1989 PLP 1277 (MLD)

2. Learned counsel for the appellant has contended that the view taken in Binani Bros. case is not correct. Having given our anxious consideration to the submission urged on behalf of the appellant, and having perused carefully the judgment in Binani Bros. case, we arc of the view that the Delhi High Court was perfectly justified in reaching this conclusion. We do not propose to reiterate the same reasoning in our own words, more so as Delhi High Court has discussed the matter in an admirable manner and the reasoning which has appealed to the High Court is unexceptionable. Under the circumstance we can do no better than to quote from the judgment of the Delhi High Court the relevant passages:- '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 S.20 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 Art.298 of the Constitution. While Art.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, therefore, cannot be said to be personally working for gain within the meaning of S.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 ors 4th May, 1971; relying on R.J. Wyllie and Co. v. Secy. of State; AIR 1930 Lah. 818 Dominion of India v. R.C.K.C. Nath and Co. Khulna, AIR 1950 Cal. 207 and Azizuddin and Company v. Union of India: AIR 1955 Mad. 345 has taken the same view. Reference in this connection may aim) be made to the observations in Badrinarayan v. Excise Commissioner Hyderabad. AIR 1902 Andh. Pra. 383 with which we respectfully agree in so far as they go in tclation to suits other than suits against Railway. On page 383 of the report, the Bench observed: "Section 20, C.P.C. has in contemplation people 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 `ahkari' contractor for certain villages in the District of Nalgonda. A penalty of Rs 9,707/8 was imposed on him by the Excise Superintondent for the alleged tapping of 145, toddy and 500 Sindhi trees without paving the excise duty. After he failed in his appeal to the Collector and the Excise Commissioner and his representation to the Minister, he filed a suit at Hyderabad impugning the levy of penalty as ultra vires, illegal and void. It was urged that as the Government enjoyed monopoly in regard to `akbar' business it should be deemed to be carrying on business within the sweep of S.20, C.P.C. 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. Therefore, the concept of carrying on business cannot be imported into activities of this description." Shri G.R. Chopra, placed strong reliance on Union of India v. Ladulal Jain, AIR 1963 SC 1681. This appeal arose out of a suit filed against the Railway for non-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 Government' 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 railways 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 headquarters 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 and Distribution v. Corporation of Calcutta, AIR 1960 SC 1355. In this case at the instance of the Corporation of Calcutta, summons under 5.488 of Bengal Act III 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 licence. 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 Stage as recognised by Art.300 of the Constitution was a legal person and was capable of having rights and yeas subject no obligations, and therefore, 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 equally with the other citizens. On page 1361) the Court said: "The question was not raised below and hits 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 indicatiorn to the contrary. apparently this Department of the Government was discharging the elementary duty of a sovereign to ensured proper and equitable distribution of available foodstuffs with a view to maintaining peace and good government." This case was specifically noticed in Union of India v. Ladulal Jain, AIR 1963 SC 1081 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 cited case, therefore, to he laying down the rule that the Courts al 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".

3. We are in full agreement with the reasoning and conclusion of the Delhi High Court reflected in the aforesaid passages. Learned counsel for the appellant has urged-thal the Delhi High Court has not properly appreciated the ratio of the decision of this Court in Union of India v. Ladu Lai Jain, (1964) 3 SCR 624: (AIR 1963 SC 1681). We are unable to accede to this argument. We concur with the view of the High Court that the decision in Ladu Lai Join's is inapplicable in the backdrop of the facts of the present matter. In Ladu Lal Jain's case the Court was concerned with the activity carried on by the Railway Administration which was held to be "business" activity. The Supreme Court has drawn distinction between the commercial activities of the State on the one hand and the discharge of the sovereign functions of the State on the other. The decision in that matter has been rendered in the context of business activity carried on by the Union of India namely running of the Railways and not in the context of a sovereign activity carried on by the Union of India. In the present case the contract pertained to construction of an ordnance factory for the Military Engineer in, Services of the Armed Forces (Modernisation and augmentation of the ordinance factory). Maintaining the armed forces is part of the sovereign activity of the State. It its an activity which is undertaken by the Central Government for ensuring the security of India which is a sovereign function of the State. It is spacious to contend that it is a business activity' with an eye on profits. Under the circumstances the view taken by the Delhi High Court cannot be taken exception to. The appeal must accordingly fail. It will be open to the appellant to institute a fresh petition for making the award a rule of the Court in an appropriate Court in Uttar Pradesh within ninety days from today. In case such an application is instituted it will be having been instituted within time. The appeal is disposed of There will be no order regarding costs. M.B.A./99/F.C. ????????????????????????????????????????????????????????????????????????????????? Appeal dismissed.