P.B. Mukharji, J.
1. This suit has by consent of parties and counsel been tried on a preliminary point of jurisdiction.
2. Before stating the preliminary point, it will be appropriate to refer to the nature of the suit, the claim made therein, and the admitted facts. In this suit a partnership firm by the name of Calcutta Motor and Cycle Company is suing the Dominion of India now the Union of India for a sum of its. 3,702-8-0 being the loss and damage which it is alleged to have suffered on account of short delivery of 483 pieces of bicycle chains out of a total consignment of 1000 pieces. These chains were despatched by the plaintiff from Byculla outside the jurisdiction of this Court to Howrah-outside the jurisdiction of this Court and which were intended to be carried over the two Railways of the Bengal Nagpur Railway and the East Indian Railway, neither of which runs through any part of the territorial limits of the Ordinary Original Civil Jurisdiction of this Court. These two Railways are now State Railways. It is admitted that the cause of action for this suit arose entirely outside the original jurisdiction of this Court. These are the admitted facts. The jurisdiction that is claimed in the plaint is founded on the allegation first that the Union of India in running these Railways carries on business within the meaning of Clause 12 of the Letters Patent of this Court and secondly that the office and the principal places of such business arc at No. 1 Royal Exchange Place and 105 Netaji Subhas Road, Calcutta, which are both admittedly within the original jurisdiction of this Court.
3. The preliminary issue that by the consent of parties and counsel is now raised for trial is :
'Does the defendant carry on business within the jurisdiction of this Hon'ble Court.'
The point in the issue is, has this Court jurisdiction to entertain a suit brought against the Union of India where the cause of action has arisen wholly outside the ordinary original civil jurisdiction of this Court, on the sole ground that the Union of India carries on business within the local limits of such jurisdiction by reason of the fact that the principal offices of the railway administration are within such limits.
4. As the facts on which the issue is raised are admitted, no evidence has been led.
5. This issue raises problems of great importance and far reaching consequences. But this is not the first time that such an issue has been raised.
6. The preliminary controversy technically arises on the celebrated words in Clause 12 of the Letters Patent of this High Court,--'if the defendant at the time of the commencement of the suit shall dwell, or carry on business, or personally work for gain within such limits.' Does the State, the Union of India in this case, 'carry on business' within the meaning of the Letters Patents when it owns and manages a railway concent or a railway undertaking ?
7. Another incidental controversy is, even if the State runs a railway and is said, therefore, to 'carry on business,' does it do so at the place where the principal offices of the railway are situate This is important because only on the ground that such principal office happens to be within the original jurisdiction of this Court that this Court is said to possess jurisdiction to entertain and try this suit.
8. It will not be enough, therefore, to find that because the State runs the railway, therefore it carries on business, but it is also necessary to find that such business is carried on within jurisdiction on the ground that the principal office of the railway is within such limit. When both these grounds operate in favour of the plaintiff, then alone this Court will have jurisdiction to entertain and try this suit.
9. I will examine the problem first from the point of view of the liability of the State to be sued in its own Courts, secondly from the point of view of the State an carrying on any particular-business and thirdly from the point of view of the situs of such business. An examination of a large number of authorities however is inevitable having regard to the arguments at the bar.
10. The liability of the State to be sued in its own Courts was first developed in Indian jurisprudence through the doctrine of negligence in the Law of Torts. The loading case of the Peninsular and Oriental Steam Navigation Co. v. Secy, of State, 5 Bom. H. C. R. App. 1, in the year 1861 decided that the plaintiff's in that case whose horse was injured by reason of the negligent conduct of workmen employed by the Government in the dockyard at Kidderpore, had a right to sue the Secretary of State because the act complained of was done in carrying on an ordinary business and not in the exercise of governmental powers the Secretary of State, it will be remembered, then represented the British Government in India. In that case the real question before the Court was not the liability of the State to be sued in cases not connected with the conduct of a business or commercial undertaking. But there are observations of the learned Chief Justice Sir Barnes Peacock in his judgment whose effect is to give immunity to the State in acts done in the course of governmental administration. The liability of the State to be sued in its own Courts, was determined by drawing a distinction between acts within the scope of governmental administration on the one hand and on the other, acts outside the governmental administration such as carrying on a business or commercial undertaking. The latter and not the former acts were held to be justiciable and cognisable by the Courts.
11. The reasons of Sir Barnes Peacock C. J., found favour with and were accepted by the Lord Chancellor Viscount Haldanc, in the Privy Council in Secy, of State for India v. Moment J., 40 ind. App. 48 at p. 51 (P. C.).
12. In India there is a historic background to this legal concept of the liability of the State and that background is provided by her colonial past and the origin of the British administration in this country. Originally the East India Company was a trading corporation under Charter of the British Sovereign trading in India and gradually it took over and acquired powers of Government of this country. What was, therefore, a trading corporation to begin with, became subsequently the Government of the country. As a trading corporation, the liability of the East India Company to be sued was recognised. What the extent of that right was has, however been never fully analysed and Lord Haldane did not pause to consider it either in that ease. In Tim Secretary of State v. Kamachee Boye Sahaba, otherwise known as the Tanjore case, reported in 7 MOO, Ind. App. 476 (P. c.) Lord Kingsdown delivering judgment observed that acts done by the East India Company in execution of sovereign powers were not subject to the control of the municipal Courts either of India or of Great Britain and referred to the cases of The Nawab of Arcot v. The East India Co. in the Court of Chancery in the year 1793 and The East India Co. v. Syed Ally, (7 MOO. ind. App. 555 P. c.) before the Privy Council in 1827. Sir Hugh Cairns, as he then was, arguing at the bar for the Secretary of State for India in Council in that case distinguished the twofold character of the East India Company. He pointed out that first they were a trading corporation and secondly they had sovereign authority. Ho conceded that the East India Company was liable to be sued in the Courts in India as in England for acts done in their trading capacity. He also conceded that they could be sued upon a contract and referred to the decision of The Bank of Bengal v. The United Company.
13. By the Imperial Government of India Act, 1885, it was declared that India was to be governed directly and in the name of the Crown acting through the Secretary of State sided by Council and to him were transferred the powers formerly exercised by the Board of Directors and the Board of Control of the East India Company. It is there provided by Section 65 that 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 as they could have done against the Company. The powers and properties of the East India Company, therefore, devolved upon the British Crown by this Statute.
14. The continuity of legal development on this point in Indian jurisprudence was maintained by declaring that the British administration in so far as it acquired and carried out non-governmental functions of commercial character of the East India Company its liability was preserved, but in the field of its governmental functions its immunity was declared. That is the historic justification of the principle and distinction envisaged by Sir Banies Peacock and approved by Lord Haldane.
15. The distinction between governmental and non-governmental functions was later developed and applied by Judges in other branches of law as a test for finding out liability of the State. The doctrine of Sir Barnes Peacock was applied in 1875 to a case on contract by the learned Chief Justice Sir Richard Couch in Nobin Chunder v. Secy, of State, 1 Cal. 11, upholding in appeal the judgment of Phear J., on the Original Side. Couch C. J. approved expressly and applied the observations of Sir Barnes Peacock C. J. He says:
'There is a grout and clear distinction between acts done in the exercise of what are usually termed sovereign powers and acts done in the conduct of undertakings which might be carried on by private individuals without having such powers delegated to them.'
16. What is more important here to observe is that this doctrine was applied in this case to non-suit a claim which did not arise out of any tortuous act but which arose out of a claim for compensation in an auction sale of licences to sell excisable liquors and drugs where the purchaser plaintiff claimed to be the highest bidder and where he alternatively claimed against the Government the return of the deposit ho had made. It was, therefore, a, claim akin to contract or quasi contract and for money repayable on failure of consideration.
17.'I The principle thus was extended from torts to contracts.
18. The next land mark in the development of the law on this branch is reached in 1886 in the celebrated case of Doya Narain Tewari v. Secy, of State for India, 14 cal. 256. In that case the plaintiff was appointed as a purchasing agent of the Commissarist Department of the Government of India in connection with the Second Kabul campaign on a salary of Rs. 100 per month and that suit was based on an implied contract on the part of the Government to pay whatever money had been advanced by the plaintiff for purchase of stores in course of his employment as the purchasing agent. This was another case on contract decided by two learned Judges on the Original Side. Mitter J., who delivered judgment in that case at p. 272 observed :
'The words by which the second head of jurisdiction has been defined in Section 12 of the Letters Patent are in my opinion inapplicable to it' (Secretary of State for India).
The same view was taken by Wells J. in Bundle v. Secy, of State, 1 Hyd. 37. There in that case Wells J., says that the words 'carry on business and personally work for gain' do not refer to an institution like the Government of India and he further held that the carrying on of the business of the Government could not be considered to be carrying on of business within the meaning of Section 12 of the Letters Patent. Mitter J., in Doya Narain Tewari's case continues at p. 272 to observe :
'It is somewhat difficult, nor is it necessary in this case, to define exactly what may be deemed 'business' within the meaning of Section 12 of the Letters Patent; but it is clear to me that the business of governing the country is not business within the meaning of Section 12 of the Letters Patent.'
19. At p. 273, Mitter J. after citing the case of Nobin Chunder v. Buroda Kant, 19 W. R. 841 and other cases conies to this conclusion which I must state in his own language :
'That the word 'business' in Section 12 of the Letters Patent was used in a restricted sense is also indicated by the words 'personally work for gain' to be found in the same section. The latter words would be unnecessary if the word 'business' had been intended to be used in an unrestricted sense.'
20. Mitter J. in that case goes further to observe at pp. 273 and 274 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. Mitter J. meets this argument at p. 274 by saying:
'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.'
21. This conclusion of that judgment is directly on the point that I ana asked to decide in this case.
22. A criticism has been made at the bar of this decision saying that the same proceeded to this conclusion only on the point that the Secretary of State was merely a nominal person or rather a mere name. But that in my view is not the real ratio of the decision. The real ratio of the decision in my view is that the State or the Government could not be said to carry on business within the meaning of Clause 12 of the Letters Patent as construed and interpreted by the learned Judges. That is why I have just set out the relevant extracts from that judgment.
23. In 1912 the problem again came before the Court and was decided by Sir Lawrence-Jenkins, Chief Justice, sitting with Harrington J. in appeal from the Original Side from a judgment of Chaudhuri J. in Rodricks v. Secy, of State for India, 40 cal. 308. This again is a case on the tort of malicious prosecution where the same doctrine was applied. The decision in this case is important because it decides almost the very identical point that has been raised before me in this suit. The original judgment in this case was delivered by Chaudhuri J. Although Chaudhuri J. dismissed the suit as being without jurisdiction being bound by the decision in Doya Narain Tewari's case, 14 cal. 256 he ventured to express his dissent from the views expressed in Doya Narain Tewari's case. In the course of the judgment Chaudhuri J. observes that the decision of Pigot J. in Biprodass Dey v. Secy, of State for India, 11 cal. 665 had taken a directly opposite view having held that such suit was maintainable. Chaudhuri J. at p. 311 in 40 cal. 308 observes :
'However differently the word 'business' may have been construed at different times, I do not think there is any question whatever that a 'carrying business,' is 'business' within the meaning of Section 12 of the Letters Patent, nor is there any doubt that a Hallway company or other corporate body, or even a body of individuals whether incorporated or not, is a 'person' within the meaning of that section: see the definition of the word 'person' in the General Clauses Act, 1897. It cannot also be doubted that a railroad company, apart from the fact of having a registered office, 'carries on business' at its principal office where the directors meet and the general business of the company is transacted. Jessel 11. B.. in Erichsen v. Last, (1881) 8 Q. B. D. 414 said that where the 'Brain Power' is, there a trade or business is carried on. The question therefore, is as to whether the Secretary of State for India in Council is a 'person' within the meaning of S. 12 of the Letters Patent, and if so, does that 'person' carry on business in Calcutta, which at the time of the institution of this suit was the capital of the Government of India.'
24. Further on in the judgment at p. 314 Chaudhuri J. continues to observe :
'It seems to me difficult to say that the Government does not dwell in its own capital and that a Government engaged in trades, though it may be for purposes of the State, does not 'carry on business.' If Sir George Jeesel is right that where the 'Brain Power' is, there trade or business is carried on, the assumption that the Brain Power of the Government of India is at its seat of Government, is not an unjustifiable assumption. I would have had, therefore, no hesitation in holding that the Secretary of State for India in Council, namely the Government dwells at its capital and carries on business there, and is thus amenable to the jurisdiction of this Court, in eases where a suit can be maintained against the Government.'
25. On appeal as I have said this view of Chaudhuri J. was not accepted by the learned Sir Lawrence-Jenkins C. J. sitting with Harrington J. At p. 317 of the judgment of the Court of appeal Sir Lawrence-Jenkins C. J. observes :
'Now, it is admitted that no part of the cause of action arose within the local jurisdiction of this Court: but it is contended that the Secretary of State for India in Council is a person who dwells or carries on business or personally works for gain within the local limits of Calcutta and it is on that ground and on that ground alone that we are asked to hold that there is jurisdiction. No doubt, this argument met with some favour in the Court of first-instance, and the appellant suggests before us that he was encouraged by the view of the learned Judge to prefer this appeal. But in fact this is a point which was decided adversely to him as far back as 1886, and it has not been suggested that from, that date to this, the decision to which I refer has ever been questioned or doubted: Doya Narain v. Secy, of State, 14 Cal. 256. It was the decision not of a single Judge but of a Bench of two Judges, and I think it would be wrong for us not to follow that decision. I regard it as important that matters of this kind should have all the certainty possible and that the Court should not lightly disregard a decision definitely setting a question of jurisdiction such as that which arises in this case, If the decision is wrong then it must be for a higher tribunal to correct it. For my own part, I prefer to follow it as being a decision of a Bench of two Judges which has long been accepted as a governing authority.'
26. With these words the learned Chief Justice came to the conclusion that the Court had no jurisdiction. The ratio of this decision in appeal settles the point so far as I am concerned. In spite of the observation of Sir Lawrence-Jenkins C. J. the decision in Doya Narain Tewari's case again came up for criticism a few years later by Lort-Williams J.
27. In 1926 this doctrine was applied to a Railway case by Sir C, C. Ghose J. sitting singly in Baijnath Kamani v. Secy, of State, 43 cal. L. J. 574. The learned single Judge followed the decision in Doya Narain Tewari's case, 14 cal. 256 and in Rodrick's case, 40 cal. 308.
28. In 1932 the same principle was applied by Bankin C. J. sitting with C. C. Ghosh J. in coming to a decision in a suit, Secretary of State v. Shreegobinda, 59 cal. 1289 whore the plaintiff complained that the manager appointed by the Court of Wards had not done his duty by realising all monies with diligence and had not accounted to the Court of Wards for certain monies which he had collected. There the learned Chief Justice after reviewing various English and Indian authorities on the subject acted on the principle laid down by Sir Barnes Peacock distinguishing acts of Government as a sovereign power and acts of the Government in the conduct of a commercial undertaking. The learned Chief Justice in that case proceeds also upon the well-known principle of English law that where an act is done by an officer of the Government in the course of exorcise of powers which cannot be lawfully exercised save by the sovereign power, no action in tort lies against the Secretary of State for India and for this purpose even the doctrine of respondent superior is of no avail.
29. In the meantime in 1930 the decision in Doya Narain Tewari's case, 14 cal. 256 had come up for criticism by Lort-Williama J. in Golab Ram Pali Ham v. Secy, of State, A. I. R. (1941) 2 Cal. 160. Although the judgment was delivered in 1930, the Law Report did not report the decision until 11 years after in 1941. The result was that Rankin C. J. did not notice this decision of Lort-Williams J. when the learned Chief Justice was deciding the case of Secretary of State v. Shreegobinda, 59 cal. 1289. In Golab Earn Pali Ram's case, there was an appeal to Rankin C. J. and Pearson J. but that was an appeal not on this point but from an order dismissing an application to revoke leave under Clause 12, Letters Patent, and reported in the same volume Secy, of State v. Golabrai Paliram, 59 cal. 150. In Golab Bam Pali Ram's case Lort-Williams J. expressed himself on the point in these terms at page 164 :
'The business of the Railways has changed and has increased enormously in the interval. It is nonsense to suggest now-a-days that they are kept up solely for the purpose of Government. The fact that a business of carriage by Railway is being carried on in India by some one is notorious. The fact that such a business called the East Bengal Railway is being carried on in Bengal and that its head office is situate at 3, Koilagha Street, Calcutta, is admitted. That such a business is a business within the meaning of Clause 12 of the Letters Patent cannot be denied. It is the same kind of business as that carried on by Railway Companies in India which clearly come within the provision. It must be equally obvious that the proprietors of such a business carry on their business amongst other places at their head office where the general business of the undertaking is transacted and where the manager is to be found or, as was said by Chowdhuri J. where the brain lies,'
The other point of this decision was that a notice under section 77, Railways Act, formed part of the cause of action in a suit against the Railway. On the question of s. 77, Railways Act, this decision has been expressly overruled by a Full Bench decision of this Court in Bansi v. Governor -General of India, in Council, 56 cal. w. N. 83.
30. In another Division Bench decision in Dominion of India v. Gopal Ckandra, 55 cal. w. n. 113 the view of Lort-Williams J. that carriage by Railway was a business within the meaning of Clause 12, Letters Patent, was expressly dissented from and not followed and the decisions in Doya Narain Tewary's case, 14 cal. 256 and in Bodrick's case, 40 cal. 308 were expressly preferred and followed. On the question, however, of notice under Section 77, Railways Act, forming part of the cause of action, this Division Bench decision itself was overruled by the Pull Bench decision in Banal v. Governor General, 56 cal. w. n. 83.
31. In 1946 the same principle was applied by a Division Bench to a Pattani case in Udai Chand v. Province of Bengal, 51 cal. w. N. 537. In that case it is held that the Crown was not liable for the negligence of the Collector in holding a sale Tinder the Pattani Eegulation, 1819, and having negligently paid out the sale-proceeds thereof to a person who was not entitled to the same. Chakravartti J. delivering judgment at p. 541 laid down the law in the clearest possible terms :
'The principle deducible from these and other cases as we understand them is as follows : A distinction must be made between acts done by the Crown in pursuance of ventures which a private individual might undertake equally well and acts done in exercise of governmental powers which could not be lawfully exercised save by the sovereign authority or persons to whom the sovereign authority might delegate those powers.'
32. On behalf of the plaintiff reliance has been placed on a Bench decision in a Civil Revision case in Dominion of India v. Jagdish Prosad Panna Lal, a Firm, 84 cal. L. J. 175. This was a decision in 1948 delivered by the learned Harries C.J. with whom Chakravartti J. concurred. This was a revision of an order of a Full Bench of the Calcutta Small Causes Court on a question of compensation for short delivery against the East Indian Railway and the Bengal Nagpur Railway in a suit brought against the Government in the Small Causes Court. At p. 180 of that report, Harries, C. J, observes :
'Clearly the Bengal Nagpur Railway did not acquiesce in the institution of the suit but the case falls within the provision because the East Indian Railway carried on the business within the limits of the jurisdiction and leave of the Court has been given. That being so, the Court had jurisdiction.'
The question here turned on the interpretation of Section 18 of the Presidency Court of Small Causes Act. Section 18(a) of that Act relates to the cause of action as a ground of jurisdiction. Section 18(c) of that Act relates to the residence or carrying on of business within limits as a ground of jurisdiction. Harries C. J., deals with this point of residence or carrying on of business at pp. 179-80 of the report and expresses himself in those terms :
'A company carries on business at its registered office, and it would appear to me that a railway treated as a separate entity would curry on its business at its head office. Admittedly, the head office of the East Indian Railway is within the local limits of the jurisdiction of the Small Cause Court, though the headquarters of the Bengal Nagpur Railway being at Kidderpore is outside such limits. It must be remembered that leave of the Court was obtained for bringing the suit and that being so, the case falls precisely within the terms of Section 18(e). What that provision requires is that anyone of the defendants at the time of the institution of the suit actually and voluntarily resided or carried on business within the local limits of the jurisdiction of the Court and either that leave of the Court had been given for the institution of the suit, which had been done in this case, or that the defendant who did not reside or carry on business within the local limits acquiesced in the institution of the suit.'
33. In this decision no reference is made either to Doya Narain Tewary's case, 14 cal. 256 or to the decision in Rodrick's case, 40 cal. 308 the two most important and relevant authorities of this Court on the point. 'While the decisions in 14 cal. 256 and 40 cal. 308 are binding on me, the decision in 'Civil Revision of the Division Bench in Dominion of India v. Jagadish Prosad Pannalal, a Firm, S4 cal. l. i. 175 is not so binding. A decision which fails to notice the ruling authorities of the Court on the point loses much of its binding character and has little persuasive force.
34. Then again the decision in Jagadish Prosad Pannalal's case, 84 cal. L. J. 175 has been criticised by Harries, C. J. himself in his subsequent judgments, first in an appeal from the Original Side in Nilima Sarkar v. Governor-General in Council, 80 cal. l. J. 98 and then again in the Full Bench case in Bansi v. Governor-General of India in Council, 56 cal. W. n. 83. There the reference to the Full Bench was made on two points distinctly. The points of reference appear at p. 85 of the report. The first point was whether notice under Section 77, Railways Act, was a part of the cause of action and the second point was the very point which is raised here and that is whether 'the Governor-General representing the two railways administrations in that case could not be said to have actually or voluntarily resided or carried on business or personally worked for gain within the jurisdiction of the Small Cause Court even though the head office of the East Indian Railway was within such jurisdiction.'
The leading judgment in the Full Bench was delivered by Das J., Banerjee J. agreed. The learned Harries C. J. also agreed but added these few words which will appear at p. 92 of that report ; 'I desire to add that I am satisfied that the view taken in the case of Dominion of India v. Jagadish Prosad Pannalal, 84 Cal. L. J. 175, a decision to which I was a party, is erroneous,'
35. There is also yet another decision, to which the learned Chief Justice was a party, in the case of Dominion of India v. Messrs. H. C. E. C. Nath & Co. : AIR1950Cal207 which requires to be noticed. After this decision, Jagadish Proscul Pannalal's case, (84 cal. L. J. 175) can no longer in my view he regarded as good law. This is a clear authority for the proposition that the Court has no jurisdiction to entertain a suit brought against the Dominion of India where the cause of action has arisen wholly outside the ordinary original jurisdiction of that Court on the sole ground that the Government of India dwelt or carried on business or personally worked for gain within the local limits of that Court. Banerjee J. who delivered the judgment in that case with which Harries C. J. agreed observes at page 208 :
'So far as defendant 1, the Dominion of India is concerned, I think, the same principle applies, which was applicable in suits against the Secretary of State for India in Council. That principle, as stated in Hodricks v. Secretary of State,, 40 Cal. 308, is this: 'The Court has no jurisdiction to entertain a suit brought against the Secretary of State for India in Council, where the cause of action has arisen wholly outside the ordinary original jurisdiction of that Court, on the sole ground that the Secretary of State for India in Council dwelt or carried on business or personally worked for gain within the local limits of that court.'
36. This shows that Harries C. J. has definitely revised his former view expressed in Jagadish Prosad Pannalal's case, (84 cal. l. J. 175) and has now accepted the principles followed in Bodrick's case, (40 cal. 308). The plaintiff's reliance, therefore, on the case of Jagadish Prosad Pannalal is n reliance on a broken reed. As I have already stud the decision both in Doya Narain Tewari's case, (14 cal. 256) as well us in Bodrick's case are binding on me follow these decision' and so also I follow the view expressed by the learned Chief Justice himself in the later decision in Dominion of India v. H. C. K. C. Nath & Co., A. i. n. 1950 cal. 207.
37. This brings to an end the examination of the authorities on this point.
38. An examination of the constitutional provisions and other statutory provisions relating to the State's liability to be sued in its own courts will at this stage be also relevant for determining the issue before me.
39. Article 300 of the Constitution of India expressly provides that
'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.'
As I read this provision in the Constitution I take it to mean that the State consents to being sued in its own Courts in India. This principle in the Constitution expressly reserves the right to sue and the obligation to be sued as they existed before the Constitution, subject of course to any statute by Parliament or State Legislature. While it affirms the principle of liability this constitutional provision does not in my view extend the scope of such liability. The scope or extent of such liability remains what it was before the, Constitution subject however to such legislative amendments, Parliamentary or State, as are valid and permissible. The group of articles from 294 to 299 of the Constitution dealing with property, contract, rights and liabilities does not lead to any different conclusion either. In fact under Article 294(b) of the Constitution it is provided expressly that all rights, liabilities and obligations of the Government of the Dominion of India whether arising out of any contract or otherwise shall be the rights, liabilities and obligations respectively of the Government of India and the Government of each corresponding State. In Article 299 dealing with contract the Constitution makes clear the form in which such contract is to be made and at the same- time in Sub-article (2) excludes only the personal liability of the President, the Governor or the Rajpramukh on such contract or of any person making or executing such contract on their behalf. This express exclusion of personal liability implies maintaining the State's liability on the contract.
40. The liability of the State is in my view also plain under the Indian Railways Act. Explicit recognition of the responsibility of a railway administration for loss, destruction or deterioration appears from Section 72, Railways Act, subject, no doubt, to the provisions under Sections 151, 152 and 101, Contract Act. Again under Section 76, Railways Act, express reference is made to burden of proof in suits against a railway administration for compensation for loss, destruction or deterioration. Railway administration under Section 3 (6), Railways Act includes a railway administration by the Government. I have no doubt in my mind that the State railway can claim no immunity from suits.
41. The Civil Procedure Code of the country also provides and recognises such right of suits against the State.
42. That is the statutory and constitutional position in India on State's liability to be sued in its own courts.
43. Reference in this connection to the English and the American Law may be misleading and in my view is. But as both the English and American laws have been discussed at the bar, I propose to deal with them as briefly as possible.
44. Taking first the English Law on the point, it is notorious that Crown procedure in England is a highly technical procedure and is a peculiar growth of English legal history. In the realm of contract, the subject in English can adopt a proceeding against the Crown known as petition of right. A long history struggling to extend gradually the liability of the Crown culminated in the Petition of Right Act of 1860. It is overlaid with many limitations. In the first place, the Crown need not in theory submit itself to the action at all unless it so chooses. An indispensable condition again in such proceeding is the issue of a fiat which theoretically at any rate is the King's own decree of grace 'Let right be done'. Technically this fiat again can be either granted or withheld.
In the realm of tort the ruling principle in England is that the King can do no wrong and no action of tort could lie against the Crown. Dr. C.K. Alien describes it. 'This startling proposition is almost unique among civilised peoples', at page 256 of his book 'Law and Orders' 1945 Edition. Its ancient origin has lost all relevance to the circumstances of modern society. Even the well-established principle of the Common Law of Torts Respondent Superior did not apply to the Crown. After a long struggle in the sphere of torts the Statute in England intervened to wipe out some of the defects of proceeding against the Crown and that was provided by the Crown Proceedings Act, 1947, giving the right to sue the Crown and making the liability of the Crown in tort clear in some of its provisions. But this Statute is not a reform of the entire Crown Procedure but only a very limited reform in a limited field. Sir William Holdsworth, an eminent authority and jurist, expressed his views on this subject in vol. 38 of the Law Quarterly Review at p. 295 in these terms :
'The subject's rights against the Crown are, therefore, governed by the inadequate rules of the mediaeval common law. That injustice results is obvious. The subject is in this respect worse protected in this country than in some foreign countries, and in some of the colonies this injustice has been so obvious that it has been removed by enlarging the competence of the petition of right.' It was said in 1887 in the case of Farnell v. Bouinan, (1887) 12 A. C. G43 at p. 049 'that the local Governments in the colonies, as pioneers of improvements, are frequently obliged to embark in undertakings which in other countries are left to private enterprise, such, for instance, as the construction of railways, canals, and other works for the construction of which it is necessary to employ many inferior workmen. If, therefore, the maxim that 'the King can do no wrong' were applied to Colonial Governments, 'it would work much greater hardship than it does in England.' It is obvious that this reason applies with great force to the activities of our modern socialistic State; and that, in consequence a reform of the law on the lines of these colonial statutes is urgently needed in the interests of the public at large.'
It will, therefore, be seen that the defects of Crown Procedure in England in proceeding against the Crown were crying out for a reform even after the pattern of Colonial Statutes and it will be insensible in my view to import all these mediaeval immunities into the Indian Law where I find, as I have shown, the law has developed on entirely different lines.
45. Nor in my opinion is the American Law a safe guide on this problem of State's liability to be sued in its own Courts. Chief Justice Taney of the American Supreme Court in Jossep D. Beers v. The State of Arkans, (1858) 20 HOW. 527 : 15 Law. Ed. 991 observes:
'It is an established principle of jurisprudence in all civilized nations that a sovereign state cannot be sued in its own Courts or in any other without its consent and permission; but it may it thinks proper waive this privilege and permit itself to be made a defendant in a suit by individuals or by another State and as this permission is altogether voluntary on the part of the sovereign, it follows that it may prescribe the terms and conditions on which it consents to be sued and the manner in which the suit shall be conducted and may withdraw its consent whenever it may suppose that justice to the public requires it.'
The principle of immunity from suits is said to apply to every sovereign power whether the form of Government i3 monarchical or republican and it is said to be essential to the common defence and the general welfare of the State. Historically it draws its origin from the doctrine of sovereign infallibility and juristically it drew its sustenance from the doctrine of State being the source and reator of law and therefore above the law. The principle of consent of the State and the with-drawability of the consent even pending the trial of a case in America have been applied to the several States in the United States except perhaps in cases where by the Constitution a State may be sued in the Supreme Court of the United States. That is a provision which appears to be recognised in the original jurisdiction of the Supreme Court of India as provided in Article 131 of the Constitution. But a suit by a citizen of one State against another State in the Courts of the United States is prohibited by the nth amendment of that Constitution and one State cannot create a controversy with another State within the meaning of that term as used in the Judicial Clauses of the American Constitution. In this respect the provisions of the American Constitution and the American law are very different from the Indian Constitution and the Indian law on this point. That the American Law is unsatisfactory from this point of view will appear from the recent decision of the Supreme Court of the United States in the American Dollar Steamship Lines litigation: Land v. Dollar, (1947) 330 U. S. 731 and Land v. Dollar, (1951) 341 U. S. 737 & 912.
46. Neither the English doctrine that 'the King can do no wrong' nor the American doctrine of State immunity in Court without the consent of State and which consent is withdrawable by the State pending trial, applies to India, The law in India has been and as I conceive it is more rational and progressive. In India, the Constitution records the consent of the State to be sued. Historically and under the Constitution, that is how I read the law in India on the liability of the State to be sued in its own Courts, I am therefore not persuaded by the English and the American law on this point to hold that an aggrieved person in India cannot sue the State on a contract with the State Bailway. I am of the opinion and I hold he can.
47. Then comes the question whether the State can be said to carry on business within the meaning of 12, Letters Patent of this High Court, The Calcutta authorities directly bearing on the point are Doya Narain v. Secretary of State, 14 Cal, 258. Eodricks v. Secretary of State for India, 40 cal. 308 and Dominion of India v. Messrs. B.C.K.C. Nath & Co., : AIR1950Cal207 . I read these decisions to be clear authorities on the point that the State cannot be said to carry on business within the meaning of Clause 12, Letters Patent of this High Court. I will refer only to one more decision at this stage and that is of the Madras High Court in Govindaraju Naidu v. Secretary of Stats, 50 Mad. 449. This was a decision of a Bench of two Judges presided over by Coutts-Trotter C. J. The learned Chief Justice at p. 454 of the report observes deciding this point :
'In my opinion the words of the section do not cover the case of government at all. The only doubt I had was with regard to the word 'residence' occurring in that section. I was inclined to the view at one time that the government must be said to 'reside' in the place where its official headquarters are located, but on consideration I think that the word 'reside' must be taken to refer to natural persons and not to legal entities such as limited companies or governments.'
Beasley J. sitting with the learned Chief Justice delivered a separate judgment in that case and; expressed his 'entire agreement' with the views expressed by Mitter J. in Doya Narain Tewary's case in 14 cal. 256. Beasley J. also agreed with the other Calcutta decision on Bodricks v. Secretary of State. The learned Judge goes on to observe at p. 459 :
'Nor do I think that the Government can be said to dwell anywhere. Whereas the words, 'carry on business' apply to a corporate body and to limited companies and 'personally work for gain' to an individual or individuals. The word 'dwell' can only apply to an individual in a private sense and not to an entity. The corporation cannot be said to dwell anywhere. It may have an office where in carries on business but it does not dwell there.'
48. There can be no doubt that the functions of the State in modern times have changed considerably and it is a fact that the State to-day does carry on many undertakings of a commercial or trading nature. The idea can be also found clearly from certain expressions used in the Constitution of India. Sub-article (2) of Article 289 of the Constitution expressly refers to trade or business of any kind carried on by or on behalf of the Government of a State. Sub-article (3) of the same article of the Constitution makes it clear that some trade or business Parliament may by law declare to be incidental to the ordinary functions of government. The first Amendment of the Constitution amending Article 19, Clause 6, Sub-clause (2) expressly mentions the carrying on by the State or by corporation owned or controlled by the State, of any trade, business, industry or service whether to the exclusion, complete or partial, of citizens or otherwise. It is inevitable in my view that in any welfare State such activities will not only be constitutional but also natural and in accord with the spirit of a welfare State. That is why Sir William Holdsworth in the passage that I have quoted elsewhere in the judgment indicates that the law in England should be so reformed as to admit the Crown liability for the State activities of a commercial or trading nature.
But here again the question has to be approached with a good deal of circumspection because what today is considered to be trade or business may not in the changing contour of the welfare Stats be regarded as a business or a trade but a necessary and indispensable State function.
Now for instance, in the particular case before me the question relates to railway administration. It is undoubtedly true that originally the railway was run by private companies under Charter of incorporation. Today running of railways by the State is regarded in many ways as an essential undertaking and essential activity of the State. 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-govermneatal 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. 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 13 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 a 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.
49. An astonishing result that ensures from the acceptance of the proposition that the State carries on business within the meaning of Clause 12 of the Letters Patent cannot be ignored in coming to a conclusion on the point. Assume that the State does carry on business within the meaning of Clause 12 of the Letters Patent. The next obvious question is where does it carry on the business or where is the situs of such State business I have pursued with great interest the theory of Jessel, M.B. which is described as 'brain power theory'. Even if that theory is accepted, it may very legitimately be said that in the case of a State railway the brain is at the capital for it is natural to say that the brain of the State is at the capital.
Even if the alluring bub deceptive theory of corporate personality of the State be said to be analogous to a company or a corporation then also on the principle laid down by Lord Loreburn in De Beers Consolidated Mines Ltd. v. Howe, (1906) A. c. 455 at p. 458 that a company resides or carries on business where its control resides, the control of the State can legitimately and properly be said to be at the capital. That indeed was suggested by Ghaudhuri J. in Rodrick's case in 40 cal. 308. In that case there was no difficulty because Calcutta happened to be the capital of India at that time. But today it is different. If on the same reasoning one were to come to a conclusion then the only conclusion would be that the brain today is now at New Delhi which is the present capital of India and the suit should, therefore, be filed not in Calcutta but at New Delhi.
But I am not persuaded by the brain power theory. I do not think that a business is carried on only by brain and I think the limbs are also indispensable in carrying on the business. Assuming that the State carries on a business, why can it not be said that it carries on the railway business throughout the length and breadth of the country wherever the railway lines run There it also does carry on business of railway undertaking in running the railway and carrying freight and passengers over the rails. What is the result If that proposition is right then this suit could have been filed in Madras, or Bombay, Coimbatore or Bangalore or anywhere in India wherever there is a piece of railway line on the ground that the State carries on business within the precincts of those particular places.
50. It seems to me, that is an absurd conclusion to reach. Yet I cannot see how one can avoid that conclusion, if it is to be held that the State carries on business within the meaning of Clause 12 of the Letters Patent. The ubiquity of the State within its own borders and its territorial omnipresence throughout the country justify the principle being pushed to its logical extreme and leading to the result that a suit could he filed anywhere wherever there is a railway run by the State. Not even a Judge would like to be in isolation in venturing an opinion on a point like this. I find myself not alone, although my companion is not a very modern one. Wells, J. in Cubit Sparhall Bundle v. Secretary of State in Council 1 Hyde 37 observes at pp. 40-41 :
'It appears, upon the face of the plaint, not only that the land in question is situated out of the local limits of the ordinary original jurisdiction of the Court but also that the cause of action arose out of such local limits; but it was contended on behalf of the plaintiff that the defendant is subject to the jurisdiction of the Court under the other heads of jurisdiction individually the defendant cannot be said to be either dwelling or carrying on business or personally working for gain within the local limits of the ordinary original jurisdiction of this Court; but the defendant is proceeded against not as a private individual but as an authorised representative of the Government and as such he must for all purposes be connected with the present question to be treated us being in the same position as the Government itself.
And what is the position of the Government The Government of India in represented in this city which is its principal seat by the Governor-General or in hisabsence by the President in Council and throughout its extensive territories by its various officers, civil and military, in every grade of official rank. It may, therefore, be said to be present everywhere and be constructively dwelling in each and every place at the same time. But it cannot be allow-ed that this universal dwelling can give a plaintiff the right to elect the forum in which to sue the Government or to give every Court of justice in India the concurrent jurisdiction in all cases against the Government. Much a rule will be one-sided in its operation and would place the Government at a disadvantage which in the case of a private individual would amount to an evil of the greatest magnitude.'
For these reasons I hold that the State cannot be suit to 'carry on business' within the meaning of Clause 12, Letters Patont of this High Court.
51. On a review of the course o decisions of this Court And on a review of the historic background of the development of law in India on this particular point, and on an examination of the provisions of the Constitution of India and upon a scrutiny of the Indian Railways Act I draw certain conclusions. First, the State in India claims no exemption from liability to be sued in its own Courts when the cause of action arises either in contract or tort against a State Railway. Secondly, that part of Clause 12, Letters Patent of this High Court where the words 'the defendant resides or carries on business' appear cannot contextually and historically be applied to the State. It does not mean that the State cannot he sued. It certainly can be wherever the cause of action arises either in whole or where in part with the leave of the Court. Thirdly, the distinction between governmental functions of sovereign character and non-governmental functions still remains a valid test by which to determine the justiciable character of any particular act or conduct of the Government inspite of the difficulty of applying that test in a welfare State with its new patterns of social and public services. The reason for upholding that test is founded primarily on the juristic concept that sovereign Governmental actions unless excluded from the scrutiny of Courts, will mean creating a new right which no jurisprudence of any country has recognised except by special constitutional writs, and secondarily on the fact that unless so excluded it will involve the practical difficulty of constant interference with administration and invasion of public funds rendering any Government or administration impossible. Fourthly, the English and the American laws on the point are less rational and less progressive than the Indian law. The progress and development of the Indian law on this point should not be hampered by appeals to such laws.
52. I, therefore, hold that this Court has not jurisdiction to entertain this suit and I answer this preliminary issue against the plaintiff.
53. The suit, therefore, must fail on the point of jurisdiction and is dismissed with costs.