KHAMBHALIA MUNICIPALITY v. CHUNILAL BHAGWANJI — 1968 DIGILAW 115 (GUJ)

B. R. SOMPURA, J. ( 1 ) THE appellant-defendant Khambhalia Municipality has filed the present appeal against the decree of eviction passed by the learned District Judge at Jamnagar in Civil Appeal No. 256/62 by which he reversed the decree of dismissal of the suit passed by the learned Civil Judge Junior Division at Khambhalia in Civil Suit No. 55 of 1961. ( 2 ) AN interesting question whether Part II of the Saurashtra Rent Control Act 1951 hereinafter referred to as the Act applies to premises taken on lease by a municipality or not has arisen in this appeal. The plaintiff filed the suit claiming that the defendant municipality had taken on rent the suit premises for its office and as the tenancy has been duly terminated by a notice dated 24th July 1961 the defendant should be asked to hand over the possession of the suit premises. It was claimed by the plaintiff that the premises were rented by the municipality for its office and so the provisions of the Act would not apply to the same. The defendant contested the suit and urged that the Act is applicable to the suit premises as the municipality was carrying on its entire business in the suit premises. The learned trial Judge held that the Act applied to the suit premises and dismissed the suit. Thereafter an appeal was preferred by the plaintiff in the Court of the District Judge at Jamnagar who allowed the appeal and passed the decree for eviction as stated above. ( 3 ) MR. Vakharia appearing on behalf of the municipality urged that the learned Judge erred in interpreting sec. 6 (1) of the Act. He contended that by virtue of sec. 4 (1) the provisions of Part II would also apply and the learned Judge was in error in passing the decree against the municipality. He also contended that the learned Judge erred in interpreting the expression `business in sec. 6 (1) of the Act. According to him the expression business would include the activities carried on by the municipality and as such Part II of the Act would apply to the suit premises. ( 4 ) THE Act is based on the model of the Bombay Rents Hotel and Lodging House Rates Control Act 1947 The same is divided into three parts. Part I contains sec. 1 to 5; Part II contains sec. ( 4 ) THE Act is based on the model of the Bombay Rents Hotel and Lodging House Rates Control Act 1947 The same is divided into three parts. Part I contains sec. 1 to 5; Part II contains sec. 6 to 30; and Part III contains sec. 31 to 36. Sec. 2 (2) of the Act provides that Part II of the Act shall extend to the areas comprising the cities and towns specified in the Schedule annexed to the Act. Sec. 2 (3) empowers the State Government by a. . . . . . . . . notification in the official Gazette to extend to any other area any or all of the provisions of Part II of the Act. Similarly sec. 2 (4) empowers the Government at any time by notification to direct that any or all the provisions of Part II shall cease to extend in such area and on such date as may be specified in the notification. Sec. 4 of the Act deals with exemptions. Sec. 4 (1) provides that the Act shall not apply to any premises belonging to the Government or a local authority or apply as against the Government to any tenancy or other like relationship created by a grant from the Government in respect of premises taken on lease or requisitioned by the Government but it shall apply in respect of premises let to the Government or a local authority. Sub-sec. (2) of sec. 4 provides that the Act shall not apply to new premises erected and let for the first time on or after the 1st January 1951. Sub-sec. (3) of sec. 4 empowers the Government by issue of a notification in the Official Gazette to direct that all or any of the provisions of the Act shall not apply to premises used for a public purpose of a charitable nature or to any class of premises used for such purpose; to premises used by public trust for a religious or charitable purpose and let at a nominal or concessional rent; or to premises held by a public trust for a religious or charitable purpose and let with a view to applying the proceeds of rents to such premises. Sec. 6 (1) of the Act provides that in areas specified in the Schedule Part II shall apply to premises let for residence education business trade or storage provided that the Government may by notification in the Official Gazette direct that in any of the said areas Part II shall cease to apply to premises let for any of the said purposes. Sec. 6 (2) empowers the State Government by Notification in the Official Gazette to direct that in any of the said areas Part II shall apply to premises let for any other purposes. Sec. 6 (3) provides that where Government has extended Part II of the Act to any area under sub sec. (3) of sec. 2 Part II shall apply to premises let for such of the purposes referred to in sub-sec. (1) of or notified under sub-sec. (2) or let for such standard rent as the Government may by a notification in the Official Gazette specify. ( 5 ) THERE is no contention of Mr. Vakharia that by virtue of sec. 4 (1) the Act applies in respect of premises let to Government or local authority. Municipality is a local authority and there is a provision in this section which says that the Act shall apply in respect of the premises let to municipality and that being so according to him it is not necessary for the municipality to further prove that the premises were let for residence education business trade or storage. Looking to the scheme of the Act the contention of Mr. Vakharia cannot be upheld. Sec. 4 occurs in Part I and sec. 6 occurs on Part II. Reading sub-sec. (1) of sec. 4 and sub-sec. (1) of sec. 6 it is clear that in order that the Act may apply to local authorities the same must be let to it for residence education business trade or storage. Sec. 4 (1) provides that the Act shall apply in respect of the premises let to the Government or local authority but that is provided as an exception to the provision of exemption contained in the first part of sec. 4 (1 ). It merely clarifies that as against the Government the Act would not apply to the premises let to Government or local authority. 4 (1 ). It merely clarifies that as against the Government the Act would not apply to the premises let to Government or local authority. The main provision regarding the restriction is in Part II and for this purpose the Legislature has specifically provided that the Act would apply to premises let for residence education business trade or storage. The Government has been empowered by notification to direct that Part II of the Act shall apply to premises let for any other purposes but is admitted that no notification is issued by the Government to provide for the application of Part II of the Act in respect of the premises let for any other purposes than those mentioned in sec. 6 (1 ). According to sec. 4 (1) the Act may generally apply to premises let to Government or the local authorities but for the application of Part II the same must be let for the purposes specified in sec. 6 (1 ). Hence in order that Part II should apply to the suit premises the same must come within sec. 4 (1) and must be let for residence education business trade or storage or Government must have issued notification providing for its application to premises let for any other purposes. This being so the contention of Mr. Vakharia that by virtue of latter part of sec. 4 (1) of the Act Part II applies to the suit premises cannot be upheld and must be rejected. ( 6 ) IN the present case no rent note is executed by the municipality for the premises let to it. Under the circumstances the learned Judge has considered the whole evidence and came to the conclusion that the offices of the municipality are housed in the suit premises. He has also held that library medical stores and the records of the municipality are kept in the suit premises. But he observes that merely because the municipal records or medical or certain other accessories required in connection with the activities connected with the control of filaria and malaria are kept in the suit premises it cannot be said that those premises were let for storage. But he observes that merely because the municipal records or medical or certain other accessories required in connection with the activities connected with the control of filaria and malaria are kept in the suit premises it cannot be said that those premises were let for storage. He further observed that the records of every office are usually kept in the same building which is being used as the office and hence from the mere circumstance that the records are kept in one of the rooms of the building where the defendant is running its office it cannot be said that the whole building was let for storage. He also considered the fact that the offices concerning the schools library and literary activities are located in the suit premises. But he held that merely because the work of lending books to students is being done in one of the rooms of the suit premises it cannot be said that the building was let for education. On an overall appreciation of the evidence he came to the conclusion that the suit premises were let mainly for the purpose of office of the municipality. It is the contention of the municipality that the municipality maintains the water works and water tax is being collected at the suit premises. But the learned Judge observed that the municipality is supplying water only within its limits and was discharging one of the obligatory duties and hence he held that the operation of the municipality in supplying water cannot be characterised as the carrying on of a business. While construing the expression `business he held that it cannot be said that the municipality is carrying on any business the object of which is primarily the acquisition of profit or gain. Under the circumstances he held that it can never be said that the suit premises were let for business as contemplated by sub-sec. (1) of sec. 6 of the Act. Mr. Vakharia criticised this finding of the learned Judge and urged that there was evidence on the record to show that the premises were not merely used as an office of the municipality. He urged that the purposes for which the premises were let must be considered and the learned Judge was in error in considering the main use of the premises. Mr. Vakharia contended that main or dominant object must be considered. He urged that the purposes for which the premises were let must be considered and the learned Judge was in error in considering the main use of the premises. Mr. Vakharia contended that main or dominant object must be considered. The premises may be used for several purposes but the applicability of Part II must be considered on the main or dominant purpose for which the same is let. He relied upon a decision of the Supreme Court in Uttamchand v. S. N. Lalwani A. I. R. 1955 S. C. 716 where the Supreme Court held that the Court must apply the test of the dominant intention of the parties and that the Court must determine the character of the lease by asking itself as to what was the dominant intention of the parties in executing the document. The learned Judge was right in considering what was the main purpose for which the premises were let. This inference of fact drawn from other proved facts is a finding of fact and cannot be disturbed otherwise than on a point of law. Mr. Vakharia had nothing to urge against that aspect of the case. Under the circumstances the appeal will have to be decided on the basis that the premises were being used mainly as the office of the defendant municipality where the library medical stores and records are kept and where the water tax is being collected for the supply of water. ( 7 ) MR. Vakharia urged that the expression business is very wide and is not confined merely to activities carried on for profit or gain. In support of his contention he relied on some of the decisions of the Supreme Court. The first decision on which he relied is D. N. Banerjee v. P. B. Mukherjee and others A. I. R. 1953 S. C. 53. In that case disciplinary action was being taken against one head-clerk and Sanitary Inspector of Budge Municipality who were the members of the Municipal Workers Union. The question had arisen before the Supreme Court as to whether the provisions of the Industrial Disputes Act 1947 which would apply to the above employees of the Municipality. Their Lordships considered the definition of Industry in secs. The question had arisen before the Supreme Court as to whether the provisions of the Industrial Disputes Act 1947 which would apply to the above employees of the Municipality. Their Lordships considered the definition of Industry in secs. 2 (j) of the Industrial Disputes Act where it was defined as meaning any business trade undertaking manufacture or calling of employers and includes any calling service employment handicraft or industrial occupation or avocation of workmen. In the course of arguments their Lordships considered the definition of public utility service given in sec. 2 (n) of that Act where according to cl. (v) any system of public conservancy or sanitation would be public utility service. In this respect their Lordships observed :-A public utility service such as railways telephones and the supply of power light or water to the public may be carried on by private companies or business corporations. Even conservancy or sanitation may be so carried on though after the introduction of local self-government this work has in almost every country been assigned as a duty to local bodies like our municipalities or District Boards or Local Boards. A dispute in these services between employers and workmen is an industrial dispute and the proviso to sec. 10 lays down that where such a dispute and a notice under sec. 22 has been given the appropriate Government shall make a reference under the sub-section. If the public utility service is carried on by a corporation like a municipality which is the creature of a statute and which functions under the limitations imposed by the statute does it cease to be an industry for this reason ? The only ground on which one could say that what would amount to the carrying on of an industry if it is done by a private person ceases to be so if the same work is carried on by a local body like a municipality is that in the latter there is nothing like the investment of any capital or the existence of a profit-earning motive as there generally is in a business. But neither the one nor the other seems a sine qua non or necessary element in the modern conception of industry. IN specifying the purpose to which the municipal fund is applicable sec. But neither the one nor the other seems a sine qua non or necessary element in the modern conception of industry. IN specifying the purpose to which the municipal fund is applicable sec. 108 Bengal Municipal Act (15 of 1932) enumerates under 36 separate heads several things such as the construction and maintenance of streets lighting water supply conservancy maintenance of dairy farms and milk depots the taking of markets on lease etc. They may be described as the normal functions in ordinary activities of the Municipality. Some of these functions may appertain to and partake of the nature of an industry while others may not. For instance there is a necessary element of distinction between the supply of the power and light to the inhabitants of a municipality and the running of charitable hospitals and dispensaries for the aid of the poor. In ordinary parlance the former might be regarded as industry but not the latter. The very idea underlying the entrustment of such duties or functions to local bodies is not to take them out of the sphere of industry but to secure the substitution of public authorities in the place of private employers and to eliminate the motive of profit-making as far as possible. The levy of taxes for the maintenance of the services of light and water is a method adopted and devised to make up for the absence of capital. The undertaking of the service will still remain within the ambit of what we understand by an industry though it is carried on with the aid of taxation and no immediate material gain by way of profit is envisaged. AFTER considering the whole scheme of the Act and the context in which the legislation was passed their Lordships came to the conclusion as under :- having regard to the definitions found in our Act the aim or objective that the Legislature had in view and the nature variety and range of disputes that occur between employers and employees we are forced to the conclusion that the definitions in our Act include also disputes that might arise between municipalities and their employees in branches of work that can be said to be analogous to the carrying out of a trade or business. In the State of Bombay and Others v. The Hospital Mazdoor Sabha and Others A. I. R. 1960 S. C. 610 the question was whether the hospitals run by the municipality would fall within the scope of Industrial Disputes Act 1947 Gajendragadkar J as he then was declaring the judgment of the Court observed as under :-LET us first read the definition. Sec. 2 (j) provides that industry means any business trade undertaking manufacture or calling of employers and include any calling service employment handicraft or industrial occupation or avocation of workmen. It would be noticed that the words used in the definition are very wide in their import and even so its latter part purports to provide an inclusive definition. The word undertaking according to Webster means anything undertaken; any business work or project which one engages in or attempts an enterprise. Similarly trade according to Halsbury in its primary meaning is exchange of goods for goods or goods for money and in its secondary meaning it is any. business carried on with a view to profit whether manual or mercantile as distinguished from the liberal arts or learned professions and from agriculture; whereas business is a wider term not synonymous with trade and means practically anything which is an occupation as distinguished from a pleasure. The word calling again is very wide; it means ones usual occupation vocation business or trade; so is the word service very wide in its import. Prima facie if the definition has deliberately used words of such wide import it would be necessary to read those words in their wide denotation; and so read hospitals cannot be excluded from the definition. HE concluded that it is the character of the activity which decides the question as to whether the activity in question attracts the provisions of sec. 2 (j) of the Industrial Disputes Act; who conducts the activity an whether it is conducted for profit or not do not make a material difference He also observed :- it is difficult to state these possible attributes definitely or exhaustively; as a working principle it may be stated that an activity systematically or habitually undertaken for the production or distribution of goods or for the rendering of material services to the community at large or a part of such community with the help of employers is an undertaking. ( 8 ) IN the case of The Corporation of the City of Nagpur v. Its Employees A. I. R. 1960 S. C. 675 it was observed that monetary consideration for service is not an essential characteristic of industry in a modern State. It was also observed that if a service rendered by an individual or a private person would be an industry it would equally be an industry in the hands of a Corporation and if a service rendered by a corporation is an industry the employees in the departments connected with that service whether financial administrative or executive would be entitled to the benefits of the Act. Accordingly it held that the following departments of the Nagpur Corporation would be governed by the Industrial Disputes Act 1947 Public Conveyance Department Fire Brigade Department Lighting Department Water Works Department City Engineers Department Enforcement (Encroachment) Department Sewage Department Health Department Market Department Public Gardens Department Public Works Department Assessment Department Estates Department Education Department Printing Press Department Building Department and General Administration Department. In Union of India and Another v. Ladu Lal Jain A. I. R 1963 S. C. 1681 the question was whether Union of India carries on the business of running railways. Their Lordships of the Supreme Court after considering the previous decisions of that Court in State of Bombay v. Hospital Mazdoor Sabha and Corporation of City of Nagpur Its Employees and others concluded that profit element is not a necessary ingredient of carrying on of business though usually business is carried on for profit. It was also observed in that case that there appears to be no good reason to hold; that running of railways ceases to be a business when they are run by the Government. Their Lordships said :- It is the nature of the activity that defines its character. Running of railways is such activity which comes within business. The fact as to who runs it and with what motive cannot affect it. ( 9 ) SEC. Their Lordships said :- It is the nature of the activity that defines its character. Running of railways is such activity which comes within business. The fact as to who runs it and with what motive cannot affect it. ( 9 ) SEC. 3 (19) of the Bombay Industrial Disputes Act 1946 defines industry as meaning any business trade manufacture or undertaking or calling of employers This definition in the Bombay Act is similar to that given in the Industrial Disputes Act 1947 The Bombay Rents Hotel and Lodging House Rates Control Act 1947 was enacted at about the same time and the Saurashtra Act is taken as a model from the Bombay Act. Under the circumstances when the similar expression has been interpreted by the Supreme Court and is applicable in similar Acts in Bombay the interpretation would equally apply to Saurashtra. Now it is an accepted view that the element of profit making is not a necessary ingredient for business. If the service rendered by an individual or private person would be an industry it would equally be an industry in the hands of a municipal corporation. Services of public conservancy sanitation or the supply of light and water if carried on by a private individual would be industry or business it would not make any difference if the same are rendered by the municipality. It is the nature of the activities which determines the character of activities and profit element is not always necessary ingredient of carrying on of business. ( 10 ) IT is no doubt true that in taxation statutes the Supreme Court has applied the test of profit making for business. Mr. Nanavati appearing on behalf of the respondent relied upon Director S. and D. Calcutta v. Board of Revenue A. I. R. 1967 S. C. 1826 which was a case under the Bengal Finance (Sales Tax) Act 1941 and State of Andhra Pradesh v. H. A. Bakhi Bros. A. I. R. 1965 S. C. 531 which was a case under the Hyderabad General Sales Tax Act 1950 and urged that the expression business should be construed in the sense of an occupation or profession which occupies the time attention and labour of a person normally with the object of making profit. This construction is correct so far as the taxation statutes are concerned. This construction is correct so far as the taxation statutes are concerned. But apart from taxation statutes the recent trend of the Supreme Court shows that the profit element is not always a necessary ingredient of carrying of business though usually business is carried on for profit. Considering the expression `business used in sec. 6 (1) of the Act in the juxta position in which it is used it seems that the expression business would imply activities which are commercial in nature but may not be strictly with a profit motive. Considering that way several activities rendered by the Municipality as shown by the Supreme Court in Nagpur Corporation v. Its Employees A. I. R. 1960 S. C. 675 (supra) would be the activities coming within the expression business used in sec. 6 (1) of the Act. ( 11 ) EVEN though there is a finding by the learned judge that the premises were being used mainly as the office of the Municipality and as there were library medical stores and records kept in the premises and water tax also was being collected at the premises the premises can be considered to be let for the purpose of business within the meaning of sec. 6 (1) of the Act and so Part II of the Act would apply to these premises. That being so in order to entitle the plaintiff to a decree for eviction he must bring his case within the purview of sec. 12 or sec. 13 of the Act. As no such ground is alleged in the plaint the plaintiff is not entitled to a decree merely on the ground that he has terminated the tenancy and has asked the defendant to hand over the possession of the suit premises. The decree passed by the learned Dist. Judge cannot be supported and hence will have to be set aside. ( 12 ) IN the result the appeal is allowed with costs. The decree passed by the learned Judge is set aside and the decree passed by the learned trial Judge is restored. ( 13 ) MR. Nanavati requests for a certificate for filing a Letters Patent Appeal under clause 15 of the Letters Patent. Certificate is granted. .