Full Judgment Text
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PETITIONER:
ALLENBURRY ENGINEERS PRIVATE LTD.
Vs.
RESPONDENT:
RAMAKRISHNA DALMIA & ORS.
DATE OF JUDGMENT15/09/1972
BENCH:
SHELAT, J.M.
BENCH:
SHELAT, J.M.
PALEKAR, D.G.
MATHEW, KUTTYIL KURIEN
DWIVEDI, S.N.
CHANDRACHUD, Y.V.
CITATION:
1973 AIR 425 1973 SCR (2) 257
1973 SCC (1) 7
CITATOR INFO :
R 1980 SC 86 (5,6)
R 1982 SC 127 (7)
RF 1986 SC 662 (25)
R 1988 SC1164 (4)
R 1988 SC2237 (6)
RF 1989 SC 79 (2)
ACT:
Transfer of Property Act-S. 106 and 107-Meaning of the word
’Manufacturer’-Whether lease for reconditioning and
repairing vehicles is manufacture within s. 106.
HEADNOTE:
In 1953, an open piece of land in the city of Bombay
belonging to Sir Sapurji Bhairucha Mills Co. Ltd., was
purchased by Bharat Insurance Co. Ltd. In 1947, the said
piece of land was leased to Allenberry & Co. on a monthly
rent of Rs. 1800/-. In 1950, the appellant Company was in-
corporated for the specific purpose of taking over the
business of Allenberry & Co. In 1954, the appellant Company
occupied the said leased land as tenant together with
certain vehicles belonging to the said Allenberry & Co. at
an agreed rent of Rs. 1800/- per mensem. A document of
lease was executed by the parties for ten years. The
document was not, however, registered with the result that
it could not be tendered in evidence as one creating a
lease.
On January 20, 1960, the Bharat Insurance Co. served a
notice upon the appellant Company terminating the tenancy
and called upon the Company to hand over quiet and vacant
possession of the said land or part of it. Later, a suit
was filed in the Court of Small Causes at Bombay, and after
nationalisation, the L.I.C. was substituted for that of the
Bharat Insurance Co. as the plaintiff in the said suit. It
was contended by the appellant that since the tenancy was
for manufacturing purposes, one month’s notice terminating
the tenancy was an invalid notice under s. 106 of the
Transfer of Property Act. All the three Courts below,
however, concurrently held that the tenancy was not
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satisfactorily proved to be for manufacturing purposes as
alleged by the appellant company and in the absence of any
proof as to the terms for which it was made, the notice
terminating the tenancy, although it was a month’s notice,
was a valid notice and on that footing, decreed the suit.
Two questions were raised before this Court: (1) That the
tenancy being for manufacturing purposes, the presumption
laid down in S. 106, Transfer of Property Act under which
such tenancy has to be regarded as a tenancy from year to
year, terminable ’by a six months’ notice and not by a
month’s notice, must apply. (2) The second question was that
in any event, the lease was for manufacturing purposes, and
therefore, the said notice was not valid. Dismissing the
appeal.
HELD : (1) The expression "manufacturing purposes" in S. 106
of the Transfer of Property Act is used in its popular and
dictionary meaning. The burden of proving that the lease
was for manufacturing purposes lie on the appellant company
who claim,-, it to be so. That burden is to establish that
the exclusive or the dominant purpose of the lease was the
manufacturing purpose. [261D]
C. Mackertich v. Sturt & Co. Ltd., A.I.R. 1970 S.C. 889,
referred to.
(ii)The word ’manufacturer, according to the dictionary
meaning, is the making of articles or material by physical
labour or mechanical power. "Manufacture" implies a change,
but every change is not manu-
18-L348Sup.Cf./73
258
facture and every change in an article is the result of
treatment, labour and manipulation. But something more is
necessary and there must be transformation a new and
different article must emerge having a distinctive name,
character and use. [261F]
R. v. Wheeler, 2 R. ALD. 349 referred to.
(iii)The disputed premises were used mostly for storing
the sal vehicles together with spare parts etc., acquired
along with them or purchased from the market for repairing
and reconditioning and making the said vehicle fit for
resale. There is no evidence except the bare word of’ one
witness that parts such as chassis and bodies etc.. were
actually manufacture and replaced for the old. No books of
account or log books showing the work carried on the
premises or other documents were produced which would throw
light on the activities carried on the premises. Even if
the evidence of the said witness were accepted, in toto, and
it is held that some spare parts were being manufactured for
repairing or reconditioning the vehicles, the dominant
purpose of the lease would still have to be regarded as one
’for storage and resale ,of the vehicles and not for
manufacturing purpose. Manufacturing of spare parts would
then be merely incidental to the main purpose of disposal of
these vehicles. Therefore, the appellants have failed to
establish that the dominant purpose of the lease was
manufacturing purpose and therefore, the appellants could
not have challenged the legality of the notice. That being
the position, it is not necessary to go into the question
whether S. 107 has ail impact on S. 106 of the Transfer of
Property Act. [265 D]
JUDGMENT:
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 1072 of
1971.
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Appeal by special leave from the judgment and order.dated
June 16, 1971 of the Bombay High Court in Special Civil
Application No. 1604 of 1969.
M. C. Chagla, R. R. Zaiwala, P. C. Bhartari and Ravinder
Narain, for the appellant.
V. M. Tarkunde, Madan Gopal Gupta R. S. Sharma,
Rameshwar,, Dial, P. N. Chadha and B. D. Sharma, for
respondent No. 1
The Judgment of the Court was delivered by
Shelat, J. This appeal, by special leave, is against the
judgment of the High Court of Bombay. When the special
leave was granted, it ",as confined to the question whether
the tenancy in favour of ’the appellant-company was one for
manufacturing purpose, and if it was so, whether the notice
terminating the tenancy was inadequate ?
The appeal first reached hearing before a Division Bench of
this Court. At that time, the Parties were agreed that the
relationship between them was that of landlord and tenant.
But
259
the case of the appellant-company was that the lease in its
favour was for a period of ten years, that such a lease was
for manufacturing purposes, and therefore, could not be
validly terminated by a month’s notice. The respondents, on
the other hand, contended that the lease was by an
unregistered document, and that it was not a valid lease by
reason of the provisions of ss. 106 and 107 of the Transfer
of Property Act. The Division Bench did not go into the
question whether the lease was for manufacturing purpose,,,
or not. However, the Division Bench felt that the appeal
raised important questions as to the impact of s. 107 upon
s. 106 of the Act, and there being so far no decision of
this Court upon such a question referred the, appeal to a
larger Bench. That is now the matter has come up before us.
The premises with which we are presently concerned consist
of an open piece of land adjoining Haines Road in the city
of Bombay. Prior to 1963, the said piece of land belonged
to a company called Sir Shapurji, Bharucha Mills Co. Ltd.
In 1953, the said piece of land was purchased by Bharat
Insurance Co. Ltd. It appears that in 1947 the said piece
of land was leased to Allenbury & Co. on a monthly rent of
Rs. 1800/where the lessee kept a number of American vehicles
used by the army during the Second World War and purchased
by that company from the Disposal Department of the
Government of India. In or about 1950, the appellant-
company was incorporated for the specific purpose of taking
over the business of Allenbury & Co. together with all its
assets and properties including the said vehicles. In 1954,
the appellant-company occupied the said leased land as
tenant together with such of the said vehicles remaining
undisposed of till then at an agreed rent of Rs. 1800/- a
month.
It is not in dispute that at ;that time a document of lease
was executed by the-parties, which according to the
appellant,company provided for a lease for ten years. The
document was, however, not registered with the result that
it could not be tendered in evidence as one creating a
lease. There was, however, no dispute between the parties
that the appellant company paid and the respondents accepted
all throughout rent from the appellant-company at the
aforesaid agreed rate of Rs. 1,800/- a month. On January
20, 1960, the Bharat Insurance Co. Ltd. served a notice upon
the appellant-company thereby terminating the tenancy and
called upon it to hand over quiet and vacant possession of
the said premises on the ground that the appellant-company
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had sub-let the said land or part of it. The appellant-
company having failed to abide, by that demand. a suit was
filed in the Court of Small Causes at Bombay. Oil the
nationalisation of the Life, Insurance Companies and on the
260
Life Insurance Corporation of India being set up, the name
of that Corporation was substituted for that of the Bharat
Insurance Co. as the plaintiff in the said suit. The suit
was henceforth continued by the Corporation.
Although the unregistered document could not go in evidence,
the suit as well as the appeal arising therefrom before the
Appellate Bench of the Small Causes Court proceeded on ,the
basis that the relationship between the parties was that of
landlord and tenant as there was no dispute that the
occupation of the premises in question by the appellant-
company was as a tenant irrespective of What the terms or
the period of that tenancy were, which terms could not be
proved as the document in respect thereof could not be
brought on record by reason of its being an unregistered
document. The Special Civil Application under Art. 227 of
the Constitution filed in the High Court against the
judgment of the Shall Causes Court and confirmed by its
Appellate Bench, also proceeded on the assumption that the
relationship between the parties was that of landlord and
tenant. All the three courts concurrently held that the
tenancy, whatever its terms ware, was not satisfactorily
proved to be for manufacturing purposes as alleged by the
appellant-company and in the absence of any proof as to the
term for which it was made, whether it was for ten years or
from year to year, the notice terminating the tenancy and
calling upon the appellant-company to deliver vacant
possession, although it was a month’s notice, was not an
invalid notice and on that footing decreed the suit.
In these circumstances, two questions were sought to be
raised by Mr. Chagla. The first was that there being no
dispute between the parties that the relationship between
them was that of landlord and tenant and the respondents
having accepted all along the said rent of Rs. 1800/- a
month, the Court- must proceed upon the basis that the
occupation of the premises by the appellant-company was in
the., capacity as a tenant. According to him, if the
appellant-company can establish that that tenancy was for
manufacturing purposes, the presumption laid down in s. 106
of the Transfer of Property Act, under which such tenancy
has to be regarded as a tenancy from year to year terminable
by a six months’ notice and not by a month’s notice, must
apply. It is true, said he, that under s. 107 of the Act a
lease from year to year can be made only by a registered
instrument, but that provision in no way controls the
presumption laid down in s. 106 tinder which once it is
proved that the parties were in the position of a landlord
and a tenant and the tenancy was for manufacturing purposes.
has to be presumed to be ’one from year to year. According
to him, the two sections are independent of each other. the
one
261
dealing with the user and notice, and the presumption
arising from such user, and the other dealing with
compulsory registration for. a lease from year to year, or
for a term exceeding one year. Mr. Tarkunde, appearing for
the Corporation,, on the other hand, disputed the
construction of these two sections suggested by Mr. Chagla.
The second question raised by Mr. Chagla was that in any
event the lease was for manufacturing purposes, and
therefore, the said notice was not valid. Assuming that Mr.
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Chagla is right in the interpretation of ss. 106 and 107
suggested by him, even then the appellant-company has first
to establish that the lease in its favour was for
manufacturing purposes and it is then only that it can take
advantage of the rule of presumption laid down in s. 106.
The expression ’manufacturing purposes’ in s. 106 is used in
its popular and dictionary meaning., the Transfer of
Property Act not having supplied any dictionary of its own
for that expression. The burden of proving that the lease
was for manufacturing purposes, must for the purposes of s.
106 of the Transfer of Property Act, lie on the party who
claims it to be so, in. the present case the appellant
company. That burden is to establish that the exclusive or
at least the dominant purpose of the lease was the
manufacturing purpose. [See C. Mockertich v. Steuart &., Co.
Ltd.(1)].
The word ’manufacture’, according to its dictionary meaning,
is the making,, of articles or material (now on large scale)
by physical labour or mechanical power. (Shorter Oxford
English Dictionary Vol. 1, 1203) According to the
Permanent Editionof Words and Phrases. Vol. 26,
’manufacture’ implies a change but every change is not
manufacture and yet every change in an article is the result
of treatment, labour and manipulation.But something more
is necessary and there must be transformation; a new and
different article must emerge having a distinctive name,
character or use. "The word ’manufacture"’ saidAbbott,
C.J., in R. v. Wheeler(2) "has been generally understood to
denote, either a thing made which is useful for its own sake
and vendible as such, as a medicine, a stove, a telescope,
and many others; or to mean an engine or instrument, or some
part of an engine or instrument, to be employed either in
themaking of some previously known articles or in some
other useful purpose, as a stocking frame, or a steam engine
for raising water from mines; or, it may perhaps, extend
also to a new process to be carried on by known implements
or elements ’acting
(1) A.I.R. 1970 S.C. 839.
(2) 2 B & Ald. 349, cited in Stroud’s Judicial Dictionary
(3rd ed.) Vol. p. 1734.
262
upon known substances, and ultimately producing some other
known substance but producing it in a cheaper or more
expeditious manner, or of a better or more useful kind. No
more philosophical or abstract principle can answer to the
word ’manufactures’. Something of a corporeal and substan-
tial nature-something that can be made by man from the
matters subjected to his art and skill, or at the least some
new mode of employing practically his art and skill, is
required to satisfy the word". In South Bihar Sugar Mills
v. Union of India,(1) the Act with which the Court was
concerned was the Central Excise and Salt Act, 1944, which
furnished no special definition of the word ’manufacture’.
The question. can canvassed there was whether carbon
dioxide, one of the constituents of kiln gas produced as one
of the processes necessary for refining sugar, could be said
to have been manufactured, quite apart from the manufacture
of sugar itself. This Court held that what was produced was
kiln gas, a compound of different gases and not carbon
dioxide, though it was one of the different gases which made
up kiln gas and therefore did not attract item 14-H in the
Schedule to the Act. Since the Excise ditty was leviable
under the Act on manufacture of goods, the Court explained
the connotation of the word ’manufacture’. In so doing, the
Court said that the word ’manufacture’ implied a change, but
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that a mere, change in the material was not manufacture.
There must be such a transformation that a new and different
article must emerge having a distinctive name, character or
use. This was also the meaning given to the word
’manufacture’ in Union of India v. Delhi Cloth & General
Mills(2). A notification issued by the Government of U.P.
under s. 3A of the U.P. Sales Tax Act, 1948 declared that
the turnover in respect of medicine and pharmaceutical
preparations would not be liable to tax except.(a) in the
case of medicine and pharmaceutical preparations imported
into U.P., and (b) in the case of medicines and
pharmaceutical preparations manufactured in U.P. The
question was whether, when in a dispensary medicines and
pharmaceutical preparations, as prescribed by a doctor, are
mixed, the process of mixing results in manufacture of
medicines. The question was answered in the negative
on the roundthat when a mixture of different drugs, as
prescribed by a doctor, is prepared by a medical
practitioner or his employee, especially for the use of a
patient in the treatment of an ailment or discomfort
diagnosed by such a medical practitioner by his professional
skill, and which mixture is normally incapable of being
passed from hand to hand as a commercial commodity, the
medical practitioner supplying the medicine cannot be said
to be a manufacturer of medicine and the mixture can-
(1) [1968] 3 S.C.R. 21.
(2) [1963] Stipp. 1 S.C.R. 586.
263
not be said to. be manufactured within the meaning of the
notification. In all these cases the statute or the
notification concerned did not furnish any artificial
meaning to the expression ’manufacture’ and the Court
applied, therefore, the ordinary meaning as commonly
understood to that expression. The expression
’manufacturing purposes’ in s. 106, thus, means purposes for
making or fabricating articles or materials by physical
labour, or skill, or by mechanical power, vendible and
useful as such. Such making or fabricating does not mean
merely a change in an already existing article or material,
but transforming,, it into a different article or material
having a distinctive name. character or use or fabricating a
previously known article by novel process.
The two cases cited by Mr. Chagla, viz., Sedgwick v. watliey
Combe, Reid and Co.(1) and Action Borough Council v. West
Middlesex Assessment Committee(2), would not be of
assistance as the question there discussed was not as, to
the meaning of the word ’manufacture’, but whether the
premises in question were industrial hereditaments within
the meaning of s. 3 of the Rating and Valuation
(Apportionment) Act, 1928. Likewise, decisions given by
courts on the word ’manufacture’ occurring in different
statutes would not be of assistance where the statute
concerned gives an artificial meaning or a special
definition.
Bearing in mind the connotation of the word ’manufacture’ as
understood in the decisions above-cited, we have to
ascertain whether the appellant-company could be said to be
carrying on operations in the premises in question which
could properly be called manufacturing operations. On this
question, the evidence on record is general character and
almost meager in quantum. Wit. Choradia, who was the
managing director of the Bharat Insurance Co. between 1950
to 1954 and who used to reside in Delhi where the company
had its headquarters,. but occasionally used to visit its
branch in Bombay, deposed that after the premises in
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question were purchased in 1953 by his company from Sir
Shapurji Bharucha Mills, he visited them and found them to
comprise an open land with sheds and a godown. There were
lying there army automobiles, jeeps etc., but he did not
notice at that time any manufacturing process going on. He
again, visited the premises in 1954 when also he found no
manufacturing operations going on Wit. V. G. Kannan was an
accountant in Allenbury. & Co. Ltd. He used to go to the
premises in 1950 and 1951 to pay wages to the workmen
engaged "here by his company. The premises had a workshop,
a godown
(1) [1931] A. C.446 (2) [1949] 2 K.B. 10.
264
and a small office and the rest was open land. The company
wound up its business in 1950, but there were lying in the
premises steel racks belonging (to his company, to inspect
which he had to go there on several occasions. He also said
that he did not see any manufacturing processes going on
except that the workshop was used for repairing the disposal
vehicles lying stored there. This was the position till
July-August 1954 and till then there was no change in the
user of the premises. Wit. J. P. Jain examined by the
appellant-company was the Central Manager of the Bombay
branch of Allenbury & Co. from 1946 to 1950. Thereafter he
became the managing director of the appellant-company.
According to him, Allenbury & Co. Ltd. had in 1948 purchased
disposal vehicles which were stored for sale in the premises
in question. The vehicles were in a damaged condition when
they were purchased. In some cases chassis were missing or
they were bent or broken; most of the parts were broken and
missing. These used to be repaired and then sold. The
company had put up a workshop where these vehicles were
repaired, reconditioned and painted before, they were sold.
The repairs, according to him, involved in some cases making
of new bodies and new parts. For that purpose, the
appellant company had to have in the workshop lathes, drill
machines, velders etc. and had employed some 200 to 250
workmen. When the appellant company took over the business
of Allenbury & Co. Ltd. in 195051, there were in all 189
vehicles of different types in the suit premises. The
working, he said, of overhauling, reconditioning and
repairing these vehicles went on until 1957 when
reconditioning of vehicles stopped presumably because the
vehicles were sold out. The premises had on them a
servicing station also with a trench in the centre for
washing the vehicles and where spare part needed for repairs
used to be stored. There was also an office and a store
room where spare parts, oils and other stores purchased
locally were kept. He denied that the premises were used
only for repairing the vehicles. Besides his oral
testimony, there is one letter on record written by this
witness to Allenbury & Co. Ltd., dated November 21, 1950
giving details of stocks lying on these premises when that
company’s business was taken over by the appellant-company.
The schedule to’ this letter gives particulars of these
stocks, viz., 182 vehicles of different types, stores,
accessories, spare parts purchased from the market or the
Disposal Directorate, tools and other workshop equipment and
three cars under repairs. The schedule shows that the
premises were used till then for storing the Disposal
vehicles, together with spare parts etc. acquired along
with them or purchased from the market forrepairing and
reconditioning and making them fit for resale. There is
no evidence except the bare word of wit. Jain thatparts
such as chassis and bodies etc. were actually manufactured
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and replaced for the old. No books of account
265
or log books showing the work carried on on the promises or
other documents were produced which would throw light on the
activities carried on the premises. Even if the evidence of
Jain were accepted in toto, and we were to find that some
spare parts were being manufactured for repairing or
reconditioning the vehicles, the dominant purpose of the
lease, would still have to be regarded as one for storage
and resale of the vehicles and not for manufacturing
purposes. Manufacturing of spare parts would then be,
merely incidental to the main purpose of disposal of these
vehicles as without repairing or reconditioning them, such
disposal could hardly have been possible. In our opinion,
the appellants failed to establish that the dominant purpose
of the lease was manufacturing purpose. In that view. the
appellants could not have challenged the legality of the
notice. The High Court, therefore, was right in the
conclusion it arrived at and no reason has been shown
justifying our interference with it. That being the,,
position, it is not necessary to go into the question
whether s. 107 has any impact on s. 106 of the Transfer of
Property Act, a question which the Division Bench, while
referring this appeal to a larger Bench, though the appeal
raised.
For the reasons stated above the appeal fails and is
dismissed with costs. Mr. Chagla appealed to us that Some
time may be given to the appellant-company for vacating the
premises in question as, according to him, there are some
machines still lying on the premises which will have to be
removed. We give the company one month’s time from today
for vacating and giving quiet possession to the respondent.
S.C. Appeal dismissed.
266