressed the view that, what the common man did not consider as 'industry' need not necessarily stand excluded from the statutory definition of the expression, and that merely because the employer was a government department or a local body, the enterprise did not cease to be an 'industry'. It was observed that an undertaking or a service would still remain within the ambit of what was understood by the expression 'industry', though it is carried on with the aid of taxation, and no immediate material gain by way of profit is envisaged'. The learned Judge concluded by holding that industries will cover branches of work that could be said to be analogous to the carrying out of a trade or business. The further question whether disputes arising in relation to purely administrative work fell within the expression was, however, left open. Banerjee was followed in quick succession by two landmark cases of the Corporation of the City of Nagpur (supra) and the State of Bombay vs. The Hospital Mazdoor Sabha (supra) both the decisions were rendered by the same Bench within a few days of each other. In the case of Nagpur Municipality, the Court spoke 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 hospitals runs by Government and Gajendragadkar, J, who spoke for the court, observed that it was the character of the activity which decided the question as to whether the activity was within the Section ; who conducted the activity and whether it is conducted for profit or did not make a material difference. It was further observed that a line would have to be drawn in a fair and just manner so as to exclude some callings, services or undertakings and that it could not be sub- gested that in its wide sweep, the word 'service' was intended to include service, however ran erad, in whatsoever capacity and for whatsoever reason.
(13) In a series of cases that followed in quick succession a narrower construction was sought to be placed on the expression 'industry' so as to exclude from its scope certain classes of institutions, functions and profession to an extent which appeared to be inconsistent with the earlier decision of larger Benches. That is what led to the reference of the question to the largest Bench consisting of seven Hon'ble Judges in the case of Bangalore Water Supply (supra).
(14) In his leading judgment in the case of Rangalori? Water Supply Krishna Iyer, J, gave the widest possible construction to the expression 'industry' and laid down guidelines for the determination of a question if an activity was within the expression or not. This is how the learned Judge summed up the conclusion : '161. 'Industry', as defined in S. 2(j) and explained in Banerji : 4SCR302 has a wide import. (a) Where (i) systematic activity, (ii) organized by co-operation between employer and employee (the direct and substantial element is chimerical) (iii) for the production and or distribution of goods and services calculated to satisfy human wants and wishes (not spiritual or religious but inclusive of material things or services geared to celestial blise i.e. making on a large scale prasad or food) prima facie, there is an industry in that enterprise. (b) Absence of profit motive or gainful objective is irrelevant, be the venture in the public, joint, private or other sector. (c) The true focus is functional, and the decisive test is the nature of the activity with special emphasis on the employer-employee relations. (d) If the organization is a trade or business it does not cease to be one because of philanthrophy animating the undertaking. II. 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, cuits or inner sense of incongruity or outer sense of motivation for or resultant of the economic operations. The ideology of the Act being industrial peace, regulation and resolution of industrial dispute between employer and workmen, the range of this statutory ideology must inform the reach of the statutory definition. Nothing less, nothing more. (a) The consequences are (i) professions, (ii) clubs, (iii) educational institutions, (iv.) co-operative, (v) research institutes, (vi) charitable projects and (vii) other kindred adventures, if they fulfill the triple tests listed in I (supra) cannot be exempted from the scope of Section 2(j)(b) a restricted category of professions, clubs, cooperatives and even gurukulas and little research labs, may qualify for exemption if, in simple ventures, substantially and, going by the dominant nature criterion, substantively. no employees are entertained but in minimal matters, marginal employees are hired without destroying the non-employee character of the unit. (c) If, in a pious or altruistic mission many employ themselves, free or for small honoraria or like return, mainly drawn by sharing in the purpose or cause, such as lawyers volunteering to run a free legal services clinic or doctors serving in their spare hours in a free medical centre or ashramites working at the bidding of the holiness, divinity or like central personality and the services are supplied free or at nominal cost and those who. serve are not engaged for remuneration or on the basis of master and servant relationship, then the institution is not an industry even if stray servants, manual or technical, are hired. Such eleemosynary or like undertakings alone are exempt not other generosity, compassion, developmental passion or project. IV. The dominant nature test : (a) Where a complex of activities some of which qualify for exemption, others not involves employees on the total undertaking, some of whom are not workman as in the University of Delhi case : (1963)IILLJ335SC or some departments are not productive of goods and services if isolated, even then, the predominant nature of the services and the integrated nature of the departments as explained in the Corporation of Nagpur (AIR I960 Sc 675} will be the true test. The whole undertaking will be industry although those who are not workmen by definition may not benefit by the status. (b) Notwithstanding the previous clauses, sovereign functions, strictly understood (alone) quality for. exemption, not the welfare activities or economic adventures 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)ILLJ241SC Gymkhana : (1967)IILLJ720SC Delhi University : (1963)IILLJ335SC Dhanrajgirji Hospital : (1975)IILLJ409SC and other rulings whose ratio runs counter to the principles enunciated above and Hospital Mazdoor Sabha : (1960)ILLJ251SC 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 disputes where government or a local authority or a public utility service may be involved and the policy of the Act rightly puts the government and the local bodies at par with private business. In the case of Corporation of City of Nagpur (supra), the Supreme Court observed a dichotomy between the regal and the non-regal functions of the State and observed that it could not have been in the contemplation of the Legislature to bring in the regal functions of the state within the definition of the expression 'industry'. To somewhat similar effect were the observations of the Supreme Court in the case of Hospital Mazdoor Sabha (supra). These regal functions were understood to mean 'legislative power, the administration of laws and the exercise of the judicial power', which are described as the 'inescapable and inalienable' functions of a constitutional government. The test of regal or non-regal functions of the State was. however, rejected by Hidaytulla, J. as the then was in Madras Gymkhana Club Employees Union (12) and it was observed that there was hardly any activity which private enterprise could not carry on. This is how the learned Judge in the later case of Safdarjung Hospital (13) held that Safdarjung Hospital was not an industry because it was run by the government. On the ratio of these two decisions, any activity carried on by government would be outside the expression 'industry' irrespective of. its nature. But in the case of Workmen of Indian Standard institution Vs Management of Indian Standard Institution (14) a majority of the three Judge Bench tilted to the Hospital Mazdoor Sabha case rather than the Safdarjung Hospital case and held that the institution, though run by the government, was 'industry'. In the case of Bangalore Water Supply (supra), Krishna lyer, J. while reviewing the earlier decisions, noticed, what Subba Rao, J. had said in the case of Nagpur Municipality as to the dichotomy between regal and non-regal activities of the State and gave expression to 'the inaptitude of relying on the doctrine of regal powers. That has reference, in this context to the Crown's liability in tort and has nothing to do with industrial law'. It was added that 'in the absence of such provision of law, it may indutitally by assumed that the key aspects of public administration like public justice stand out of the circle of industry', but hastened to add: 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 defiinition 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 out by using the term 'governmental functions', although there are difficulties here also inasmuch as the government has entered largely new fields of industry. thereforee, only those services which are governed by separate rules and constitutional, provisions such as Articles 310 and 311 should, strictly speaking, be excluded from the field of 'industry' by necessary implication'. Chandarchud, CJ., however, in his concurring opinion, expressed the view that there was no justification even for undertaken by the government in exercise of its inalienable junctions under the Constitution, cull it regal, sovereign or by any other name'
(16) If the expression, 'industry' and the other expres- sions used in the definition of the expression in Section 2(j) of the Industrial Disputes Act, may legitimately illumine the judicial path in determining the true meaning and import of the expression 'carries on business' in Section 20 of the Code, and we have the authority of the Supreme Court for this proposition, it is difficult to give a narrow construction to the expression 'carries on business'. On the contrary, there are good reasons why a still wider meaning should be given to the expression 'carries on business'. The limitation of employee-employer relationship, so obvious in the case of Industrial Disputes Act, is not a necessary condition of the application of the Code. The Code will regulate institution and trial of any suit so long as it is a suit of a civil nature us 9 of the Code. State action, whether of a regal or non-regal nature, may lead to disputes of a civil nature. The expression 'business' has very wide import and governments also conduct business even though it is the business of government. The Constitution itself envisages rules of business which the government may make for the proper conduct of its business. All State action is subject to judicial review even though a class of State actions may be subject to limited judicial review and in exceptional cases beyond such review. If Article 226 of the Constitution confers powers on the High Court to issue writs to government which functions within its territorial limits, the position could not be different under the Code irrespective of what other test may . determine the jurisdiction of a Court. The Union could. thereforee, be legitimately understood as carrving on business when it performs its functions 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 culimating 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 Union was carrying on business within the meaning of Section 20 Civil Procedure Code when it performs its various functions, whether regal or otherwise. The larger question. however, does not arise before me and I need not thereforee widen the scope of consideration of the question that falls for decision in the present proceedings. The dispute in the present case arose out of a contract entered into with the Union in relation to the expansion of an ordnance factory and the construction of a building for the purpose. Construction of a building and manufacture of arms and ammunition could not be said to be part of the traditional regal functions of the State and are obviously activities which would amount to carrying on business when done by private sector. even if one applied the doctrine of regal functions for the determination of the question. If that be so, the Union could certainly be said to be carrying on business in relation to the ordnance factories if the manufacture of arms and ammu- nition is an activity which is analogous to carrying on business, so is the construction of a building in the course of or for the purpose of the said business.
(18) If the expression 'carries on business' be thereforee, appropriate to the non-regal functions of the Union and if the activity with which we are concerned in the present case be within the expression the only other question that would require consideration is if the Union could be said to be carrying on that business at the place which is the seat of the Central Government. True, the factory in question was situated in Moradabad and that is where the process of manufacture as indeed, the expansion and the process of modemisatic could be said to be going on. But the Union nevertheless exercises control over the various activities from the cost of power at the Centre and as in the case of a corporate body, its location is the place where the brain or the decision making apparatus resides, the Central authority of the Central Government is the pivotal point of control. That is from where it exercises control and authority. A legislative indication of this is to be found in Section 80 of the Code of Civil Procedure when it requires that a notice in case of Union may be served at the office of a Secretary to Government. To an extent, control may be exercised by the local authority in exercise of delegated power at the 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, thereforee, 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 and the cause of action, forming subject-matter of the suit. What gives the Court the necessary jurisdiction is the fact that the defendant carries on business within jurisdiction. There is no further requirement of any nexus between the business being carried on and the business or the activity out of which the cause of action has arisen. Such a nexus may, however, if at all, be necessary in relation to a subsidiary place of business of a defendant, if the case falls within the terms of the Explanationn to Section 20 as in the case of a Corporation and in such a case, both the conditions of the location of the subordinate office and the status of the cause of action must co-exist. We are, however, not concerned in the present case, with any subsidiary place of business and it is unnecessary, thereforee, to consider this aspect of the matter in the present proceedings.
(20) The aforesaid conclusion appears to be reinforced when the problem is approached from the angle of the well-known doctrine of immunity of Crown from action for damages in its courts. The doctrine is based on the common law principle that the King commits no wrong and that he could not be guilty of any negligence and 'misconduct and as such was not responsible for the negligence or misconduct of his servants. An attribute of sovereignty is that State could not be sued in its own courts without its consent. This doctrine of immunity of the Crown was incorporated in Section 65 of the Government of India Act, 1858, and was continued by the constitutional acts that followed. Section 32 of the Government of India Act, 1915 and Section 176 of the Government of India Act, 1935 are the corresponding provisions. Article 300 of the Constitution of India is the post-independence counterpart of these provisions. This is how section 65 of the Government of India Act 1858 reads:
'THESecretary of State in Council shall and may sue and be sued as well in India as in England by the name of the Secretary of State in Council as a Body corporate; and all Persons and Bodies Politic shall and may have and take the same suits. Remedies, and Proceedings., legal and equitable against the Secretary of State in Council of India as they could have done against the said Company; and the Property and effects hereby vested in her Majesty for the purposed, of the Government of India acquired for the said purposes 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 decision of the then Chief Justice Peacock and has since been followed in all subsequent decisions, with the exception of one dissent and has since been approved by the Supreme Court of India. The claim in that case was based on the injury caused to horses on the highway by the negligent act of the servants of the Government who had been employed in the Government Dockyard in Kidderpur. The question was referred to the Supreme Court at Calcutta and the Supreme Court ruled that the Secretary of State in Council of India would be liable for damages occasioned by the negligence of the servants in the service of the Government, if the negligence was such as would render an ordinary employer liable. In the case of Director of Rationing and Distribution (16), the Supreme Court was called upon to consider the extent to which the English common law rule that Crown was not bound by any statute was applicable to India after the Constitution. It was held by majority that the rule of interpretation of statutes that State was not bound by the statute unless it is so provided in express terms or by necessary implication was still good law as that was the law applicable in India until the advent of the Constitution and its operation was continued by Article 372 of the Constitution. Wanchoo, J. as he then was, held to the contrary and observed that proper rule of construction after the enforcement of the Constitution was that the State in India, whether in the Centre or in the State, was bound by law unless there is an express exemption in favor of the state or an exemption could be inferred by necessary implication.
(22) In the case of State of Rajasthan (J7) the Supreme Court pointed out that function of the welfare State which has been established under the Constitution are not confined only to maintaining law and order, but extend to engaging in all activities including industry, public transport, state trading, etc. and that so far as powers of the State as employer in public sector are concerned, it was too much to claim that State should be immune from the consequences of the tortious act of its employees committed in the course of their employment as such. It was further pointed out that when the rule of immunity in favor of the Crown based on common law in United Kingdom had disappeared from the land of its birth, there was no legal warrant for holding that it has any validity in this country, particularly after the Constitution and thereforee, 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 Calcuttta 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 Government, the enquiry had to be. could such a suit be filed against a corresponding constitutional authority if the Constitution had not been passed. It was also observed that when no law has been passed by the Parliament under Article 300 of the Constitution of India to make a departure from the existing law, prevalent before the Constitution of India. the liability of the Government concerned would be the same as the pre-existing liability. It was held that there was a material distinction between the acts committed by the servants employed by the State where such acts are referable to the exercise of sovereign, powers delegated to public servants and acts committed by public servants which arc not referable to the delegation of any sovereign powers. If a tortious act was committed by a public servant and it gives rise to a claim for damages, the question to ask would be : was the tortious act committed by the public servant in the dies charge of statutory function which are referable to and ultimately based on the delegation of sovereign powers of the State to such public servant and if the answer was in the affirmative, the action for damages for loss will not lie but if the act had been committed by a public servant in the discharge of duty assigned to him not by virtue of delegation of any sovereign power, an action for damages would lie. The Supreme Court quoted with approval the decision of the Supreme Court at Calcutta, referred to above. The Court emphasised the significance and importance of the distinction particularly when in pursuit of the welfare ideals, the Government, both at the Centre and in the State 'naturally and legitimately enter into many commercial and other undertakings and activities which have no relation with the traditional concept of governmental activities in which the exercise of sovereign power is involved.' It was further observed that it was necessary to limit the areas of affairs of the State in relation to the exercise of sovereign power 'so that if acts are committed by Government employees in relation to other activities which may be conveniently described as non-governmental or non-sovereign, citizens, who have cause of a action for damages,could not be precluded from making their claim against the State. This is the basis on which the area of the State immunity must be limited. The decision of the Court in the earner 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 statem 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 doctrina of separation of powers embodied in the Constitution of India. The result is that this area of immunity continues to constitutes an acronistic 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 entitles capable of being sued in relation to their respective 'affairs' and secondly that such suits could extend to all matters and all cases in which the dominion of India and corresponding provinces and corresponding Indian State might have been sued, if the Constitution had not been enacted. The area of immunity which has been recognised, even though reluctantly, is limited to the class of cases arising out of liability in tort for damages with the result that the Union could be sued in relation to all the other affairs in the courts of the country thereby pointing to the irresistible conclusion that if the Union could be sued in relation to all the affairs that it conducts such suits could be filed, inter alia, where such affairs are conducted at the seat of the Central Govt. irrespective of what other places it could be deemed to be conducting its affairs.
(25) Counsel for the Union sought to rely on the decision of a Division Bench of this Court in the case of Binani Bros vs. Union of India (19) the Division Bench was persuaded to hold that the expression 'carries on business' did not refer to functions carried on by the Union in discharge of its executive power conferred by Article 298 of the Constitution of India. This decision appears to be in direct conflict with the decision of the Supreme Court in the case of Union vs. Ladu Lal Jain (supra) which was also noticed by the Division Bench and apparently for that reason, the Division Bench held that there was nothing 'in the record to show that the Director of Supplies and Disposals. New Delhi carried on business at Delhi'. This case thereforee, could not be said to have laid down any general proposition of law. But for the clear decision of the Supreme Court on the question in the case of Ladu Lal Jain, as indeed, in several other cases referred to above, I would have sought a reference of the question to a larger Bench, which, in the circumstances, appears to be unnecessary.
(26) It is, however, necessary to point out that even though both the principle and the precedents irresistibly point to the conclusion that the expression 'carries on business' is of sufficiently with amplitude to cover the activities of the Union except perhaps in the exceptional category of exempted cases, there is no doubt that in working out Section 20 in relation to the Union, the State or other statutory authorities, 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 proceedings. O.K..?. Issue regarding jurisdication answered in the affirmative. (!) Shn Ram Rattan Bhartia vs. Food Corporation of India and another, : AIR1978Delhi183 . Union of India and another vs. Sri Ladulal Jain. : 3SCR624 . Rolls vs. Miller (1884) 27 Ch. D. 71, Ca, per Lindley. L.J. p. 88. (4) Halsbury : Laws of England, Fourth Edn. Vol. 10, Pages 106-108 at pages 66-67. (5) The State of Bombay & Ors. vs. The Hospital Mazdoor Sabha & Ors. : (1960)ILLJ251SC . The Corporation of the City of Nagpur vs. Its employees. : (1960)ILLJ523SC . Satya Narain Singh vs. District Engineer, P.W.D., Ballia : AIR1962SC1161 . Director of Rationing and Distribution vs The Corporation of Calcutta & Ors. : 1960CriLJ1684 . Bangalore Water Supply & Sewerage Board vs. A. Rajappa & ors. : (1978)ILLJ349SC . D. N. Banerji vs. P.R. Mukherjee : 4SCR302 The Law of Industrial Disputes, 3rd Edn by O.P. Malhotra. (12) Madras Gymkhana Club Employees Union vs. The Management of the Gymkhana Club. : (1967)IILLJ720SC . The Management of Safdar Jung Hospital vs. Kuldip Singh Sethi : (1970)IILLJ266SC . The Workmen of Indian Standard Institution vs. the Management of Indian Standard Institution : (1976)ILLJ33SC . Penninsula Oriental Steam Navigation Company vs. Secretary of State in Council of India 5 Bombay H.C.R., Appa. 1. Boorke Aoc 116. (16) See No. (8) above. (17) State of Rajasthan vs. Mst Vidhyawati and another. : AIR1962SC933 . MI'S. Kasturi Lal Balia Ram Jain vs. The State of Uttar Pradesh, Air 1962 S.C. 1039 Binani Bros. (P) Ltd, vs. Union of India. .