Tarapada Bhowmick vs The State Of West Bengal

For the Plaintiff : Mr. Reetobroto Mitra, Adv. Mr. Sankarsan Sarkar, Adv. Mr. Soumyajit Ghosal, Adv.

For the Defendant : Mr. Samrat Sen, Senior Adv. Mr. Paritosh Sinha, Adv. Mr. Salaluddin Molla, Adv.

Heard on : 05.06.2018, 13.06.2018, 21.06.2018, 18.07.2018, 31.07.2018, 01.08.2018, 14.08.2018, 16.08.2018, 17.09.2018, 26.09.2018, 18.12.2018, 28.11.2018, 21.01.2019, 12.02.2019, 26.02.2019, 07.03.2019, 10.04.2019, 17.06.2019, 08.08.2019, 26.08.2019, 17.09.2019.

Delivered on : 05.11.2019. Moushumi Bhattacharya, J.

1. The issue which falls for adjudication in this matter is whether the nature

of work undertaken by the State is a relevant factor for deciding whether a court has territorial jurisdiction to entertain a civil suit instituted by a citizen against

the State.

[

2. The defendant, State of West Bengal, in this application, has sought

revocation of the leave granted to the plaintiff under Clause 12 of the Letters

Patent, 1865, and for dismissal of the suit. The plaintiff says an enquiry into the

nature of work contemplated by the State is not relevant and that the suit can be

instituted wherever the State is found to carry on business under Clause 12 of

the Letters Patent, 1865, on the other hand, the defendant contends that where

the activity undertaken by the State is in respect of its sovereign functions, the

court would have the territorial jurisdiction to entertain the suit where the cause

of action arose.

3. The instant suit has been filed for recovery of the plaintiff's claims in

connection with the work of civil construction for a six-bedded Primary Health

Centre at Chaipat in the district of Paschim Medinipur, West Bengal. From the

pleadings in the plaint filed in the suit, the undisputed facts are as follows;

(a) The contract was in relation to the civil construction of a Primary Health Centre on behalf

of the State so as to enable the State to render primary healthcare services to its citizens in exercise

of its duties as a Welfare State;

(b) The Primary Health Centre was to be set up at Chaipat in the district of Paschim

Medinipur, West Bengal, outside the original jurisdiction of this Hon'ble Court;

(c) The Notice Inviting Tender was issued by the State from the office of the Superintending

Engineer, South Circle, C.B. Directorate, PWD, Government of West Bengal having its office at 76,

Dr. Sundari Mohan Avenue, Kolkata-700 014, outside the jurisdiction of this Hon'ble Court;

(d) The tenders were to be deposited and submitted by diverse bidders including the plaintiff

at the office of the superintending Engineer, South Circle, C.B. Directorate, PWD, Government of

West Bengal, having its office at 76, Dr. Sundari Mohan Avenue, Kolkata-700 014, outside the

jurisdiction of this Hon'ble Court;

(e) That the contract was executed at 76, Dr. Sundari Mohan Avenue, Kolkata-700 014,

outside the jurisdiction of this Hon'ble Court;

(f) The contract was performed by the plaintiff in Chaipat, Paschim Medinipur outside the

original jurisdiction of this Hon'ble Court.

4. The contention of Mr. Samrat Sen, learned Senior Counsel appearing for

the defendant/applicant is that the pleading and the documents annexed to the

plaint would show that no part of the plaintiff's cause of action has arisen within

the local limits of the ordinary original civil jurisdiction of this court. According to

counsel, "State" can neither "dwell" nor "personally work for gain" which means

that the relevant question is whether the State (defendant) can be said to have

carried on business within the original jurisdiction of this court at the time of

commencement of the suit. Counsel submits that the only ground for invoking

the jurisdiction of this court by obtaining leave under Clause 12 of the Letters

Patent is that the State had its Principal Seat of governance at Writers' Building

within the original jurisdiction of this court. Counsel contends that this may have

far-reaching consequences since every civil suit would then be filed against the

State wherever the State can be shown to have an administrative office.

According to him, since the Government has administrative offices in most

territorial units of the State and, by implication, has territorial omnipresence,

litigants would be at liberty to choose their courts regardless of the situs of the cause of action. Counsel disputes the very basis of the plaintiff's contention that

the seat of governance of the State (at Writers' Building) automatically means

that the State "carries on business" at Writers' Building in the context of the

contract which forms the subject-matter of the suit. Counsel submits that the

"business" of governing the State is not contemplated in Clause 12 of the Letters

Patent and would only mean contracts related to commercial or business activity

undertaken by the State. Counsel seeks to draw a distinction between activities

of a commercial nature and those undertaken as an extension of the sovereign

functions of the State. Counsel relies on several decisions to buttress this point,

namely, that it is the nature of the activity which would determine whether a

State can be sued where it allegedly carries on business. The decisions relied on

counsel appearing for the defendant are;

• Doya Narain Tewary Vs. The Secretary of State for India in Council: (1886) ILR Cal

256 (DB)

• Rodricks Vs. Secretary of State for India: (1912) ILR 40 Cal 308 (DB)

• R.J. Wyllie & Co. Vs. Secy. of State: AIR (1930) Lahore 818

• Union of India Vs. Shri Ladulal Jain: AIR (1963) SC 1681

• Binani Bros. (P) Ltd. Vs. Union of India: (1975) SCC Online Del 50 & ILR (1975) 2

Del 196 (DB)

• Associated Commercial Engineers Vs. State: AIR (1979) MP 96 (DB) • Gupta Sanitary Stores Vs. Union of India: AIR (1985) Del 122 & ILR (1985) 1 Del

169 (FB)

• Prahlad Rai Dalmia Vs. Union of India: AIR (1986) Del 76 (DB)

• Bakhtawar Singh Bal Kishan Vs. Union of India: (1988) 2 SCC 293.

• Union of India Vs. Electronic Controls & Instrument Engineers: 1997 SCC Online

Del 685 & (1997) 2 Arb LR 691 (DB)

• Steel Authority of India Ltd. Vs. Dinesh Kumar Jaiswal: 2002 (1) CLJ 366 (DB)

5. Mr. Sen submits that the above decisions would make it clear that it was

essential for the plaintiff to specifically plead whether the nature of the activity

forming the subject-matter of the contract was in the nature of a commercial or a

business venture which would entitle the plaintiff to invoke the jurisdiction of

this court on the basis that the seat of the government is within the original

jurisdiction of this court. According to him, the plaintiff has not made any such

averment and the records would show that the contract contemplated was in

exercise of the sovereign functions of the State since it involved providing

healthcare services to the citizens. The situs of the cause of action, as pleaded in

the plaint, occurred outside the jurisdiction of this court and, therefore, this

court would be denuded of its power to entertain the suit. Mr. Sen further

submits that since the plaintiff has chosen not to file an affidavit-in-opposition,

the assertion of the defendant with regard to the nature of the contract remains

uncontroverted. Counsel places emphasis on the nature of the contract in the decisions cited where the courts held that jurisdiction must be invoked on the

basis of the situs of the cause of action on the basis of the suit of governance of

the State.

6. The second point urged by Mr. Sen appearing for the defendant is whether

delay or participation in the proceedings on the part of the defendant can operate

as an impediment in raising the issue of the court's jurisdiction to entertain the

suit. Counsel raises two issues, namely, the plaintiff had participated in the

interlocutory proceedings in the suit and that there has been an inordinate delay

(of twenty-eight years) in the defendant urging the issue of jurisdiction.

7. Mr. Sen also seeks to limit the application of Section 21 of the CPC (that an

objection to jurisdiction has to be taken at the very threshold) to suits where

leave has been obtained under Clause 12 of the Letters Patent. Counsel relies on

Maharaja Bahadur Guru Mohadev Asram Prosad Sahi of Hathwa Vs. Hastin gs

Evelyn Beal reported in 40 CWN 65 and Raja Setrucherla Ramabhadra Raju Vs.

Maharaja of Jeypore 46 IA 151 reported in 51 Ind. Cas. 185 as instances where it

was held that section 21 has no application where this court has no jurisdiction

to hear the matter. Reliance is also placed on Manindra Chandra Nandy Vs. Lal

Mohan Ray reported in AIR 1929 Cal 358 and Kiran Singh Vs. Chaman Paswan

reported in AIR 1954 SC 340, a decision of a stellar bench of four distinguished

judges of the Supreme Court, for the proposition that a defect of jurisdiction

strikes at the very authority of the court to pass a decree and cannot be cured by

consent of parties. Counsel relies on Jnan Chand Chugh Vs. Jugal Kishore

Agarwal reported in AIR 1960 Cal 331, which held that if a court has no jurisdiction, its judgment is not merely voidable, but void. Relying on the

aforesaid decision, counsel urges that there cannot be any waiver of jurisdiction

nor can the plea of jurisdiction by a defendant be defeated on the ground of

acquiescence or participation in the interlocutory proceedings.

8. Mr. Reetobroto Mitra, learned counsel appearing for the plaintiff puts

forward a simple argument in defence to the demurrer; that the defendant carries

on business at Writers' Building, B.B.D. Bag, Kolkata- 700001, which is within

the jurisdiction of this court. Hence, the condition under Clause 12 of the Letters

Patent, namely, that if the cause of action has arisen either wholly or in case the

leave of the court shall have been first obtained, in part, within the local limits of

the ordinary original jurisdiction of this court or 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, the court, in exercise of its ordinary original civil

jurisdiction, shall be empowered to receive, try and determine such suit

(substantially in the language of the Clause 12) has been satisfied. According to

counsel, the point of consideration is whether the State of West Bengal can carry

on business at Writers' Building, Kolkata, which is within the jurisdiction of this

court. Counsel relies on Articles 298 and 299 of the Constitution of India, which

provide that the Union or the State can carry on any trade or business including

the making of contracts for any purpose, which are distinct from its sovereign

power. Counsel relies on Union of India Vs. Kamal Kumar Goswami reported in

AIR 1974 Calcutta 231, where it was held that this court had jurisdiction to

receive, try and determine a suit against the Union of India under Clause 12 of the Letters Patent, if the Union of India carries on any business within its

jurisdiction at the time of commencement of a suit regardless of where the cause

of action relating to such suit has arisen. In that case, the Division Bench,

supported the view taken in Union of India Vs. Ladulal Jain reported in AIR 1963

SC 1681, which held that the Government of India carried on business in its

Railway undertakings and the concerned court had jurisdiction to try the suit

against the Union of India as the Head Office of that Railway undertaking was

situated within the territorial limit of that court. Counsel relies on Ladulal Jain

for the aforesaid proposition and contends that the real test for determining

whether the persons aggrieved can approach the writ court under Article 226 of

the Constitution or whether the aggrieved person has to institute a civil action by

filing a Civil Suit against the State is whether the State is exercising its sovereign

function or purely a commercial function and that a Civil Suit is the appropriate

remedy for the latter. Counsel relies on the celebrated decision of Life Insurance

Corporation of India Vs. Escorts Ltd. reported in AIR 1986 SC 1370, where the

crossing over by a State or an instrumentality of the State from public law

domain to a private law field was explained by the Supreme Court in the

following manner:-

".............When the State or an instrumentality of the State ventures into the corporate world and purchases the shares of a company, it assumes to itself the ordinary role of a shareholder, and dons the robes of a shareholder, with all the rights available to such a shareholder. There is no reason why the State as a shareholder should be expected to state its reasons when it seeks to change the management, by a resolution of the Company, like any other shareholder."

Counsel contends that there is no longer any compartmentalization of the

functions of the State as "sovereign" and "non-sovereign" and the modern system

of jurisprudence does not support the attribution of sovereign power or functions

on a State. Counsel relies on N. Nagendra Rao Vs. State of A.P. reported in (1994)

6 SCC 205, where the Supreme Court drew a distinction between the executive

function of a State being sovereign in nature where the State is answerable for

such actions in courts of law and other functions from which the State cannot

claim any immunity. Counsel relies on Agricultural Produce Market Committee Vs.

Ashok Harikuni and another reported in (2000) 8 Supreme Court Cases 61, where

it was held that all functions of the State cannot be construed as Sovereign and

that the sovereign functions would broadly cover taxation, police power,

legislative function, internal and external security and maintenance of law and

order. Counsel submits that as opposed to the sovereign functions enumerated in

Agricultural Produce, in the instant case, the State had floated a tender for the

contract where the plaintiff as the successful bidder had been awarded the

contract. The contract was purely commercial in nature and did not involve the

State exercising its sovereign function in the nature of a welfare action as has

been argued on behalf of the defendant. Since the contracts were purely

commercial in nature, leave had been prayed for and obtained under Clause 12

of the Letters Patent since the defendant was carrying on business at Writers'

Building, within the jurisdiction of this court at the time of commencement of the

suit.

9. Counsel submits that after institution of the suit, several interlocutory

applications were filed which were contested by the defendant thereby acceding

to the jurisdiction of this court. In this connection, counsel alludes to a joint-

measurement being taken of the work done by the plaintiff in respect of the

subject contract in the presence of the defendant's representatives and that

Receivers were appointed by orders of court which showed that the defendant by

its own action has waived and acquiesced to the jurisdiction of this court.

Counsel makes repeated references to the intervening period of twenty eight

years from the date of institution of the suit until the making of the present

application for revocation of leave. In this context, reliance is placed on

Chittaranjan Mukherji Vs. Barhoo Mahto reported in AIR 1953 SC 472, where a

Bench of Chief Justice Kania, Justice Patanjali Sastri and Justice S.R. Das found

that the respondent in that case had not only acquiesced to the steps taken by

the appellant to carry forward the progress of the suit incurring considerable

expenses but "made use of the existence of the suit" (in the words of Justice

Clough of the learned First Court in that case).

10. Learned counsel for the defendant/applicant distinguishes Ladulal Jain on

the basis that the Supreme Court in that case noticed that prior to the State

taking over the running of the Railways, the business of running of Railways was

carried on by private companies which meant that the nature of the activity did

not change even after the same was taken over by the Government,. Counsel

draws supports for such contention in Bakhtawar Singh Bal Kishan Vs. Union of

India reported in (1988) 2 SCC 293 and Gupta Sanitary Stores Vs. Union of India reported in AIR (1985) Del 122. Counsel distinguishes Union of India Vs. Kamal

Kumar Goswami reported in AIR 1974 Calcutta 231 also on that basis. According

to counsel, the issue in Life Insurance Corporation of India Vs. Escorts Ltd.

reported in AIR 1986 SC 1370 was whether the High court while exercising writ

jurisdiction under Article 226 ought to interfere with contractual obligation and

the court held that if the contractual obligations partake of a public law

character then the court may intervene in exercise of its constitutional writ

jurisdiction. Counsel submits that the issue under consideration in N. Nagendra

Rao was whether the State is vicariously liable for the negligence of its officers in

the discharge of their statutory duties where the Supreme Court held that

sovereign immunity, as a defence, is not available where the State is involved in

commercial or private undertaking as it is not available where officers of the

State are guilty of interfering with the life and liberty of a citizen in a manner not

warranted by law. According to counsel, the issue of sovereign immunity is not

under consideration as the State does not dispute that its contractual obligations

are subject to judicial review. The only question is with regard to the territorial

jurisdiction of the court in which such action can be initiated by the citizen.

Arguing to counsel, the activity undertaken by the State is in exercise of its duty

as a welfare State is distinct from commercial or business ventures and in the

case of the farmer, the court where the cause of action arose would have the

territorial jurisdiction to entertain the Civil Suit.

11. I have heard learned counsel appearing for the parties and carefully

considered the decisions relied upon. The controversy in the demurrer application filed by the defendant for revoking the leave granted to the plaintiff

under Clause 12 of the Letters Patent is premised on the contention that the

State cannot be said to be "carrying on business" when the contract in question

is an extension of the sovereign function of the State. The defendant contends

that leave under Clause 12 could not have been granted to the plaintiff for

instituting the suit solely for the reason that the defendant State of West Bengal

had its principal seat of governance at Writers' Building, Kolkata-1 within the

original jurisdiction of this court on the date of institution of the suit. The

defendant's case is that the cause of action pleaded in the plaint has not arisen

within the original jurisdiction of this court. The point for adjudication arises

from the presumption that leave under Clause 12 of the Letters Patent, 1865,

may be granted by the High Court of Judicature at Fort William in Bengal, in the

exercise of its ordinary original civil jurisdiction, and the court shall be

empowered to receive, try and determine suits (other than those relating to land

and other immovable property) if (a) the cause of action shall have arisen in part

within the local limits of the ordinary original civil jurisdiction of this court, the

presumption being that if the cause of action arises wholly within the local limits

of the jurisdiction of this court, then no such leave is required and (b) if the

defendant at the time of commencement of the suit shall (i) dwell or (ii) carry on

business or (iii) personally work for gain within such limits. Since it is not the

case of any of the parties that the State can either dwell or personally work for

gain, the question is whether the State, in the facts and circumstances of the present case, can be said to "carry on business" at the time of commencement of

the suit within the original jurisdiction of this court.

12. The case made out in the plaint relates to a contract entered into between

the plaintiff and the defendant (State of West Bengal) following the plaintiff

participating in a tender for construction of a primary Health Centre at Chiapat,

Midnapore. Disputes arose between the parties with the plaintiff contending that

the actual cost of construction exceeded the estimate for cost of work in the

tender because of the inaccessibility of the site. The plaintiff further contended

that the plaintiff was prevented from completing the work within the time by

reason of the defendant's approach of the terms of the contract. The plaintiff

claimed a sum of Rs.5,18,240/- including the balance outstanding from the

defendant, refund of security deposit and refund of amounts paid towards

materials for the construction. The pleading in paragraph 35 of the plaint is as

follows;

"In as much as the defendant had and has its principal seat and office at Writers' Building

within the aforesaid jurisdiction as stated in paragraph 4 herein and in as much as work

was carried out and the contract was executed as mentioned in various paragraphs of the

plaint outside the jurisdiction aforesaid the plaintiff prays leave under Clause 12 of the

Letters Patent."

13. The contention of the defendant that the leave is liable to be revoked by

reason of the fact that the State cannot be said to "carry on business" at Writers'

Building, has to be tested on the nature of the contract which forms the subject

matter of the suit. For understanding the relevance of delving into the nature of

the work which the contract envisaged and the role of the defendant State in the performance of the said contract, an overview of the decisions cited should briefly

be mentioned. The case law relied on by learned counsel for the defendant

proceeds on the basis that there is a fundamental distinction between the

sovereign functions of a State and transactions/enterprises to which a State is a

party but which involves a commercial angle. The approach of the courts in

elevating certain functions of the State as emanating from a "Sovereign" can be

found from Doya Narain Tewary Vs. The Secretary of State for India in Council

[(1886) ILR 14 Cal 256]; Rodricks Vs. Secretary of State for India; [(1913) ILR 40

Cal 308], R.J. Wyllie and Co. Vs. Secretary of State [AIR 1930 Lah 818]; Binani

Borthers (P) Ltd. Vs. Union of India [ILR 1975 II Delhi 196]; Gupta Sanitary Stores

Vs Union of India [AIR 1985 Delhi 122]; (confirming Binani Brothers); M/s

Bakhtawar Singh Bal Kishan Vs. Union of India [(1988) 2 SCC 293]; Kiran Singh

Vs. Chanam Paswan [AIR 1954 SC 340], where it was held that the expression

"carry on business" cannot apply to the State or the Government of India as the

business of governing the country is not "business within the meaning of the

Letters Patent" (Doya Narain Tewary). This view was reinstated in Rodricks, R.J.

Wyllie and Binani Brothers. In Gupta Sanitary Stores, a three-Judge bench of the

Delhi High Court, while examining whether "carries on business" within the

meaning of Section 20 of The Code of Civil Procedure, 1908 can apply to the

Union of India proceeded further to hold that the mode of business as

contemplated under Section 20 is that it is commercial in character and that

sovereign functions of the State are outside the purview of "business". A

departure in this approach was made in Union of India Vs. Ladulal Jain reported in AIR (1963) SC 1681 where the Supreme Court rejected the argument that

running of Railways ceases to be a business when it is run by the Government

and held that the nature of the activity defines its character and the fact as to

who runs the business and with what motive cannot affect the nature of the

activity. The Supreme Court further opined that profit element is not a necessary

ingredient for carrying on business and held that the Union of India carries on

the business of running Railways and can be sued in a court of the Subordinate

Judge of Gauhati within whose territorial jurisdiction the Head-quarters of one of

the Railways run by the Union is situated.

14. In Binani Bros (P) Ltd. Vs. Union of India reported in ILR (1975) II Del 196,

the Delhi High Court held that the expression 'carries on business' or 'personally

works for gain' does not refer to the functions carried on by the Union of India in

discharge of its executive powers conferred by Article 298 of the Constitution and

distinguished Ladulal Jain on facts by holding that there was nothing on record

to show that the Director of Supplies and Disposals carried on business in New

Delhi. The question in Binani was 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. In Associated Commercial Engineers Vs.

State reported in AIR 1979 MP 96, a Division Bench of the of Madhya Pradesh

High Court was of the view that construction of a dam by the Government will

not amount to carrying on business. The Court placed reliance on Ladulal Jain

but found that the plaintiff could not show any material to the effect that the

construction of the project was a 'business proposition'. In Bakhtawar Singh Bal Kishan Vs. Union of India reported in (1988) 2 SCC 293, the Supreme Court

agreed with the reasoning of Binani Bros. and distinguished Ladulal Jain as not

being applicable to the facts of that case. The Supreme Court proceeded on the

basis that the construction of an ordnance factory for the military engineering

service of the Armed Forces is a part of the sovereign activity of the State since it

was undertaken by the Central Government for ensuring the security of India.

This decision therefore marked a departure from the reasoning of Ladulal Jain

which held that the business of running of the Railways is in the nature of the

commercial enterprise by a State and not an extension of the executive duty in

the governance of the State.

15. A similar view was held in Prahlad Rai Dalmia vs. Union of India by a

Division Bench of the Delhi High Court which distinguished Ladulal Jain on the

ground that unlike the railways, rationing of food is a sovereign function. In

Gupta Sanitary Stores, a Full Bench of the Delhi High Court sought to explain the

ratio of Ladulal Jain in the light of railways being run by private companies and

individuals before being taken over by the State which contributed to the

railways retaining the character of a business enterprise. The Court drew a

distinction between carrying on business as essentially having a commercial

flavour as opposed to the sovereign functions of a State. In the conclusions

arrived at, the Delhi High Court agreed with the view taken in Binani Bros. and

formulated the test to be an enquiry into the nature and purpose of the activity.

The view taken was if the activity is commercial in character, the suit can be filed

at the principal place of business or principal office and also at the place where the cause of action arises wholly or in part. Where the business is not of a

commercial nature, the suit must be filed against the Government at the place

where the cause of action arises wholly or in part.

[

16. The issue as to the requirement of an objection to the place of suing being

taken at the earliest possible opportunity, Maharaja Bahadur Guru Mohadev

Asram Prosad Sahi of Hathwa Vs. Hastings Evelyn Beal reported in 40 CWN 65,

has been shown which held that if the conditions of Clause 12 of the Letters

Patent were not satisfied, this court would have no jurisdiction hence could not

apply Section 21 of the CPC. In other words (and in the words used by Chief

Justice Harold Derbyshire), "..............if this court has no jurisdiction under the

Letters Patent, Section 21 of the Code of Civil Procedure cannot give it jurisdiction". In Kiran Singh Vs. Chaman Paswan reported in AIR 1954 SC 340, the Supreme

Court was of the view that a decree passed by a court without jurisdiction is a

nullity and its invalidity can be set up whenever and wherever it is sought to be

relied upon even at the stage of execution or in collateral proceedings. In the

words of the Supreme Court,

"a defect of jurisdiction, whether it is pecuniary or territorial, or whether it is in

respect of the subject-matter of the action, strikes at the very authority of the court

to pass any decree, and such a defect cannot be cured even by consent of parties".

17. In Manindra Chandra Nandy Vs. Lal Mohan Roy reported in AIR 1929 Cal

358, held, inter alia, that if Section 16 is not to be applied to the Original Side,

then any other section which appears to be incidental or ancillary thereto cannot

also be made applicable. In Achut Anant Pai Vs. Governor General-in-Council reported in AIR 1955 Cal 331, it was held that since leave under Clause 12 of the

Letters Patent is the very foundation of the jurisdiction, the question of waiver of

objection to jurisdiction in cases instituted under Clause 12, cannot arise at all.

The court however found that different considerations will arise in cases governed

by Section 20 of the CPC where Section 21 is attracted. In Jnan Chand Chugh Vs.

Jugal Kishore Agarwal and Ors. reported in AIR 1960 Cal 331, the Calcutta High

Court relying upon Rajalakshmi Dassee Vs. Katyayani Dassee reported in ILR 38

Cal 639, held, inter alia, that if a court assumes to act where it has no

jurisdiction, "its adjudications are all utterly void and have no effect either as an

estoppel or otherwise".

18. The Supreme Court decided three points in Kamal Kumar Goswami (AIR

1974 Cal 231) following the ratio of Ladulal Jain. First, that Doya Narain Tewary

was no longer good law as being contrary to the decision of Ladulal Jain and

second, if the court has jurisdiction over a private individual carrying on

business within the court's jurisdiction at the commencement of the action under

Clause 12 of the Letters Patent, then it cannot be said that the court ceases to

have jurisdiction over the Government when the Government carries on business

within the jurisdiction of the court. The third point was that if the Union of India

carries on business within the jurisdiction of a court, the determination of the

situs of the cause of action becomes wholly irrelevant as that court shall have

jurisdiction over the Union of India. The blurring of distinction between the line

historically drawn by the courts between the sovereign and non-sovereign

functions of the State was pronounced in Agricultural Produce Market Committee where the Supreme Court held that the categorization of "sovereign" would

depend on the nature of power and the manner of its exercise. The court

expressed the view that ".............defence of the country, raising armed forces,

making peace of war, foreign affairs, power to acquire and retain territory may be

approved to be 'sovereign' since these are not amenable to the jurisdiction of

ordinary civil courts". The other functions of the State including welfare activity of

the State were not construed as sovereign exercise of power which would show

that "..........every Governmental function need not be 'sovereign'. The Supreme

Court proceeded to decide the issue in the following manner;

"32. So, sovereign function in the new sense may have very wide ramification but essentially sovereign functions are primary inalienable functions which only the State could exercise. Thus, various functions of the State, may be ramifications of "sovereignty" but they all cannot be construed as primary inalienable functions. Broadly, it is taxation, eminent domain and police power which covers its field. It may cover its legislative functions, administration of law, eminent domain, maintenance of law and order, internal and external security, grant of pardon. So the dichotomy between sovereign and non-sovereign function could be found by finding which of the functions of the State could be undertaken by any private person or body; the one which could be undertaken cannot be sovereign function. In a given case even on subjects on which the State has the monopoly may also be non- sovereign in nature. Mere dealing in subject of monopoly of the State would not make any such enterprise sovereign in nature."

19. The historical weightage given to the term "sovereignty" and "sovereign

immunity" was whittled down in N. Nagendra Rao & Co. Vs. State of Uttar

Pradesh [(1994)6 SCC 205], where the Supreme Court held that the concept of

sovereignty had a theoretical context in power vesting in a person or body which

is supreme. It was further held that the distinction between sovereign and non-

sovereign powers were irrelevant both before and after the Constitution came into force. The court proceeded to opine that "sovereignty" had its social context in the

monarchy being vested with legislative, executive and judicial powers and quoted

the English Political Theorist and Economist Harold Laski

".........that sovereignty was the supreme coercive power and it was by possession

of sovereignty that the State was disgruntled from all other forms of human

association".

After tracing the historical approach to the position of a sovereign, the Supreme

Court concluded that the dilution and disappearance of the concept of

sovereignty can be traced to the growth of the outlook that "sovereignty vests in

the people" and that "the old and archaic concept of sovereignty thus does not

survive". The most significant pronouncement of the Supreme Court in N.

Nagendra Rao is that the distinction between sovereign or non-sovereign power

does not exist and that everything depends on the nature of power and manner of

its exercise. The view of the Supreme Court expressed in the following words is

required to be set out;

"any watertight compartmentalization of the functions of the State as sovereign

and non-sovereign or governmental and non-governmental is not sound. It is

contrary to the modern prejudicial thinking" and "the demarcating line between

sovereign and non-sovereign powers for which no rational basis survives has

largely disappeared".

20. In the judgment of Justice Chinnapa Reddy in the celebrated case of LIC

Vs. Escorts [(AIR) 1986 SC 137], the impossibility of drawing the line between

sovereign and other actions of the State was reiterated as also demarcating the frontiers of public law domain and private law field. The court reiterated that the

question must be decided in each case with reference to the particular action

together with other relevant circumstances. Tethering the State to the ground, as

it were, was complete when the court equated the State with an ordinary

shareholder with all the rights available to a shareholder.

21. The above cases show that not only has the demarcation between sovereign

and non-sovereign functions emanating from a State disappeared with reference

to judicial scrutiny of State action but further that the nature of the power and

the manner of its exercise will have to be seen in the context of the particular

facts of each case. The facts in the present case, as pleaded in the plaint (the

dismissal of which is being sought in the present application), involves the

plaintiff, an individual, who upon successfully participating in a tender floated by

the defendant, State of West Bengal, entered into contract with the defendant for

construction of a dispensary building and primary Health Centre at Chaipat,

Midnapore. The plaintiff claims breach of the terms of the contract by the

defendant which led to the plaintiff being prevented from completing the work

within the stipulated time and incurring additional costs causing loss and

damage to the plaintiff. The subject-matter of the plaint and the relief claimed

therein is therefore the transaction between the contractor plaintiff and the State.

Although, the end product of the contract happens to be a dispensary building,

the subject-matter and the suit is a transaction between two contracting parties

simpliciter. The nature of the project, namely, construction of a dispensary

building/primary Health Centre cannot, in the view of this court, transform the nature of the dealing into more than what it simply is; or in other words, elevate

the role of the defendant State to that of a sovereign exercising its functions for

public welfare. The situation may have been different if the defendant State had

taken the work of construction of a public Healthcare Centre upon itself and

been responsible for the actual execution of the work. By selecting the plaintiff as

the successful bidder for the proposed project, the State donned the robes of a

contracting party who is equally bound by the terms of the contract as that of the

private individual/plaintiff. The entire argument made on behalf of the defendant

proceeds on the basis that where the activity undertaken by the State is in

exercise of its sovereign functions, as distinguished from commercial ventures,

the court where the cause of action arose would have the territorial jurisdiction

to entertain the civil suit instituted by a plaintiff. There are two answers to this

argument. First, the statements made in the plaint do not reflect that the State

entered into the contract with the plaintiff in aid of any sovereign or welfare

functions and second, there is also no evidence from the pleadings that the

dispensary building was a non-commercial enterprise. Further, to an individual,

who has entered into the transaction involving valuable consideration for

performance of work under the terms of a contract, the dealing is imbued with

the flavour of a commercial venture. It would matter little to the individual

whether the contracting party at the other end is the State of West Bengal, the

Union of India or any instrumentality of the State declaring the work concerned

to be an expression of its sovereign function. At this point, it may be useful to re-

visit Kamal Kumar Goswami where the Supreme Court held that a court under Clause 12 of the Letters Patent has jurisdiction to receive, try and determine a

suit against the Union of India if the Union of India carries on business within its

jurisdiction at the time of commencement of a suit against it irrespective of the

question as to where the cause of action relating to such a suit has arisen.

22. Two decisions cited by learned counsel for the defendant needs particular

mention. The first is of a Division Bench of this court:-

Steel Authority of India V. Dinesh Kumar Jaiswal, which was placed for the

reference made by the court to a view expressed in an earlier decision wherein it

was held that just because the Government can be said to be present everywhere

and be consequently dwelling in each and every place at the same time, a

plaintiff cannot have the right to elect the forum in which to sue the Government.

The aforesaid decision was however concerned with the application of Section 20

of The Code of Civil Procedure to matters governed by Clause 12 of the Letters

Patent and the primary point of adjudication was the proper place of suing when

the defendant Corporation had one of its offices within the ordinary original civil

jurisdiction of this court. The point with regard to what would be the correct

position if the State was the defendant was an incidental observation made by

the Division Bench. The next decision is Gupta Sanitary Stores V. Union of India

of a three member Bench of the Delhi High Court which considered the scope of

the expression "business" as used in Section 20 of the CPC. The Court explained

the scope of Ladulal Jain in the context of the running of railways which had

been held to be a business in the case of Ladulal Jain. After examining various

decisions, it was held that if the activity concerned is in the nature of a commercial venture, the suit against the Union of India can be instituted at the

place of central management and control of that business and that a plaintiff can

institute the suit against the Union of India at the principal seat of the

Government. The Court further reinforced that "carries on business" under

Section 20 of the CPC is clearly business in a commercial sense and envisages a

defendant carrying on a commercial enterprise. In fact, in that decision, the

passage relied on by the Division Bench of this Court in Steel Authority of India

was quoted (Wels C. In Cubit Sparhall Rundle V. Secretary of State in Council,

(1862) 1 Hyde 37) for the proposition that universal dwelling of a Government

cannot give a plaintiff the right to elect its forum. The ratio of that decision was

that

"if an individual defendant cannot be sued anywhere the plaintiff likes, likewise

the Government cannot be sued anywhere a plaintiff likes, it can be sued at its

principal place of business or headquarters if it is engaged in a commercial

venture".

The conclusions summarised by the court in paragraph 54 of that decision

reiterates that the headquarters are the principal office where the centre of

control exists and further that the expression "business" means commercial

business and not the duties or functions of a sovereign character. The court also

concluded that whether the State has carrying on business is a pure question of

fact.

23. The approach of the courts, as evident from the above decisions points to a

direction different from what is being urged on behalf of the defendant in the present case. In Ladulal Jain, the Supreme Court held that the Union of India

which carries on the business of running railways can be sued in the court of the

subordinate judge of Gauhati within whose territorial jurisdiction the

headquarters of one of the railways run by the Union is situated. The decisions

explaining the scope of Ladulal Jain in the context of business ventures of the

State, as distinct from its sovereign functions, reinforces the view that a plaintiff

cannot take advantage of the territorial omnipresence of the Government by

electing the forum in which to sue the Government. The rationale behind the

said view was to discourage a plaintiff from placing the Government at a

disadvantage which may or may not "amount to an evil of the greatest magnitude"

(the words of Wels C. In Cubit Sparhall Rundle). The reason for this approach was

that a plaintiff should not drag the Government from its principal place of

business or headquarters to a forum where the Government has a subordinate

office. The focus has always been on the seat of power where the Government

was carrying on a commercial activity and not any other place which may be

convenient to the plaintiff. It has clearly been held in the various decisions that

if it is a commercial activity, the Government can be sued at the place of central

management and control of that business. The decisions cited by counsel have

also reiterated that a court must look into the nature of the particular business

and that the facts may vary from case to case. In the facts of the present case,

this court cannot proceed on a presumption that construction of a primary

health centre must necessarily have its origins in or be an extension of the

sovereign functions of the defendant State of West Bengal, in the absence of any statement made in the plaint to that effect. It may also be said that in the

present day, there are several hospitals/medical centres which are being

managed and run by the Government purely as commercial ventures both in and

outside Calcutta. The facts would have assumed a different character had the

plaintiff sued the defendant State in a remote corner of West Bengal taking

advantage of the territorial omnipresence of the State Government. Writers'

Building, at the time of institution of the suit, was undeniably the seat of and the

nerve centre of control and administration of the Government in the State of West

Bengal. Since it has already been held that the nature of the transaction entered

into between the plaintiff and the defendant partakes of a commercial flavour, the

argument of counsel for the defendant, however attractive and industrious, must

be seen in the back drop of the decisions where it has been held that the situs of

the cause of action in determining the place of suing would be relevant only in

cases where the State was exercising its sovereign functions.

24. The next question is whether the delay of 28 years on the part of the

defendant in filing the present application for revocation of leave granted to the

plaintiff in 1990 can operate against the defendant for granting the relief it seeks,

namely revocation of leave and dismissal of the suit. The decisions relied on by

counsel for the defendant including Kiran Singh vs. Chaman Paswan reported in

AIR 1954 SC 340 and Jnan Chand Chugh vs. Jugal Kishore Agarwal reported in

AIR 1990 Cal 331 on the principle that a decree passed by a court without

jurisdiction is a nullity and its invalidity can be set up whenever the decree is

sought to be enforced, cannot be called to question. The aforesaid decisions would however apply only if the defendant succeeds at the threshold of the

plaintiff not being entitled to the leave granted under Clause 12 of the Letters

Patent in 1990. On the other hand, the decision of the Supreme Court in

Chittaranjan Mukherji Vs. Barhroo Mahto reported in AIR 1953 SC 472 would be

relevant as in that case, the participation of the defendant (and its acquiescence)

was found to militate against the ground for revocation. The defendant has

admittedly contested interlocutory applications filed in the suit including in a

joint measurement taken of the work done by the plaintiff and receivers were

appointed by orders of court. The aforesaid conduct therefore ill-behoves the

defendant to taking an objection to jurisdiction after a silence of 28 years. The

reliance placed on Maharaja Bahadur Guru MohadevAsramProsadSahi of Hathwa

v Hastings Evelyn Beal reported in 40 CWN 65, AchutAnant Pal v Governor-

General -in Council reported in AIR 1955 Cal 331 and Manindra Chandra Nandy v

Lal Mohan Ray reported in AIR 1929 Cal 358 on section 21 of the CPC not being

applicable in cases where jurisdiction is founded on Clause 12 of the Letters

Patent can only be seen as a buffer for the inexplicable delay on the part of the

defendant in contesting the issue of jurisdiction. This Court is of the view that

whether the defendant is entitled to question the court's jurisdiction to entertain

the suit in the context of the defendant's acquiescence and participation is an

issue relevant for the grant or refusal of relief and is thus secondary to the

question of whether this Court has the power to entertain the suit under Clause

12 of the Letters Patent.

25. In view of the above discussion, this Court finds no reason for granting the

reliefs prayed for in the application of the defendant for revoking the leave

granted under Clause 12 of the Letters Patent or for dismissing the suit for want

of jurisdiction.

26. G.A. No. 1093 of 2018 is accordingly dismissed without any order as to

costs.

27. C.S. No. 369 of 1990 will appear in the monthly list of December, 2019

before the Regular Bench.

Urgent Photostat certified copy of this Judgment, if applied for, be supplied

to the parties upon compliance of all requisite formalities.

(MOUSHUMI BHATTACHARYA, J.)