P L D 1969 Lahore 453 (PLP)

MUHAMMAD AKRAM, J.‑--This will dispose of the following question referred to us in the Division Bench "Are the words `the defendant .carries on business in section 20, of the Code of Civil Procedures 1908 applicable to the Government if a suit is brought against it in relation to its commercial activities and for that purpose can it be said that like a corporation the Government shall be deemed to carry on business at its principal office irrespective of the place where the‑part or the whole of the cause of action; accrued to the plaintiff ?" In other words can it be said that in the case of the Government, it `carries on business', at its principal seat of office, within the meanings of this section and it can be sued in a Court having territorial jurisdiction at that place, although the cause of action, either wholly or in part, may have arisen at another place.

2. Briefly, the facts in this case are that the appellant had entered into an agreement to construct the Anatomy and Physio logy Block in the Nishtar Medical College and Hospital at Multan for the Government of West Pakistan. In course of time disputes and differences arose between the parties to the contract in connection with this work and they submitted to the arbitration by the Superintending Engineer of the First Circle, Rawalpindi, in the matter. However, on 16‑5‑1959, the appellant filed an. application against the Province of West Pakistan and otherwise, in the Court of Ch. Abdul Rehman P. C. S., Civil Judge 1st Class at Lahore, under section 11 of the Arbitration Act, 1940, read with section 151, C. P. C. for the removal of the arbitrator. The respondents resisted the appli cation and, inter alia, raised the preliminary objection challenging the territorial jurisdiction of the Civil Court at Lahore to entertain it. On 10‑3‑1960, the trial Court upheld this objection and returned the application to the applicant for presentation to the proper Court.

3. Dissatisfied with this order dated 10‑3‑1960, the petitioner -appellant has filed this appeal against it. At first it was put up before me in Single Bench. Under section 31(3) of the Arbitration Act, 1940 all applications regarding the conduct of arbitration proceedings or otherwise arising out of such proceed ings are to be made to the Court having jurisdiction in the matter to which the reference relates. Therefore, the question as to territorial jurisdiction of a Court in these matters has to be decided with reference to the relevant provisions in the Code of Civil Procedure. On going through the facts of this case, I was of the opinion that the contract for this work was made at Multan, the work in question was executed at Multan and no part of the cause of action had arisen at Lahore. Nevertheless a very strong reliance was placed before me on behalf of the appellant on section 20 of the Code to contend that in relation to this contract for the work executed for the West Pakistan province, it must be deemed to be "carrying on its business" at its principal place of business and seat of the Government at Lahore within the meanings of `section 20 'of the Code and as such the application in question filed by the petitioner against the respondent was competent at Lahore. In this connection the learned counsel for the appellant had relied on Federation of Pakistan v. The Co operative Insurance Society of Pakistan Ltd., Lahore (P L D 1956 Lah. 878) which supports his contention. In that case a learned Single Judge of the Lahore High Court has held that "Section 20(a), however, provides that the defendant can be sued in a Court within the local limits of whose jurisdiction the defendant resides or carries on business etc. Surely the defendant is carrying on business through its railway departments and the head‑office of the railway department is in Lahore. The suit is on the basis of the commercial activities of the State and not on the basis of its executive activities. The Chief Officer of the railway department is the general manager who has his office in Lahore . . . . . Under the circumstances, there is not the least doubt in my mind that the defendant carries on business in Lahore in connection with its railway departments and as such the Court at Lahore had jurisdiction to try the suits."

4. I had my own doubts about this interpretation placed on section 20 of the Code. Moreover, this view appeared to me to be contrary to the pre-ponderence of the judicial opinion in the Indo‑Pakistan Sub‑Continent. Therefore, by my detailed order dated 15‑2‑1965, I decided to forward this case to my Lord; the Chief Justice, with a request for referring the above question formulated by me, to a larger Bench for an authoritative pronouncement in the matter. Accordingly, this Bench was constituted to hear and answer this reference.

5. Under section 20 of the Code of Civil Procedure a suit can be brought in a Court within the local limits of whose juris diction the cause of action has arisen, or the defendant actually or voluntarily resides, or carries on business or personally works for gain. This section is as under:‑‑ "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, at 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 defendants, where there are more than one, at the time of the commencement of the suit, actually and volun tarily 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, as aforesaid, acquiesce in such institution; or (c) the cause of action, wholly or in part, arises. Explanation I‑ Explanation II.‑

A corporation shall be deemed to carry on business at its sole or principal office in Pakistan or, in respect of any cause of action arising at any place where it has also a subordinate office, at such place." It is admitted before us that the words "actually and voluntarily resides" or "personally works of gain." In this section are applicable to natural persons and not to legal entities like a Government. We have only o see if it can be said in the case of the Government that it "carries on business" at its principal office in Pakistan for the purpose of this section.

6. In this respect Wells, J. in interpreting an analogous pro vision of law in section 12 of the Letters Patent of the High Court of Judicature at Fort William in Bengal in Rundle v. Secretary of State‑in‑Council (1 Hyd. 37) had held that: `the words `carry on business and personally work for gain do not refer to an institution like the Government of India", and that clearly the business of governing the country was not within the contemplation of the section. But in Subbaraya Mudall v. The Government (1 Mad. H C 286) Scotland, C. J., was of a different opinion and held that "the words carrying on business can, we think, reasonably be applied to the Government as a deliberative body." However, in the same connection in Doya Narain Tewary v. Secretary of State for India‑in‑Council (I L R 14 Cal. 256) the Court observed that: "It has been said that supposing the business of governing the country is not business within the meaning of section 12 of the letters Patent, still the Government in this country carries on various trades, such as the trades in opium and salt, and the principal places of business of these trades are located in Calcutta. But these trades are not carried on by the defendant in this case. As already observed the words carrying on of a business or trade are inapplicable to this case. These trades, if they can be properly called trades, are carried on in one sense by the Government officers in charge of them, but they are so carried on for the benefit of the Indian Exchequer. For these reasons I am of opinion that this Court has no jurisdiction to entertain this suit." Similarly in Govindarajuht Naidu v. Secretary of State (A I R 1927 Mad. 689), the Madras High Court held that the Government cannot be said to be carrying on business within the meaning of the word in that clause of the Letters Patent. Also Hilton, J. in R. J. Wyllie & Co. v. Secretary of State (A I R 1930 Lah. 818), has held in this connection that the words 'actually and voluntarily resides refer only to natural persons and not to legal entities such as limited companies and Governments and that `business' in this section meant the commercial business and not the business of Government.

7. Also under the Indian Jurisdiction in a number of decided cases from the different High Courts, in Golabrai Paliram v. Secretary of State (I L R 2 Cal. 160), Dominion of India v. Lagadish Prasad (A I R 1949 Cal. 622), Nilima Sarkar v. Governor‑General‑in‑Council (86 Cal. L J 98), Dominion of India v. Nath & Co., Khulna (A I R 1950 Cal. 207), Nagi Bros. v. Dominion of India (A I R 1951 Pb. 92), Calcutta Motor Cycle Co. v. Union of India (A I R 1953‑Cal. 1), Bata Shoe Co. Ltd. v. Union of India (A I R 1954 Bom. 129), Lakhshmi Chand v. State of Punjab (A I R 1954 Pb. 181), Azizuddin & Co. v. Union of India (A I R 1955 Mad. 345), Corporation of Calcutta v. Director of Rationing and Distri bution (A I R 1955 Cal. 282), Achut Anant Pal v. Governor‑General‑in‑Council (A I R 1955 Cal. 331),. Trilok Chand Agarwal v. Dominion of India (A I R 1959 Cal. 281), in consonance with this old accepted view, it was held that these words `carries on business' in section 20 of the C. P. C. having no applications to the case of the Government even with respect to its commercial activities. But in Pratap Chandra Biswas v. Union of India (A I R 1956 Assam 85), the Assam High Court has made a departure in this connection and held that:‑ "It is difficult to hold that even commercial ventures of the Government assume .the colour of its ordinary adminis trative 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 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,. C. 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." and of late this view was accepted and upheld by the Supreme Court of India in Union of India and another v. Sri Ladular Jain (A I R 1963 S C 168). In this connection the Court observed:‑ "Running of railway is a business. That is not denied. Private companies and individuals carried on the business of running railways, prior to the State taking them over. The only question then is whether the running of railway ceases to be a business when they are run by Government. There appears to be no good reason to hold that it is so. It is. the nature of the activity which defines its character. Running of railway is such an activity which comes within the expression `business'. That fact as to who runs it and with what motive cannot affect it." In this respect the Court has also observed that; profit element is not a necessary ingredient of carrying on business, though usually business is carried on for profit.

8. In this country, in Muhammad Saeed v. Federation of Pakistan (P L D 1954 Sind 117), a learned Single Judge of Sind Chief Court has preferred to adhere to the old accepted view in this matter and observed that this view has held the field ranging from, 1886 to 1953 and under these circumstances it was a fit case for the application of rule of stari decisis, as the interpretation put on these words has remained uninterrupted for the last 70 years. But in Federation of Pakistan v. Co‑operative Insurance Society of Pakistan Ltd., Lahore as mentioned above, a learned Single Judge of the Lahore High Court. without any discussion of relevant case law bearing on the point, was of the opinion, that the Government was carrying on its business at Lahore in relation to its commercial activities through the railway department and as such it could be sued in Lahore. But, in this connection, in Pakistan v. Waliullah Sufyani (P L D 1963 S C 310) Kaikaus J., has observed asunder:‑ "A suit against a person can only be brought under the C. P. C. at a place where the cause of action arose or where the defendant resides or carries on business or personally works for gain. A suit would not lie in the India Courts because the cause of action arose at a place which is not in India and a Government neither resides anywhere nor carries on business nor works for gain." These remarks in the judgment appear to be more in the nature of an obiter dicta. But even then, coming as they do from a learned Single Judge of the highest Court in our country, are entitled to the greatest respect by us and they were not uttered in vain,

9. In a welfare state, now‑a‑days, its activities and func tions are not merely confined to its police powers, maintenance of law and order within the State, defence and security of the country and good diplomatic relations. In addition to its sovereign powers as a State, it enjoys the power or rather owes a duty towards people to increasingly look after their welfare and social well‑being. Within the scope of these lawful activities it is not only necessary but quite often the bounder duty of the State to cater for their needs. It is inevitable that must provide for essential requirements and needs of its people. For example, in our country the Government has undertaken the gigantic task of providing easy means of transport at competitive rates to its people, through its railway department. The postal, telegraph and telephone facilities are equally necessary. It may be required to procure and even subsidise the essential commodities and supplies for its people. These activities which may be truly commercial in the hands of the private agencies may not necessarily partake of the same character after they are undertaken by the Government in pursuit of its welfare policies. A private person may run a hospital as a business venture. But it may altogether cease to retain that character in the hands of the State running the same for the welfare and service of its people. In our opinion, the dominant, if not the sole object in running a business is to make profits. In contradistinction to this, the immediate and paramount consideration before the Government in providing for these facilities and services, is the welfare of its people. "They have to be operated for use and not for profit," according to, H. J. Laski, in his "Grammer of Politic", at p.

436. This then is the essential difference in the nature and character of these two activities.

10. In our opinion the answer to the question before us depends upon the true meanings to be ascribed to the expres sion "carries on business" used in section 20 Of the Code of Civil Procedure. The word `business' in its widest sense includes every trade, occupation or profession and has a more extensive meanings then the word `trade'. In Smith v. Anderson (15 Ch. D 258), Jessel M. R., after citing definitions of `business' from several dictionaries, said, "anything which occupies the time and attention and labour of a man for the purpose of profit is business." We find that the word business is used in different statutes in a somewhat different sense. But we have come across a reported case in Garaham v. Lewis ((1889) 22 Q B D I) which is very near to this case before us. Under section 12 of the Mayor's Court (Extension) Act, 1857 the local Court had jurisdiction over persons who "shall dwell or carry on business within the city of London." Lord Esher, M. R. in interpreting the section was of the opinion that they ought to give those words their primary business meanings. Fry L. J. in that context observed "Now, I think that the expression `carry on business' is not ordinarily used in the sense of a person being busy or doing business merely. A butler employed to look after his master's plate and perform the other duties of his Occupation may be a very busy man, but he could not be said to be carrying on business. A man who busies himself about science, the volunteer movement, or politics, though he may have a great deal of business to transact in respect of those matters, does not carry on business. I think that the expression has a narrower meaning than that of doing business or having business to do. In my opinion it imports that the person has control and direction with respect to a business, and also that it is a business carried on for some pecuniary gain." In this connection he has attributed their natural and primary meanings to these words. From the above discussion it follows that those words in section 20 of the Code have been used in their primary business and natural meanings and connote a business carried on for pecuniary profits and gains by the business and trading houses. These have no application to the case of the Government engaged in commercial activities as a part of its duties for the welfare of its people.

11. There is yet another reason for us in arriving at this conclusion. In case these words are construed in a wider sense so as to be applicable to the Government engaged in the com mercial activities, startling results are bound to flow from this. Applying the provisions contained in clauses (a) and (b) of section 20 of the Code to the Government, it is liable to be sued all over the country within the territorial jurisdiction of the Courts in which it has got its offices. The railway in selling the tickets at its booking offices spreading all over the country could be said to be carrying on its business in these places and may be sued anywhere. In this respect, in accordance with Explanation II to this section, a `corporation' shall be deemed to carry on business at its sole or principal office or in respect of any cause of action arising at any place where it has also a subordinate to office, at such place. But in terms this explanation is not applicable to the Govern ment, and by no fiction of law a similar construction can be placed in a suit brought against the Government. This is bound to result in anomalies and embarrassment for the Government. Therefore, such an interpretation cannot be accepted.

12. For all these reasons, in our opinion, the Government cannot be deemed to be carrying on business within the meaning of section 20 of the Code and these words have no application in the case of a suit brought against the Government. A. E./K. B. A. Reference answered accordingly.