1. This is an appeal from a judgment and decree of G. K. Mitter, J., dismissing the plaintiffs suit for recovery of a sum of Rs. 25,547/6/- as compensation for non-delivery of certain goods entrusted to the then East Indian Railway, which was a State Railway. It appears that the appellant, which is a partnership firm and carries on business at 59. Cross Street, Calcutta and also at Chandari and Kanpur, delivered to the then East Indian Railway on 26th February, 1949 a consignment of artificial silk goods for carriage from Chandari Station to Howrah Station both on the East Indian Railway. The East Indian Railway at all material times had its head office at No. 17 Netaji Subhas Road, Calcutta. As the goods were not delivered to the appellant the Tatter after giving notice under Section 77 of the Indian Railways Act and Section 80 of the Code of Civil Procedure filed a suit in this Court on 14th July, 1950. No leave under Clause 12 of the Letters Patent was however, obtained before institution of the suit. The learned trial Judge has dismissed the suit on the preliminary ground that this court has no Jurisdiction to entertain the suit.
2. The only question which arises for determination in this appeal is whether this court has jurisdiction under Clause 12 of the Letters Patent to entertain the suit solely on the ground that the Union of India, as owner of the Railway, can be said to be carrying on business at the Head Office of the Railway which, it has already been stated, is at 17, Netaji Subhas Road, Calcutta, which is within the ordinary original civil jurisdiction of this Court. This question has been the subject of determination in various cases decided by the different High Courts. Mr. I. P. Mukherjee, the learned counsel for the appellant, has taken us through a large number of decisions to persuade us to hold that the view previously expressed by this Court, to the effect that the government by carrying on an undertaking like the Railway cannot be said to be carrying on business within the meaning of Section 20 of the Code of Civil Procedure or Clause 12 of the Letters Patent, is not correct and requires modification due to a change in the conception of the State brought about by the Constitution of India, which envisages a welfare State, The cases cited by the learned counsel are Shiels v. Great-Northern RIy., Co. Ltd., (1861) 30 LJQB 331; Brown v. London and North Western Ry. Co., (1863) 122 ER 481, Subbaraya Mudali v. Government, 1 Mad HCR 286 at p. 291; Rundle v. Secy. of State, 1 Hyde 37 at pp. 40-41; Biprodas Dey v. Secy, of State, ILR 14 Cal 262 (FN); Doyanarayan Tewari v. Secy, of State, ILR 14 Cal 256 at pp. 272-273; Rodricks v. Secy, of State, ILR 40 Cal 308; Govinda Rajalu Naidu v. Secy, of State, ILR 50 Mad 449: (AIR 1927 Mad 689); R. J. Wyllie and Co. v. Secy, of State, AIR 1930 Lah 818; Golabrai Paliram v. Secy, of State, ILR (1941) 2 Cal 160; Dominion of India v. Jagadish Prosad, 84 Cal LJ 175: (AIR 1949 Cal 622); Nilima Sarkar v. Governor General in Council, 86 Cal LJ 98; Dominion of India v. Nath and Co., Khulna, : AIR1950Cal207 ; Nagi Bros. v. Dominion of India, AIR 1951 Punj 92; Calcutta Motor Cycle Co. v. Union of India, : AIR1953Cal1 ; Bata Shoe Co. Ltd. v. Union of India, : AIR1954Bom129 ; Lakshmi Chand v. State of Punjab, ; Azizuddin and Co. v. Union of India, (S) : AIR1955Mad345 ; Corporation of Calcutta v. Director of Rationing and Distribution, (S) : AIR1955Cal282 ; Achut Anant Pai v. Governor General in Council, (S) : AIR1955Cal331 ; P. C. Biswas v. Union of India, AIR 1956 Assam 85; Bhuramal Champalal v. Union of India, 1958-1 Cal LJ 67 and Trilok Chand Agarwall v. Dominion of India, : AIR1959Cal281 .
3. In the case reported in : AIR1953Cal1 , my learned brother exhaustively dealt with the' relevant cases on the point and after considering the question from all conceivable angles recorded the following conclusion at p. 48 of that report (Cal LJ): (at p. 9 of AIR):
'By carrying on a business the State itself does not become a business concern. By carrying on an undertaking like the railways the State itself does not become a railway corporation. The State is not an arithmetical or mechanical conglomeration of functions so that by undertaking a venture of commercial nature it is to be regarded as a commercial institution. I cannot persuade myself to accept the idea that the State in India is to be regarded as a trading Corporation. It is quite true that one of its functions or even one of its duties in the welfare State might be to carry on an undertaking which formerly at any rate could only have been a private commercial enterprise. But does that mean that the State ''carries on business' within the meaning and intention of Clause 12 of the Letters Patent? I have given my most anxious and careful consideration to the problem and I have come to this conclusion that this is not what was intended by Clause 12 of the Letters Patent.'
4. This view has been accepted as correct by the Bombay and Madras High Courts in : AIR1954Bom129 and : AIR1955Mad345 , and has been followed uniformly by this Court in subsequent decisions. The sheet anchor of Mr. I.P. Mukherjee's contention is the decision of the Assam High Court to which reference has already been made, AIR 1956 Assam 85, and which came to a conclusion contrary to what has been held by my learned brother. Ram Labhaya J. observed, inter alia that:
'Government is not merely for administrative purposes, for maintenance of law and order, for doing justice and providing security but also for promoting the welfare of its people by engaging in trade and industry. The two functions of the Government have to be kept apart and if they are seen separately there is no difficulty in applying Section 20 of the Code of Civil Procedure to the Union of India. It may not be said to reside in any particular place nor may it be said that it is carrying on business for personal gain or profit. But it does carry on business. Therefore, it would be wholly unrealistic to say that the Government is not carrying on business when it is providing, transport of all descriptions in a country, so vast as India.'
5. It may be pointed out that the decision of my learned brother does not at all overlook this aspect of the matter. He was fully alive to it and after a very illuminating discussion of this matter and after a very thoughtful analysis of the various cases, he came to the conclusion, which I have already quoted. As I have also pointed out already, this view of my learned brother has found favour with the other High Courts and it is only this decision of the Assam High Court which has struck a different note, but it appears to us that there is nothing new in this decision or in the argument of Mr. I.P. Mukherjee which can induce us to take a different view. Before concluding this judgment, I may refer to an observation made by B.K. Mukherjea J. in the case of Saghir Ahmed v. State of U.P., : 1SCR707 , which is as follows:
'In our opinion, the argument of Mr. Pathak that the State ceases to function as a State as soon, as it engages itself in a trade like ordinary trader, cannot be accepted as a sound proposition of law under the Constitution of India at the present day.'
6. Although this was a case in which the provisions of Article 14 of the Constitution and the provisions of the U.P. State Road Transport Act; came up for consideration, the observation quoted above is pertinent to the question at issue and provides an effective answer to the contention which has been put forward on behalf of the appellant.
7. In our view there is no substance in this appeal and it must accordingly be dismissed with costs.
8. Certified for two counsel.
P.B. Mukharji, J.
9. I agree.
10. Clause 12 of Queen Victoria's Letters Patent of 28th December, 1865, for this Court, still exhibits surprising vitality. It is not a dead horse even after riding it for nearly a century. It is still running new races on unpredictable tracks or even old races with undiminished vigour. Kabul campaigns have come and gone, their sound and fury stilled, but the cases on this Clause of the Letters Patent on the aftermath of Kabul campaign like ILR 14 Cal 262 (F. N.) and ILR 14 Cal 256, continue to resound in the halls of this Court.
11. In this appeal, we are asked to reconsider the old familiar question whether the State or the Government can be said to be a defendant carrying on business within the meaning of Clause 12 of the Letters Patent of 1865, in which year States perhaps did not carry on business at all and certainly not on the scale and in the manner and in the fields that they do now.
12. The point came up for consideration before me in the case of : AIR1953Cal1 , where, after considering the different aspects of the controversy, and a review of all relevant authorities then existing, I came to the conclusion that the State or the Government could not be said to be carrying on business within the meaning of Clause 12 of the Letters Patent.
13. Mr. I.P. Mukherji, the learned counsel for the appellant, who very ably canvassed his point of view, has not however argued any point which I had not noticed, discussed and determined in the Calcutta Motor Cycle case, : AIR1953Cal1 , I, therefore, see no reason to come to any different conclusion that the one that I reached in : AIR1953Cal1 .
14. My attention, however, has been drawn to the subsequent decision of the Assam High Court reported in AIR 1956 Assam 85, a decision of a Division Bench of Sarjoo Prosad C. J. and Ram Labhaya, J. on Section 20 of the Civil Procedure Code. The judgment in the Assam case was given by Ram Labhaya J. At p. 93 of that report, the learned Judge says:
'The State may not be converted into a business concern by carrying on business. It still remains a State. It has got its governmental activity or business which is distinguishable from commercial business. But it has a legal entity and if in addition to ordinary governmental functions of the police State it takes on itself the duty or the obligation of starting commercial ventures, there should be no difficulty in law in holding that the State is carrying on business of a commercial nature.
I find it difficult to hold that even commercial ventures of the Government assume the colour of its ordinary administrative or governmental functions. In its commercial undertakings the Government is entering into contracts with the citizen. These contracts are governed by the ordinary law of the land and they are enforceable between the parties. The Government has got no privileged position in regard to these contracts nor can it have any privileged position for purposes of Clause 12 of the Letters Patent or Section 20, Civil P.C. unless the law lays down expressly that these provisions or parts of these provisions have no application to business undertakings of the Government.
To say that the Government is not carrying on business for purpose of Section 20, Civil P. C. or Clause 12 of the Letters Patent, even when actually it is engaged in the business of transport is to introduce a legal fiction into the law. Tbe legislature has the power to do so. But the Courts may not exercise that privilege. For, introducing a fiction involves reading something into the law which is not there. In fact the words 'carries on business' in Section 20 would lose their meaning if they are not applied merely because the defendant happens to be the Government.
The change in the conception of the Government which the Constitution has introduced creates no difficulty. On the contrary it facilitates their application. It brings out into bold relief the situation that Government is not merely for administrative purposes, for maintenance of law and order, for doing justice and providing security but also for promoting the welfare of its people by engaging in trade and industry. The two functions of the Government have to be kept apart and if we see them separately there is no difficulty in applying the provision of Section 20, Civil P. C., to the Union of India. It may not be said to reside in any particular place, nor may it be said that it is carrying on business for personal gain or profit. But it does carry on business.'
15. I have dealt with and discussed each one of the above reasons in my decision In : AIR1953Cal1 to say that I do not with respect consider the reasons to be sound. The Assam High Court did not consider either the Division Bench decision of the Bombay High Court of Gajendragadkar and Vyas JJ. in : AIR1954Bom129 or the Division Bench decision, of the Madras High Court of Rajmannar C. J. and lyengar J. in : AIR1955Mad345 , both of which followed and adopted my decision in : AIR1953Cal1 . Nor do I find that the Assam High Court discussed or noticed the decision of Kapur J. in AIR 1951 Punj 92. Kapur J. in the last mentioned case came to the conclusion that the Dominion of India, now the Union of India, could not be brought within the definition of the phrase 'carry on business or personally work for gain in India' while construing that expression in Section 4 of the Displaced Persons (Institution of Suits), Act, 1948. On the same Act but on the concept of State carrying on business a Division Bench of this Court in : AIR1959Cal281 , a Bench of which I was a member, decided at pp. 283-6 that the State could not be said to carry on business.
16. Gajendragadkar T., in the case of : AIR1954Bom129 , after considering at page 131, the different meanings and connotations or the word 'business' observed:
'But we are disposed to hold that the context in which the word has been used in Section 18(b), Presidency Small Cause Courts Act, Section 20, Civil P. C. and Clause 12 of the Letters Patent, requires that this word should not be construed in such a wide and unrestricted sense.
It is well known that the Union of India and the Governments of respective States in India have set before themselves the ideal of a Welfare State and for achieving this ideal Governments have inevitably to carry on many undertakings which in the hands of private agencies partake of the character of commerce or trade. If a private person starts a hospital for patients, it may, in a sense, be business in his hands, because the primary object of the private individual is to make a profit. But if the State starts hospitals to render service to the invalid and the sick, the dominant intention is to render social service and the motive of profit-making is totally absent. If a merchant conducts a grain-shop, it is a business. But if the State undertakes the supply of essential foodstuffs to its citizens to enforce its policy of controls, that is not business.
It seems to us that activities or undertakings which may properly be treated as commercial in the hands of private agencies would not necessarily continue to partake of the same character when they are undertaken by the Government of the State in pursuit of its welfare policies. In our opinion, therefore, the fact that the running of the Railway would have been treated as a business in the hands of the Railway Company would not necessarily show that it is business when it is undertaken by the Government of the State. Indeed, in regard to the running of the Railway itself as such, it is possible to take the view that it forms an important part of the governance of the State. The State naturally requires the lines of transport to be kept in order, both for the purpose of keeping internal peace and for the purpose of defending the borders of the country in case of emergency.
It is true that in normal times and in an ordinary way the Railways bring income to the State. But it is difficult to hold that the Railway has been nationalised by the State for the purpose of making income or profit. The running of this railway may, and indeed does, bring profit; but such profit goes to the Public Exchequer; and that makes a material difference. That is why nationalisation is often described as socialisation. In a sense, many of the essential services which the State undertakes to render in modern times could easily be converted into business in the hands of private agencies. But it would be difficult to describe these activities as business when they are carried on by the Government of the State for the benefit of its citizens.'
17. I respectfully agree with these observations of Gajendragadkar J. and if I have quoted His Lordship at great length that is because I find the above observations as completely answering the line of reasoning of Ram Labhaya J. in AIR 1956 Assam 85.
18. Indeed it is precisely this difficulty which led me to observe in : AIR1953Cal1 :
'Railway is said to provide, and rightly so, a form of public transport on which the welfare of the nation depends on a very large measure. Providing public transport in that sense therefore, can also be considered as providing a kind of public service which is part of good administration and good government of a country. The question here is not one of mere degree but of changing notions of quality of the State. With the developing ideas of the functions, powers and duties in a welfare State, it is I consider, difficult and perhaps subtle, to draw the line where administration ends and business begins or where administration begins and business ends. It appears to be a variable line which is bound to shift from time to time and relative in its concept with reference both to the time and society that the State has to serve. What was, therefore, in a police State of the nineteenth century a clear-cut notion and simplified formula, of broad distinction between governmental and non-governmental functions as providing a workable test to determine the liability of the State, requires in the contemporary world, to be moulded in its application to fit in with a service State or a Welfare State.'
19. I am, therefore, unable to accept the correctness of the observations of Labhaya J. in AIR 1956 Assam 85 and respectfully dissent from the view expressed therein.
20. Mr. Mukherjee, the learned counsel forthe appellant, relied on two English decisions of(1861) 30 LJQB 331 and (1863) 4 B and Section 326.The latter case did not find favour with the Division Bench of the Bombay High Court whereGajendragadkar J. considered that English authority.
21. These two English cases are clearly distinguishable on the ground that there it was not a State or Government but a private company which certainly carried on business. That a private company or corporation can carry on business within the meaning of Clause 12 of the Letters Patent is too well settled to permit re-agitation. The point here is, whether a State or Government can be said fo cany on business within the meaning of that Clause. Secondly, these two English decisions proceed on the principle that in respect of a private company or corporation, the words, 'carry on business,' must be given a sensible meaning and, in doing so, seem to emphasise the jurisdiction of the Court of that place where the head office is or where the control is. To apply that test in the case of a State or Government' will again be an attempt to revive the old 'brain power theory' under the garb of the 'head office theory.' I have already given my detailed reasons in the Calcutta Motor Cycle Company's case : AIR1953Cal1 why that theory cannot he accepted and applied to a State. I adhere to those reasons and have nothing further to add on this point.
22. I am, therefore, of opinion that those two English cases cannot and do not lead to any different conclusion and that they cannot induce us to hold that in the case of a State or Government it could be said to carry on business within the meaning of Clause 12 of the Letters Patent.
23. This Court therefore continues to holdthat the State does not ''carry on business' withinClause 12 of this Court's Letters Patent of 1865.