PETITIONER: <ORG> Vs. RESPONDENT: STATE OF BIHAR AND OTHERS DATE OF JUDGMENT: 25/02/1964 BENCH: GAJENDRAGADKAR, P.B. (CJ) BENCH: GAJENDRAGADKAR, P.B. (CJ) WANCHOO, K.N. SHAH, J.C. AYYANGAR, N. <NAME>, S.M. CITATION: 1965 AIR 40 1964 SCR (6) 885 CITATOR INFO : D 1970 SC 564 (17) RF 1973 SC 106 (11) R 1974 SC1300 (24) R 1981 SC1368 (7) RF 1983 SC 937 (12) RF 1984 SC 420 (46) RF 1986 SC1370 (90) ACT: <ORG>-Position of-Whether citizen-Whether petition under Art. 32 by <ORG> claiming a fundamental right guaranteed under Art. 19 competent-Doctrine of piercing the corporate veil -Exceptions to rule that <ORG> has a separate legal entity-Levy of Sales Tax challenged--Constitution of India, Arts. 19, 32 and 286(1) (a). HEADNOTE: The petitioners were ordered to pay sales-tax on account of certain transactions made by them in the State of Bihar. Their contention was that the sales in question took place outside the state and hence they were entitled to the protection of Art. 286(1)(a). Their plea was rejected by the Sales-tax authorities and it was held that Art. 286(1)(a) did not apply to them. The petitioners challenged the orders of the sales-tax authorities by writ petitions filed by them under Art. 32 of the Constitution. A preliminary objection was taken on behalf of respondents that the petitions were not competent as those were filed by corporations or companies and the provisions of Art. 19 did not apply to them as corporations were not citizens. Dismissing the writ petition, Held.-The petitions under Art. 32 were incompetent although in each of them one or two of the share-holders of the petitioning companies or corporations had also joined. Article 19 guarantees rights to citizens as such and associations cannot lay claim to the fundamental rights guaranteed by that Article solely on the basis of their being an aggregation of citizens. Once a company or a corporation is formed, the business which is carried on by the said company or corporation is the business of the company or corporation and is not the business of the citizens who got the company or corporation formed or incor- porated and the rights of the incorporated body must be judged on that footing and cannot be judged on the assumption that they are the right attributable to the business of individual citizens. The petitioners cannot be heard to say that their share-holders should be allowed to file the present petitions on the ground that in substance, the corporations and companies are nothing more than association of share-horders and members thereof. If their contention is accepted, it would really mean that what the corporations or companies cannot achieve directly, they can achieve indirectly by relying upon the doctrine of lifting the veil. If the corporations and companies are not citizens, it means that the Constitution intended that they should not get the benefit of Art. 19. 886 The position of a corporation is that it is in law equal to a natural person and has a legal entity of its own. That entity is entirely separate from that of its shareholders. It bears its own name and has a seal of its own. Its assets are separate and distinct from those of its members. It can sue and be sued exclusively for its own purpose. Its creditors cannot obtain satisfaction from the assets of its members. The liability of the members or share holders is limited to the capital invested by them. The creditors of the members have no right to the assets of the corporation. However. there are some exceptions to the rule that the corporation or a company has a jurisfic or legal entity and the doctrine of lifting the veil of a corporation and examining its face in substance has been applied in many cases but the same does not apply in the present case. <CITATION> . A.I.R. 1963 S.C. 1811, <CITATION> .  1 S.C.R. 778, <CITATION> .  6 S.C.R. 594, <CITATION> . A.I.R. 1957 S.C. 790, <CITATION> ,  2 S.C.R. 303, <CITATION> .  2 S.C.R. 509, <CITATION> .  2 S.C.R. 146, <CITATION> (inspection),  2 S.C.R. 852, <CITATION>  1 S.C.R. 305, <CITATION> , 14 S.T.C. 188, <CITATION> . 14 S.T.C. 416, Salomon v. <ORG>  A.C. 22, <CITATION> . 1948 I.T.R. 270, <ORG> v. <ORG>  A. C. 307 and <CITATION> .  3 S.C.R. 269, referred to. JUDGMENT:

CRIMINAL JURISDICTION: Writ Petitions Nos.112 and 113 of 1961 etc. Petition under Art. 32 of the Constitution of India for enforcement of, Fundamental rights.

<NAME>, <NAME>, <NAME> and <NAME>, for the petitioners (in W.P. Nos. 112 and 113 of 61 and 79 to 80 of 1962).

<NAME>, <NAME>, <NAME>, <NAME> and <NAME>. for the respondents (in W.P. Nos. 112 and 113 of, 1961).

<NAME>, Additional Solicitor-General, <NAME> and <NAME>, for the respondents (in W.P. Nos. 79 and 80 of 62).

<NAME>, <NAME>, <NAME>, <NAME> and <NAME>, for the petitioners (in W.P. Nos. 202- 204/1961).

<NAME> and <NAME>, for the respondents (in W.P. Nos. 202 and 203 of 1961). <NAME>, <NAME>, <NAME> and <NAME>, for the respondent (in W.P. 204 of 1961). February 25, 1964. The Judgment of the Court was delivered by <NAME>, <NAME> writ petitions have been placed for hearing before us in a group, because they raise a common question of law in regard to the validity of the demand for sales tax which has been made against the respective petitioners by the Sales-tax Officers for different areas. The facts in respect of each one of the writ petitions are not the same and the years for which the demand is made are also different; but the pattern of contention is uniform and the arguments urged in each one of them are exactly the same. Broadly stated. the case for the petitioners is that the appropriate authorities purporting to act under the different Sales Tax Act s- are attempting to recover from the petitioners sales-tax in respect of transactions to which the petitioners were parties, though the said transactions are not taxable under Art. 286 of the Constitution. Art. 286(1) (a) provides that no law of a Sales shall impose, or authorise the imposition of, a tax on the sale or purchase of goods where such sale or purchase takes place outside the State; and the argument is that the sales in question are all sales which took place outside the State and as such, are entitled to the protection of Art. 286(1) (a). The authorities under the respective Sales Tax Act s have rejected the petitioners' contention that the transactions in question are inter-State sales and have held that Art. 286(1)(a) is not applicable to them. A similar finding has been recorded against the petitioners under Art. 286(2). The petitioners' grievance is that by coming to this erroneous conclusion, a tax is being levied against them in respect of transactions protected by Art. 286(1)(a) and that constitutes a breach of their fundamental rights under Art. 3 1 (1). It is this alleged infringement of their fundamental rights that they seek to bring before this Court under Art. 32(1). It has been urged on their behalf that the right to move this Court under Art. 32(1) is itself a fundamental right, and so, under Art. 32(2) an appropriate order should be passed setting aside the directions issued by the Sales-tax Authorities calling, upon the petitioners either to pay the sales-tax, or to comply with other directions issued by them in that behalf.

For dealing with the points raised by these writ petitions, it is not necessary to set out the facts in respect of each one of them. For convenience we will refer to the facts set out by <ORG>, the petitioner in W.Ps. Nos. 112 and 113 of 1961. The peti- tioner is a company registered under the Indian Companies Act , 1913 and carries on the business of manufacturing, inter alia, Diesel Truck and Bus chassis and the spare parts and accessories thereof at Jamshedpur in the State of Bihar. The company sells these products to dealers, <ORG> and others doing business in various States of India. The registered office of the petitioner is in Bombay. In order to promote its trade throughout the country, the petitioner has entered into Dealership Agree- ments with different persons. The modus adopted by the petitioner in carrying on its business in different parts of India is to sell its products to the dealers by virtue of the relevant provisions of the Dealership Agreements. Accordingly, the petitioner distributes and sells its vehicles to dealers, <ORG> and consumers in the manner set out in the petition. The petitioner contends that the sales in respect of which the present petitions have been filed were effected in the course of inter-State trade and as such, were not liable to be taxed under the relevant provisions of the Sales Tax Act . The Sales-tax Officer, on the other hand, has head that the sales had taken place within the State of Bihar and were intra-State sales and as such, were liable to assessment under the Bihar Sales Tax Act. In accordance with this conclusion, further steps are threatened against the petitioner in the matter of recovery of the sales-tax calculated by the appropriate authorities. The petitioner is a company and a majority of its share- holders are Indian citizens, two of whom have joined the present petitions.

The petitioners in W.Ps. Nos. 79 and 80/-1962 are <ORG> and Another. The majority of the share-holders of this company are also citizens of India and one of them has joined the petitions. Writ petitions Nos. 202-204/1961 have been filed by <ORG> The shareholders of this <ORG> are the President of India, and two Additional Secretaries, <ORG>, <ORG>; one of these Secretaries, has joined the petitions. It may incidentally be stated at this stage that these writ petitions were heard by a Special Bench of this Court on the 26th July, 1963 in order to determine the constitutional question as to whether <ORG> can claim to be a citizen within the meaning of Art. 19 of the Constitution. The majority decision rendered in these writ petitions on the preliminary, issue referred to <ORG> was that the petitioner as <ORG> is not a citizen under Art. 19 , and so, could not claim the protection of the fundamental rights guaranteed by the said Article [vide <CITATION> (1)]. That is why this petitioner along with other petitioners have made the petitions in the names of the companies as well as one or two of their shareholders respectively. It is argued on behalf of the petitioners that though the company or the <ORG> may not be an Indian citizen under Art. 19 , that should not prejudice the petitioners case, because, in substance, the <ORG> is no more than an instrument or agent appointed by its Indian share holders and as such, it should be open to the petitioners either acting themselves as companies or acting through (1) A.I.R. 1963 S.C 1811, their shareholders to claim the relief for which the present petitions have been filed under Art. 32.

These petitions are resisted by the respective States on the ground that the petitions are not competent under Art. 32. The respondents contend that the main attack of the petitioners is against the findings of the Sales-tax Officers in regard to the character of the impugned sale transactions and they urge that even if the said findings are wrong, that cannot attract the provisions of Art. 32. The validity of the respective Sales-tax Act s is not challenged and if purporting to exercise their powers under the relevant provisions of the said Acts, the appropriate authorities have, during the course of the assessment proceedings, come to the conclusion that the impugned transactions are intra-State sales and do not fall under Art. 286(1)(a ), that is a decision which is quasi-judicial in character and even an erroneous decision rendered in such assessment proceedings cannot be said to contravene the fundamental rights of a citizen which would justify recourse to Art. 32. In other words, the alleged breach of the petitioners' fundamental rights being referable to a quasi- judicial order made by a <ORG> appointed under a valid Sales-tax Act , does not bring the case within Art. 32. That is the first preliminary ground on which the competence of the writ petitions is challenged. In support of this plea, reliance is placed by the respondents on a recent decision of a Special Bench of this Court in <CITATION> (1).

There is another preliminary objection raised by the respondents against the, competence of the writ petitions, and that is based upon the decision of this Court in the case of <ORG> (2). It is urged that the decision of this Court that <ORG> is not a citizen, necessarily means that the fundamental rights guaranteed by Art. 19 which can be claimed only by citizens cannot be claimed by such a <ORG>, and so, there can be no scope for looking at the substance of the matter and giving to the shareholders indirectly the right which the <ORG> as a separate (1)  1 S.C.R. 778.

(2) A.I.R. 1963 S.C. 1811.

legal entity is not directly entitled to claim. The respondents have urged that in dealing with the plea of the petitioners that the veil worn by the <ORG> as a separate legal entity should be lifted and the substantial character of the <ORG> should be determined without reference to the technical position that the <ORG> is a separae entity, we ought to bear in mind the decision of this <ORG> in the case of the State Trading <ORG> of India Ltd.(1). Basing themselves on this contention, the respondents have also argued that if the fundamental rights guaranteed by Art. 19 are not available to the petitioners, then their plea that the sales-tax is being collected from them contrary to Art. 31(1) must fail and in support of this contention reliance is placed upon a recent decision of this <ORG> in the case of <CITATION> (2). Logically, the second preliminary objection would come first, because if the petitioners cannot claim the status of citizens and are not, therefore, entitled to base their petitions on the allegation that their fundamental rights under Art. 19 have been contravened, that would be the end of the petitions. It has been conceded before us by all the learned counsel appearing for the petitioners that it is only if both the preliminary objections raised by the respondents are over-ruled that the hearing of the writ petitions would reach the stage of considering the merits of their pleas that the sales which are sought to be taxed fall under Art. 28 6 (1) (a) of the Constitution. If the respondents succeed in either of the two preliminary objections raised by them, the writ petitions would fail and there would be no occasion to consider the merits of the pleas raised by them. Since we have come to the conclusion that the second preliminary objection raised by the respondents must be upheld, we do not propose to pronounce any decision on the first preliminary objection. However, as the point covered by the said objection has been elaborately argued before us, we would prefer to indicate briefly the broad arguments urged fry both the parties in that behalf.

(1) A.I.R. 1963 S.C. 1811. (2) (1964) 6 S.C.R. 594.

The controversy between the parties as to the scope and effect of the provisions contained in Art. 32 on which the validity of the first preliminary objection rests, substantially centres round the question as to what is the effect of the decision of this <ORG> in <NAME> case(1). The petitioners argue that though the majority view in that case was that the writ petition filed by <NAME> was incompetent, it would appear that the reasons given in most of the judgments support the petitioners' case that where the fundamental rights of a citizen are contravened, may be by a quasi-judicial order, in pursuance of which a tax is attempted to be recovered from a citizen, the erroneous conclusion in regard to the nature of the transaction must be held to contravene the fundamental right of the citizen, and as such, would justify the petitioners in moving this <ORG> under Art. 32.

On the other hand, the respondents urge that the effect of the decision. in <NAME> case plainly tends. to show that if a quasi-judicial decision has determined a matter in regard to the taxability of a given transaction, there can be no question about the breach of fundamental rights which would justify an application under Art. 32. The argument is that the intervention of a quasi-judicial order changes the complexion of the dispute between the parties, and in cases of that character, the only remedy available to an aggrieved citizen is to take recourse to the appeals and other proceedings prescribed by the taxing statute in question. Art. 32 is not intended to confer appellate jurisdiction on this <ORG> so as to review or examine the propriety of quasi-judicial orders passed by appropriate authorities purporting to exercise their powers and jurisdictions under the several taxing statutes. It may be that after exhausting the remedies by way of appeals and revisions prescribed by the statute, the party may come to this <ORG> under Art. 136 , but Art. 32 is inapplicable in such cases. In <NAME> case(1), the first issue which was referred to <ORG> was whether an order of assessment made by an authority under a taxing statute which is intra vires is open to challenge as repugnant to (1)  1 S.C.R. 778.

Art. 19 (1)(g ), on the sole ground that it was based on a misconstruction of a provision of the Act or of a notification issued thereunder; and the second question was, can the validity of such an order be questioned in a petition under Art. 32 of the Constitution? The majority view expressed in this case was against the petitioner. <NAME> who delivered the main judgment on behalf of the majority view observed that where a quasi-judicial authority makes an ,order in the undoubted exercise of its jurisdiction in pursuance of a provision of law which is intra vires, an error -of law or fact committed by that authority cannot be impeached otherwise than on appeal, unless the erroneous determination relates to a matter on which the jurisdiction of that body depends; and so, he held that if the impugned order of assessment is made by an authority under a valid taxing statute in the undoubted exercise of its jurisdiction it cannot be challenged under Art. 32 on the sole ground that it is passed on a misconstruction of a provision of the Act or of a notification issued thereunder.

<NAME>, on the other hand, took the view that Art. 32 confers wide jurisdiction on this <ORG> to enforce the fundamental rights, and he held that it is the duty of this <ORG> to entertain a writ petition wherever a fundamental right of a citizen is alleged to have been contravened, irrespective of whether the question raised involves a question of jurisdiction, law, or fact; this is the minority view pronounced in <NAME> case.

<NAME>, who agreed broadly with the majority view, expressed the opinion that if a quasi-judicial tribunal embarks upon an action wholly outside the pale of the law he is enforcing, a question of jurisdiction would be involved and that would justify an application under Art. 32. <NAME> held that if it appeared that the impugned order of assessment was based upon a plain and patent misconstruction of the provisions of the taxing statute, that itself would give rise to a plea that the authority was acting beyond its jurisdiction and in such a case, a petition under Art. 32 may be justified. Proceeding on this view, the learned Judge held that the construction placed by the taxing authority was not shown to be patently erroneous.

and so, he was not prepared to grant any relief to <NAME>. That is how the learned Judge agreed with the majority decision.

<NAME>, who also agreed with the majority decision, was disposed to make an exception in cases where an erroneous construction of the law would lead to the recovery of a tax which is beyond the competence of the legislature, or is violative of the provisions of Part III or of any other provisions of the Constitution.

It would, thus, be seen that though the majority decision was that <NAME> petition should be dismissed, the reasons given in the judgments pronounced by the learned Judges who agreed with the majority decision are not all uniform and-do not disclose an identity of approach or of reasons, and that naturally has given rise to the arguments in the present writ petitions, both parties suggesting that the majority decision in the case of <NAME> supports the rival views for which they contend.

Mr. <NAME> has strongly urged that if a misconstruction of the notification on which <NAME> rested her case, was not held to justify a petition under Art. 32 , that would necessarily mean that the misconstruction of the nature of the transaction would be no better, even though in this 'latter case, the wrong decision on the question as to the character of the sale transaction may involve -taxing a transaction which is protected by Art. 286(1) (a). One can understand the argument, said Mr. <NAME>, that a breach of the fundamental rights, however it is caused would justify recourse to Art. 32; that would be consistent and logical; but once it is held that a breach of the fundamental rights alleged to have been caused by a misconstruction of a notification or a statute placed by an appropriate authority acting under the provisions of a valid taxing law does not attract Art. 32 , it is not logically possible to urge that another kind of breach alleged to have been caused by a misappreciation of the nature of the transaction and an erroneous conclusion as to its taxable character would make any difference. In the first case, the erroneous construction of the notification violates the provisions of Art. 265 of the Constitution and thereby brings in the breach of Art.

31 (1); in the other case, the misconstruction as to the taxable character of the transaction violates Art. 28 6 (1 )

(a) and thereby brings in Art. 31 (1). Therefore, it is urged that he necessary consequence of the decision in Ujjam Bai is that even if the Sales-tax Officer has held wrongly that the impugned transactions are not inter-State transactions, the remedy of petition under Art. 32 is not open to the aggrieved citizen.

On the other hand, Mr. <NAME> has strenuously urged that the decision in Ujjam Bai rested on the basis that the misinterpretation of the notification did not involve the violation of any constitutional limitations or prohibitions and he has referred us to some passages in the judgments of <NAME>, <NAME> and <NAME>. In support of his argument that where an erroneous decision of a salestax officer results in the violation of a constitutional prohibition or limitation, different considerations would arise and an aggrieved citizen would be entitled to move this Court under Art. 32 , Mr. <NAME> has emphasised the fact that whereas <NAME> J. expressly held that the view taken in <CITATION> .(1) was not right, he approved of the other decisions which were cited at the <ORG> and exhaustively discussed on the ground that those decisions 'fall under the category in which an executive authority acts without authority of law, or a quasi-judicial authority acts in transgression of a constitutional prohibition and without jurisdiction"(2). These decisions are: <CITATION> (3); <CITATION> (4); <CITATION> (5); <CITATION> ) (6); and <CITATION> ( 7 ) . To the same effect is the observation made by <NAME> J. when the learned Judge stated that in the case of M/s. Mohanlal Hargovind <NAME>s ( 4 ) ':he dispute did not turn upon a misconstruction of any statute by any quasi-judicial authority, but that was a case (1) A.I.R. 1957 S.C. 790(2)  1 S.C.R. at 842. (3)  8 S.C.R. 303.(4)  2 S.C.R. 509. (5)  2 S.C.R. 146.(6)  2 S.C.R. 852. (7)  1 S.C.R. 305.

in which the very transaction was outside the taxing powers of the <ORG> and any action taken by the taxing authorities was one without authority of law. In support of the same argument, both Mr. <NAME> and Mr. <NAME> strongly relied upon the two subsequent decisions of this <ORG> where writ petitions filed under Art. 32 were entertained on grounds somewhat similar to those on which the present writ petitions are founded, <CITATION> (1) and <CITATION> (2). Basing himself on these decisions, Mr. <NAME> has argued that the question as to whether a particular transaction of sale attracts the protection of Art. 286(1) (a) is a collateral fact the decision of which confers jurisdiction on the Sales-tax Officer; and he contends that the decision of the Sales-tax Officer, who is a <ORG> of limited jurisdiction, on a collateral jurisdictional point can always be challenged under Art. 32 of the Constitution if the said decision impinges upon the citizen's right protected by Art. 28 6 (1) (a).

Mr. <NAME> urged the argument of jurisdiction in a slightly different way. He contended that the concept of jurisdiction on which he relied was not based on the view that jurisdiction means authority to decide. According to him, the concept of jurisdiction was of a different category and was of a vital character when constitutional limitations or prohibitions were involved in the decision of any case brought before a Sales-tax Officer.

On the other hand, Mr. <NAME> has urged that <ORG> is not a Tribunal of limited jurisdiction and the charging sections in the respective Sales-tax Act s leave it to <ORG> and the heirarchy of officers contemplated by them to decide the question about the taxability of any given transaction and impose a tax on it in accordance with the provisions of the Acts. Where a tribunal is entitled to deal with transactions which fall (1) 14 S.T.C. 188.

(2) 14 S.T.C. 416.

under the charging sections of the statute, it would be erroneous to contend that the decision of the <ORG> on the said question about the taxability of the transaction is the decision on a collateral jurisdictional fact. If the said argument is accepted, logically, it may mean that all questions the decision of which inevitably precedes the imposition of the tax, would be collateral jurisdictional fact; and that clearly cannot be the effect of the charging sections of the different Acts.

In regard to the point of constitutional limitations and prohibitions raised by Mr. <NAME>, Mr. <NAME> contends that if the provisions of Art. 286(1) (a) makes the decision of the Sales-tax Officer on the character of the sale trans- action one of jurisdiction, then it is difficult to see why his decision on other points should also not partake of the same character. In that connection, he emphasised the fact that the provisions of Art. 286(1) (a) cannot be distinguished from the provisions of Art. 265. As we have already indicated, having regard to the fact that we have come to the conclusion that the other preliminary objection urged by the respondents must be upheld, we do not propose to express any opinion on this part of the controversy between the parties.

That takes us to the question as to whether the petitioners, some of whom are companies registered under the Indian Companies Act and one of whom is <ORG>, can claim to file the present writ petitions under Art. 32 having regard to the decision of this Court in the case of <ORG> of India Ltd. (1). The petitioners argue that the said decision merely held that <ORG> of India Ltd. was not a citizen. The question as to whether the veil of the <ORG> can be lifted and the rights of the shareholders of the said <ORG> could be recognised under Art. 19 or not, was not decided, and it is on this aspect of the question that arguments have been urged before us in the present writ petitions.

The true legal position in regard to the character of a corporation or a company which owes its incorporation to (1) A.I.R. 1963 S.C. 1811.

134-159 S.C.-57 a statutory authority, is not in doubt or dispute. The corporation in law is equal to a natural person and has a legal entity of its own. The entity of the corporation is entirely separate from that of its shareholders; it bears its own name and has a seal of its own; its assets are separate and distinct from those of its members; it can sue and be sued exclusively for its own purpose; its creditors cannot obtain satisfaction from the assets of its members; the liability of the members or shareholders is limited to the capital invested by them; similarly, the creditors of the members have no right to the assets of the corporation. This position has been well-established ever since the decision in the case of <ORG> (1) was pronounced in 1897; and indeed, it has always been the well- recognised principle of common law. However, in the course of time, the doctrine that the corporation or a company has a legal and separate entity of its own has been subjected to certain exceptions by the application of the fiction that the veil of the corporation can be lifted and its face examined in substance. The doctrine of the lifting of the veil thus marks a change in the attitude that law had originally adopted towards the concept of the separate entity or personality of the corporation. As a result of the impact of the complexity of economic factors, juidical decisions have sometimes recognised exceptions to the rule about the juristic personality of the corporation. It may be that in course of time these exceptions may grow in number and to meet the requirements of different economic problems, the theory about the personality of the corporation may be confined more and more. But the question which we have to consider is whether in the circumstances of the present petitions, we would be justified in acceding to the argument that the veil of the petitioning corporations should be lifted and it should be held that their shareholders who are Indian citizens should be permitted to invoke the protection of Art. 19 , and on that basis, move this <ORG> under Art. 32 to challenge the validity of the orders passed by the Sales-tax Officers in respect of transactions which, it is alleged, are not taxable.

(1) [1897] A. C. 22. H.L.

Mr. <NAME> has very strongly urged before us that having regard to the fact that the controversy between the parties relates to the fundamental rights of citizens, we should not hesitate to look at the substance of the matter and disregard the doctrinaire approach which recognises the existence of companies as separate juristic or legal persons. If all the shareholders of the petitioning companies are Indian citizens, why should not the <ORG> look at the substance of the matter and give the shareholders the right to challenge that the contravention of their fundamental rights should be prevented. He does not dispute that the shareholders cannot claim that the property of the companies is their own and cannot plead that the business of the companies is their business in the strict legal sense. The doctrine of lifting of the veil postulates the existence of dualism between the corporation or company on the one hand and its members or shareholders on the other. So, it is no good emphasising that technical aspect of the matter in dealing with the question as to whether the veil should be lifted or not. In support of his plea, he has invited our attention to the decision of <ORG> in <CITATION> (1), as well as the decision of <ORG> in <ORG> v. <ORG>).

It is unnecessary to refer to the facts in these two cases and the principles enunciated by them, because it is not disputed by the respondents that some exceptions have been recognised to the rule that a corporation or a company has a juristic or legal separate entity. The doctrine of the lifting of the veil has been applied in the words of <NAME> in five categories of cases : where companies are in the relationship of holding and subsidiary (or sub-subsidiary) companies; where a shareholder has lost the privilege of limited liability and has become directly liable to certain creditors of the company on the ground that, with his knowledge, the company continued to carry on business six months after the number of its members was reduced (1) [1948] I.T.R. 270. (2) [1916] A.C. 307.

below the legal minimum; in certain matters pertaining to the law of taxes, death duties and stamps, particularly where the question of the "controlling interest" is in issue; in the law relating to exchange control; and in the law relating to trading with the enemy where the test of control is adopted(1). In some of these cases, judicial decisions have no doubt lifted the veil and considered the substance of the matter.

<NAME> has similarly summarised this position with the observation that in a number of important respects, the legislature has rent the veil woven by the <NAME> case. Particularly is this so, 'says <NAME>, in the sphere of taxation and in the steps which have been taken towards the recognition of enterprise-entity rather than corporate- entity. It is significant, however, that according to <NAME>, the courts have only construed statutes as "cracking open the corporate shell" when compelled to do so by the clear words of the statute; indeed they have gone' out of their way to avoid this construction whenever possible. Thus, at present, the judicial approach in cracking open the corporate shell is somewhat cautious and circumspect. It is only where the legislative provision justifies the adoption of such a course that the veil has been lifted. In exceptional cases where courts have felt "themselves able to ignore the corporate entity and to treat the individual shareholders as liable for its acts",(2) the same course has been adopted. Summarising his conclusions, <NAME> has classified seven categories of cases where the veil of a corporate body has been lifted. But it would not be possible to evolve a rational, consistent and inflexible principle which can be invoked in determining the question as to whether the veil of the corporation should be lifted or not. Broadly stated, where fraud is intended to be prevented, or trading with an enemy is sought to be defeated, the veil of a corporation is lifted by judicial decisions and the shareholders are held to be the persons who actually work for the corporation.

That being the position with regard to the doctrine of the veil of a corporation and the principle that the said (1) Palmer's Company Law 20th Ed. p. 136.

(2) Gower" Modern Company Law, 2nd Ed. pp. 193 & 195.

<NAME>

veil can be lifted in some cases, the question which arises for our decision is; can we lift the veil of the petitioners and say that it is the shareholders who are really moving the <ORG> under Art. 32 , and so, the existence of the legal and juristic separate entity of the petitioners as a corporation or as a company should not make the petitions filed by them under Art. 32 incompetent? We do not think we can answer this question in the affirmative. No doubt, the complaint made by the petitioners is that their fundamental rights are infringed and it is a truism to say that this <ORG> as the guardian of the fundamental rights of the citizens will always attempt to safeguard the said fundamental rights; but having regard to the decision of this <ORG> in <ORG> (1) we do not see how we can legitimately entertain the petitioners' plea in the present petitions, because if their plea was upheld, it would really mean that what the corporations or the companies cannot achieve directly, can be achieved by them indirectly by relying upon the doctrine of lifting the veil. If the corporations and companies are not citizens, it means that the Constitution intended that they should not get the benefit of Art. 19. It is no doubt suggested by the petitioners that though Art. 19 is confined to citizens, the Constitution-makers may have thought that in dealing with the claims of corporations to invoke the provisions of Art. 19 , courts would act upon the doctrine of lifting the veil and would not treat the attempts of the corporations in that behalf as falling outside Art. 19. We do not think this argument is well-founded. The effect of confining Art. 19 to citizens as distinguished from persons to whom other Articles like 14 apply, clearly must be that it is only citizens to whom the rights under Art. 19 are guaranteed. If the legislature intends that the benefit of Art. 19 should be made available to the corporations, it would not be difficult for it to adopt a proper measure in that behalf by enlarging the definition of 'citizen' prescribed by the Citizenship Act passed by the <ORG> by virtue of the powers conferred on it by Articles 10 and

11. On the other hand, the fact that the <ORG> has not chosen to make any such provision indicates that it was not the intention of the (1) A.I.R. 1963 S.C. 1811.

<ORG> to treat corporations as citizens. Therefore, it seems to us that in view of the decision of this Court in the case of <ORG>) the petitioners cannot be heard to say that their shareholders should be allowed to file the present petitions on the ground that, in substance, the corporations and companies are nothing more than associations of shareholders and members thereof. In our opinion, therefore, the argument that in the present petitions we would be justified in lifting the veil cannot be sustained.

Mr. <NAME> sought to draw a distinction between the right of a citizen to carry on trade or business which is contemplated by Art. 19(1)(g) from his right to form associations or unions contemplated by Art. 19 (1) (c). He argued that Art. 19(1)(c) enables the citizens to choose their instruments or agents for carrying on the business which it is their fundamental right to carry on. If citizens decide to set up a corporation or a company as their agent for the purpose of carrying on trade or business, that is a right which is guaranteed to them under Art. 19(1)(c). Basing himself on this distinction between the two rights guaranteed by Art. 19(1)(g) and (c) respectively, Mr. <NAME> somewhat ingeniously contended that we should not hesitate to lift the veil, because by looking at the substance of the matter, we would really be giving effect to the two fundamental rights guaranteed by Art. 19(1). We are not impressed by this argument either. The fundamental right to form an association cannot in this manner be coupled with the fundamental right to carry on any trade or business. As has been held by this <ORG> in <CITATION> (2), the argument which is thus attractively presented before us overlooks the fact that Art. 19 , as contrasted with certain other articles like Arts. 26, 29 and 30, guarantees rights to the citizens as such, and associations cannot lay claim to the fundamental rights guaranteed by that Article solely on the basis of their being an aggregation of citizens, that is to say, the right of the citizens composing the body. The respective rights guaranteed by Art. 19(1) (1) A.I.R. 1963 S.C. 1811.

(2) [1962] 3 S.C.R. 269.

Cannot be combined as suggested by Mr. <NAME>, but must be asserted each in its own way and within its own limits; the sweep of the several rights is no doubt wide, but the combination of any of those two rights would not justify a claim such as is made by Mr. <NAME> in the present petitions. As soon as citizens form a company, the right guaranteed to them by Art. 19(1)(c) has been exercised and no restraint has been placed on that right and no infringement of that right is made. Once a company or a corporation is formed, the business which is carried on by the said company or corporation is the business of the company or corporation and is not the business of the ,citizens who get the company or corporation formed or incorporated, and the rights of the incorporated body must be judged on that footing and cannot be judged on the assumption that they are the rights attributable to the business of individual citizens. Therefore, we are satisfied that the argument based on the distinction between the two rights guaranteed by Art. 19(1)(c) and (g) and the effect of their combination cannot take the petitioners' case very far when they seek to invoke the doctrine that the veil of the corporation should be lifted. That is why we have come to the conclusion that the petitions filed by the petitioners are incompetent under Art. 32 , even though in each of these petitions one or two of the shareholders of the petitioning companies or corporation have joined. The result is, the second preliminary objection raised by the respondents is upheld and the writ petitions are dismissed as being incompetent under Art. 32 of the Constitution. There would be no order as to costs. Petitions dismissed.


PETITIONER: RAJA SOAP FACTORY AND OTHERS Vs. RESPONDENT: S. P. SHANTHARAJ AND OTHERS DATE OF JUDGMENT: 20/01/1965 BENCH: <NAME>, J.C. BENCH: <NAME>, J.C. WANCHOO, K.N. HIDAYATULLAH, M. SIKRI, S.M. CITATION: 1965 AIR 1449 1965 SCR (2) 800 CITATOR INFO : R 1988 SC1531 (152) D 1991 SC2176 (30) ACT: High Court of Mysore Act, 1962 (Mysore Act 5 of 1962)-Trade and Merchandise Marks Act , 1958 (Act 43 of 1958), 105-Code of Civil Procedure, 1908 (Act 5 of 1908), ss. 24, 151-High Court--Passing off Action, institution-Entertainability- Exercise of original jurisdiction-Jurisdiction, Meaning of. HEADNOTE: The respondents instituted a passing off action in <ORG> for a declaration that they were exclusive owners of a certain trade mark and for a permanent injunction restraining the appellants from passing off their goods as that of respondents. By s. 105 of the Trade and Merchandise Mark Act such an action may be instituted in any court not inferior to <ORG> having jurisdiction to try the suit. It appears that on the day the suit was instituted <ORG> was closed and there was no Judge functioning in <ORG> who was on duty and competent to exercise the powers of <ORG>. <ORG> entertained the plaint and granted temporary injunction. In appeal by special leave : HELD:(i) <ORG> of Mysore is by its constitution primarily a court exercising appellate jurisdiction; it is competent to exercise original jurisdiction only in those matters in respect of which by special Acts it has been specifically invested with jurisdiction. It would be competent to exercise original jurisdiction under s. 105 of the Act if it was invested with ordinary original jurisdiction of <ORG> and not otherwise. [802 D- F] As a Court of appeal it undoubtedly stands at the apex within the State, but on that account it does not stand invested with original jurisdiction in matters not expressly declared within its cognizance. [802 H] (ii) Power under s. 24 of the Code of Civil Procedure to try and dispose of a proceeding after transfer from a court lawfully seized of it does not involve a power to entertain a proceeding which is not otherwise within the cognizance of <ORG>. [803 C-D] (iii) Section 151 of the Code of Civil Procedure preserves the inherent powers of the Court, but it does not authorise <ORG> to invest itself with jurisdiction where the jurisdiction is not conferred by law. [803 D-E] (iv) By "jurisdiction" is meant the extent of the power which is conferred upon the court by its constitution to try a proceeding : its exercise cannot be enlarged because an extraordinary situation "requires" the court to exercise it. [803 H-804 A] JUDGMENT:

CIVIL APPELLATE JURISDICTION: Civil Appeal No. 771 of 1964. Appeal by special leave from the judgment and order dated H May 29, 1964, of <ORG> in Civil Petition No. 90 of 1964.

<NAME> and <NAME>, for the appellants. <NAME>, <NAME> and <NAME>, for respondents Nos. 1 to 7.

The Judgment of the Court was delivered by <NAME> On May 5, 1964 the respondents-hereinafter called 'the plaintiffs'-instituted in <ORG> an action in the nature of a passing off action against the appellants-hereinafter called 'the defendants--for a declaration that they "are exclusive owners of the trade mark consisting of the letters R.S.F. and No. 806", for a permanent injunction restraining the defendants from passing off their washing soap as the goods of the plaintiffs and for incidental reliefs.

By s. 105 of the Trade and Merchandise Marks Act 43 of 1958 a passing off action whether the trade mark is registered or unregistered may be instituted in any court not inferior to <ORG> having jurisdiction to try the suit. It appears that on May 5, 1964 <ORG>, within the territorial limits of which the cause of action was alleged to have arisen, was closed for the summer vacation, and it is common ground that on that day there was no Judge functioning in <ORG> who was on duty and competent to exercise the powers of <ORG>. At the request of the plaintiffs <ORG> entertained the plaint and also an application for interim injunction restraining "the defendants their agents or servants from using the trade mark R.S.F. on washing soap manufactured by them and from selling washing soap bearing the said offending mark pending disposal of the case." By order dated May 29, 1964 <ORG> granted the temporary injunction in terms of the prayer in the application.

In this appeal with special leave, counsel for the defendants argues that <ORG> had no jurisdiction to entertain the action instituted by the plaintiffs and had no power to make an order issuing a temporary injunction. The action, as framed, could properly be instituted in <ORG>. The expression "<ORG>" has by virtue of s. 2(e) of Act 43 of 1958 the meaning assigned to that expression in the Code of Civil Procedure, 1908. Section 2(4) of the Code defines a "district" as meaning the local limits of the jurisdiction of a principal civil court- called <ORG>-and includes the local limits of the ordinary original civil jurisdiction of <ORG>. If therefore <ORG> is possessed of ordinary original civil jurisdiction, it would, when exercising that jurisdiction be included, for the purpose of Act 43 of 1958, in the expression "<ORG>".

Exercise of jurisdiction by <ORG> is governed by Mysore Act 5 of 1962. The Act is purely a regulatory Act enacted for regulating the business and exercise of the powers of <ORG> in relation to the administration of justice : it does not purport to confer upon <ORG> any jurisdiction original or appellate. It is true that by s. 12 of the Mysore High Court Act 1 of 1884 enacted by the Maharaja of Mysore to amend the constitution of <ORG>, and to provide for the administration of justice by that Court, <ORG> was authorised by notification to invest <ORG> with ordinary original civil jurisdiction of a District Court in all suits of a civil nature exercisable within such local limits as the <ORG> may from time to time declare and appoint in that behalf. But s. 12 of the Mysore Act 1 of 1884 has been repealed by s. 14 of Mysore Act 5 of 1962.

<ORG> is by its constitution primarily a court exercising appellate jurisdiction : it is competent to exercise original jurisdiction only in those matters in respect of which by special Acts it has been specifically invested with jurisdiction. <ORG> is competent to exercise original jurisdiction under s. 105 of the Trade and Merchandise Marks Act 43 of 1958 if it is invested with the ordinary original civil jurisdiction of <ORG>, and not otherwise, and <ORG> not being invested by any statute of under its constitution with that jurisdiction was incompetent to entertain a passing off action.

But it was urged that in a State <ORG> is at the apex of the hierarchy of civil courts and has all the powers which the subordinate courts may exercise, and it is competent to entertain all actions as a court of original jurisdiction which may lie in any court in the State. For this exalted claim, there is no warrant in our jurisprudence. Jurisdiction of a <ORG> means the extent of the authority of a <ORG> to administer justice prescribed with reference to the subject-matter, pecuniary value and local limits. Barring cases in which jurisdiction is expressly conferred upon it by special statutes, e.g. the Companies Act ; the Banking Companies Act , <ORG> of Mysore exercises appellate jurisdiction alone. As a <ORG> of Appeal it undoubtedly stands at the apex within the State, but on that account it does not stand invested with original jurisdiction in matters not expressly declared within its cognizance.

Section 24 of the Code of Civil Procedure on which counsel for the plaintiffs relied lends no assistance to his argument. Among the powers conferred upon <ORG> by s. 24 Code of Civil Procedure, there is enumerated the power to withdraw any suit, appeal or other proceeding in any Court subordinate to it, and to try or dispose of the same : [S. 24(1) (b) (i)]. But jurisdiction to try a suit, appeal or proceeding by <ORG> under the power reserved by s. 24(1) (b) (i) arises only if the suit, appeal or proceeding is properly instituted in a court subordinate to <ORG>, and the suit, appeal or proceeding is in exercise of the power of <ORG> transferred to it. Exercise of this jurisdiction is conditioned by the lawful institution of the proceeding in a subordinate court of competent jurisdiction, and transfer thereof to <ORG>. Power to try and dispose of a proceeding after transfer from a court lawfully seized of it does not involve a power to entertain a proceeding which is not otherwise within the cognizance of <ORG>.

Section 151 of the Code of Civil Procedure preserves the in- herent power of the <ORG> as may be necessary for the ends of justice or to prevent abuse of the process of the <ORG>. That power may be exercised where there is a proceeding lawfully before the High <ORG> : it does not however authorise the High <ORG> to invest itself with jurisdiction where it is not conferred by law.

Reliance was sought to be placed upon the summary of a judgment dated June 6, 1962 in a case decided by <NAME>, J : <NAME> v. <NAME>, which is found printed under the heading "Short Notes of Recent Decision" in <ORG> (1962) at p. 1. The learned Judge is reported to have observed that s. 24 of the Code of Civil Procedure "read along with s. 151 which preserves to <ORG> all inherent powers to make such orders as may be necessary for ends of justice necessarily implies that whenever an extraordinary situation so requires, <ORG> may confer original jurisdiction upon itself to do or protect ends of justice". It does not appear that the judgment is reported in any series of reports-authorised or unauthorised, and we have not been supplied with a copy of the original judgment. But if the learned Judge, as reported in the summary of the judgment, was of the opinion that <ORG> is competent to assume to itself jurisdiction Which it does not otherwise possess, merely because an "extraordinary situation" has arisen, with respect to the learned Judge, we are unable to approve of that view. By "jurisdiction" is meant the extent of the power Which is conferred upon the <ORG> by its constitution to try a proceeding; its exercise cannot be enlarged because what the learned Judge calls an extraordinary situation "requires" the <ORG> to exercise it. The appeal must therefore be allowed. Temporary injunction granted by <ORG> is vacated and the plaint is ordered to be returned for presentation to the proper <ORG>. As before <ORG>, no objection was raised about the maintainability of the suit or the application for injunction, we direct the parties to bear their own costs. Appeal allowed.


JUDGMENT

1. The circumstances giving to this appeal are as follows:-

<NAME> respondent was at the material time posted as Superintendent of police, Guedaspur. A government jeep was supplied to him for official use. It was being maintained at Government expense. The tyres of this jeep became worn out. <NAME>, therefore, on the 7th June, 1966 wrote a letter to the controller of stores, Punjab, chandigarh, that inter alia, some tyres and tubes for government jeep and other transport under his charge were urgently required by him. The controller was requested to intimate the amount involved so that sanction of the competent authority to purchase those articles might be obtained. He followed this by a reminder, dated 23-6-1966, requesting the controller to make necessary arrangements for the supply of types and tubes at an early date. The controller of stores, in reply sent the letter, dated 24-6-1966, requesting the respondent to send his demand in the new prescribed from the controller of printing and stationary, Punjab. He added that that further action would be taken on hearing on hearing from him (respondent).

2. On the 20th July, 1966 <NAME> proceeded in the <ORG> jeep no. PNP-15 registered in the name of Superintendent of police, Gurdaspur, on official duty, to Pathankot. The jeep was driven by Constable <NAME> 43. It was raining at about 6.45 P. M. when the jeep was on the road near village Paniar, it skidded and overturned, as a result on which <NAME> received injuries. His right clavical bone was fractured . He remained in plaster for 6 weeks suffering intense pain. Mr. <NAME>, therefore made an application to <ORG>, Punjab chandiaarh, claiming rs. 5.000/- as compensation. It was alleged that the accident occurred due to the worn out tyres of the government vehicle, which were not replaced by the appellant-State, despite repeated requests, in time. At the time of the accident it was raining and the road was wet; consequently, the vehicle skidded and overturned.

3. The application was opposed by the state of Punjab through its secretary in the home department. In its written statement, the state denied its liability to pay any compensation, It was added that the officer had taken out the jeep on the road against the instructions of the Inspector-General of police, and that the superintendent of police, Gurdaspur, being himself the registered owner of the vehicle, could not claim compensation against himself.

4. The <ORG> framed these issues:-

1. Was the accident due to any negligence on the part of the driver of the vehicle or due to any defect in the vehicle involved in the accident?

2. What is the quantum of compensation due if any and and from whom?

3. Is not the claimant entitled to any compensation?

4. Is the government not liable to pay any compensation to the claimant?

5. after recording the evidence produced by the parties, the <ORG> found:-

"The accident no doubt took place because the tyres were worn out and had become unserviceable and the driver was not to blame as it was raining that day and the tyres slipped, but the driver was negligent in the performance of his duties as he did take the defective vehicle on the road and did not inform his officer about its unserviceable that day. The accident was, therefore, both due to the negligence of the driver as well as due to the defect of the tyres. The respondents have also admitted that requisition had been made to the controller of Stores by the applicant much before the accident for the supply of new tyres. Had they been supplied prior to the accident, it would not have occurred."

6. The two-pronged issue No. 1 was thus decided entirely in favour of the claimant. The remaining issues were also decided against the state. In the result Rs. 4,000/- were awarded as compensation under section 110-B of the Motor Vehicles Act, 1939, to the claimant against the appellant -State, with costs. It was further directed that the amount be paid within a month of the date of the award, failing which it will carry interest at 6% per annum. Hence this appeal by the state.

7. Mr. <NAME>, the learned counsel for the appellant state, has canvassed these points in the course of his arguments:-

1. The claimant as Superintendent of police was the registered owner of the vehicle, and at the material time, it was being driven by his own subordinate, Constable-driver. It was a rainy day the claimant knew or should have, by the exercise of ordinary diligence, known that the tyres of the vehicle were worn out and unserviceable, and it was dangerous to take it out on a rainy day on the road. This act of the claimant, <NAME>, and his constable-driver in taking out the jeep, which was not in a roadworthy condition, on that rainy day, amounted to an offence under section 121 of the Motor Vehicles Act, read with Rules 5.1 and 5.3 of the Motor Vehicles Rules. The claimant, therefore could not claim compensation for his own wrong or negligence.

2. the state was not liable, because no negligence either on the part of the controller in not supplying the new tyres, or the driver in driving the vehicle, was established.

3. There were several transport vehicle under the control of the superintendent of police, Gurdaspur. The claimant could avoid travelling on that rainy day in that unsafe vehicle, by selecting some other vehicle, or adopting any other mode of conveyance. The accident was, therefore, self-invited and the direct result of the negligence on the part of the claimant.

8. Mr. <NAME>, the learned Counsel for the claimant-respondent contends occurred as a result of the negligence of the appellant-<ORG> in not replacing the worn out tyres of the government jeep in time, despite requisitions made by the claimant: secondly, even if there was no such negligence, the liability of the <ORG> to compensate its servant for an injury sustained by him in the performance of his duty was absolute. It was not dependent on proof of any negligence either on the part of the Controller in not supplying the new tyres in time, or on the part of the drives of the vehicle in driving it. The claim ant as well as the driver both were servants of the <ORG>. The claimant was required to go on official tours in this jeep. While it was the duty of the constable-driver to drive it. A jeep with worn out tyres when driven on the road on a rainy day, is an intrinsically dangerous vehicle.

It was only in answer to the call of duty, which was paramount, that the claimant-respondent tool the risk of taking the unsafe vehicle on the road, and thereby met an accident and got injured. It was the duty of the master to keep the vehicle in a roadworthy condition, in which the servant was required to travel in the performance of his duties. It is maintained that the principle of res ipsa loquitur will be attracted. It is also said that section 110-B of the Motor Vehicles Act does not say that compensation can be awarded only when negligence on the part of the driver of the vehicle or its owner is established. I n support of this contention, Mr. <NAME> has referred to <CITATION> roadways, Ambala 1962-64 Pun LR 448=(AIR 1962 Punj 540): <ORG> and sons, Ltd., (1921) 2 KB 674: <ORG>, (1955) 1 All ER 6: and <ORG>, (1944) 1 All ER 465.

9. Before entering on the merits of the case, it will be worthwhile to elucidate the law on the point. It is true that there is nothing either in Ss. 110, 110- A, 110-B or 110- C of the Motor Vehicles Act , which says that compensation can be awarded by <ORG> only when negligence on the part of the driver of the vehicle concerned is established. These provisions, however, do not lay down any criterion for awarding compensation. They merely substitute the Motor Accidents claims tribunal for the Civil courts, for adjudicating claims to compensation in respect of accidents, involving death of or bodily injury to persons, arising our of the use of motor vehicles. They do not deal with the question as to who is to be held liable and in what circumstances, if any injury results from an accident. For fixing liability, in the absence of any specific statutory provision, we have to go back to the law of torts, according to which, generally speaking negligence in causing the accident is essential to hold the negligent person liable.

As observed by I. D. dua, J. in shri ram Pertap's case, 1962-64 Pun LR 448=(AIR 1962 Punj 540) the cardinal principle of liability on tort, when death or bodily injury has been caused to a person, is negligence or failure to take the requisite amount of care required by law. Similarly, in <CITATION> . AIR 1963 Punj 214, the accident in which the claimant received injuries while travelling in a bus, run by the state, was not proved to be due to any rash or negligent act of the driver. It was held that the claimant was not entitled to claim any compensation from the state for the injuries received by him.

10. It must be remembered that 'absolute liability' - which means liability without any fault or negligence on the part of the respondent, is exception under the common law, the general rule being that a person is liable only for the injury or harm directly flowing from his intention or negligence and not for any harm resulting from an unavoidable accident. The rule of absolute liability has grown in modern times. In Rylands V. Fletcher. (1865) 3 H & c 774 (sic) (1868- 3 HL 330 reversing (1865) 3 H & C 774), it was laid down that a person who brings dangerous things on his land and a harm results due to their escape, is liable. An extension of this rule casts vicarious liability on employers towards their employees. Employing servants or workmen in industry of business under the present conditions in this machine age is attended with risk of injury due to the negligence or mischief of the employees, which their employer cannot avoid with any amount of care. Statutory provisions, such as Workmen's Compensation Act , have been made to put the employer in the position of an insurer against harm done to the employees or its workmen within the scope of the employment. This principle of insurance against harm is in consonance with the socialistic pattern of society envisaged in our constitution.

11. In applying the doctrine of absolute liability, the <ORG> have to perform a delicate task. They have to give a new look to the old principles in the light of the present-day circumstances. They have to adopt the old principles to the modern world. If the old principles are to live and not become flint fossils of time, they must be constantly renovated, molded, and attuned to the changing social conditions. The courts play a limited role in this process by placing, what is called a dynamic interpretation on principles which carry behind them the sanction of tradition and precedent. They cannot, however, in the absence of any statutory provision, sanctioning that course, cut themselves completely adrift from their past moorings, and arrogate to themselves the functions of the <ORG>. Introducing entirely new principles, radically differing from a conflicting with the fundamental principles of Common law that have evolved through the centuries. Leaving aside the cases governed by special statutory provisions, such as Workmen's compensation Act, in cases of the kind before me, negligence on the part of the master or his agent must be proved before he can be fastened with the liability to compensate his servant, sustaining an injury in the course of the service.

12. The above being the law on the point, I pass on to consider whether in the present case, the accident resulting in injury to the claimant was due to negligence - actual or presumed - on the part of the employer - <ORG> or its servant, the driver of the vehicle concerned.

13. It was first on the 7th June 1966, that the claimant wrote to the controller of <ORG> that some tyres and tubes for <ORG> jeep and other transport under his charge were urgently required by him. This letter was more or less of an exploratory nature, inasmuch as the controller was requested to intimate the amount involved so that sanction of the competent authority to purchase those articles might be obtained. To this letter, the controller of stores sent a reply, dated 24-6-1966, asking the claimant -respondent to send his demand in the prescribed indent form available from the controller of printing and stationary, Punjab. There is nothing on the record to show that the claimant-respondent had sent his demand in the prescribed form thereafter. In the letter, dated 7-6-1966, Exhibit D. B., the claimant-respondent did not even say that the tyres of the vehicles had become unserviceable or worn our. The only thing mentioned therein is, that certain number if tyres and tubes were urgently required.

On the other hand, the controller of stores in his letter, Exhibit D. D., dated 24-6-1966, clearly intimated the claimant-respondent that further action in the matter could be taken only on respect of his demand on the prescribed indent forms No. "UF 88". It is true that the knowledge of the employer or the controller about this unserviceable or dangerous condition of the motor vehicle concerned is not a sine qua non for fixing him with the liability. It is, however, an important piece of evidence showing that were was no negligence on his part. Thus, it was not established that there was any negligence on the part of the appellant or its servant, the controller of stores, in not replacing the worn out tyres of the vehicle in time. Indeed, there was negligence on the part of the claimant in not making the demand well in time in the prescribed form. <ORG>, also, has not recorded any clear finding that there was negligence on the part of the state in replacing the worn out tyres, though it has said that the accident occurred due to the defect in the tyres.

14. Having seen that no negligence on the part of the employer-state has been proved, I pass on to consider, whether any negligence on the part of the driver held been established. The <ORG> has held that the driver was not to blame for the accident, which occurred due to the rain and the worn out and unserviceable condition of the tyres. The <ORG> has however, held that the driver was negligent as he did take the defective vehicle on the road and did not inform his officer about its unserviceable that day.

15. I am unable to appreciate this reasoning. It was the claimant's own case that the tyres of the vehicle had become worn out and unserviceable and they required urgent replacement. The knowledge of the claimant about the worn out condition of the tyres can be inferred from the circumstances that he wrote to the controller as far back as the 7th June 1966, that the tyres and tubes of the <ORG> jeep and other transport vehicles were urgently needed by him. He followed up this letter by a reminder, dated 23-6-1966. Thereafter, he received the reply of the controller that the requisition should be sent in the prescribed form. The accident occurred only about 4 weeks after the receipt of this letter. It is therefore, preposterous to suggest that Mr. <NAME> did not know about the worn our and unserviceable condition of the tyres.

He further knew that it was a rainy day. By ordinary diligence, therefore, he ought to have known that it was dangerous to take out the vehicle with unserviceable tyres on a rainy day. He did not require to be told by the Constable-driver about the condition of the tyres and the consequent roadworthy condition of the jeep on that rainy day. This act of the driver in driving that dangerous and unsafe vehicle on that rainy day, with its unserviceable tyres, and also act of <NAME> in allowing his subordinate driver to drive the vehicle on that day, might amount to the commission of an offence by the claimant as well as the driver under section 121 of the Motor Vehicles Act. Section 121 of the Act, reads as follows:-

"121. Using vehicle in unsafe condition. Any person who drives or cause or allows to be driven in any public place a motor vehicle or trailer while the vehicle or trailer has any defect, which such person knows of or could have discovered by the exercise of ordinary care and which is calculated to render the driving of the vehicle a source of danger to persons and vehicles using such place, shall be punishable with fine which may extend to two hundred and fifty rupees, or if as a result of such defeat an accident is caused causing bodily injury or damage to property, with imprisonment for a term which may extend to three months or with fine which may extend to one thousand rupees, with both."

16. Thus, the claimant and the driver both committed a wrongful act which is interdicted Act. The claimant, therefore cannot be compensated for a harm flowing from his own wrongful act or negligence.

17. The facts of the cases referred to by Mr. <NAME> were materially different from those of the instant case. The sheet-anchor of Mr. <NAME>, is the case, (1921) 2 KB 674. The plaintiff, Mr. <NAME>, a commercial traveler, was employed by the defendants, who were wholesale grocers. His duties were to travel round the district, show samples, take orders and deliver goods, and for that purpose he was supplied by the defendants with a motor-car, the starting gear of which was defective. He complained of this on several occasions to the defendants, who admitted that it was defective, but failed to remedy the defect. While the plaintiff was upon one of his journeys the car stopped, and in trying to restart it, he was severely injured. In an action brought by the plaintiff to recover damages in respect of personal injury resulting from the negligence of the defendants, it was held that the plaintiff notwithstanding his knowledge of the defect in the starting gear, had never undertaken or consented to take upon himself the risks arising from continuing to use the car, that he had sustained the injury owing to the personal negligence of the defendants, and that, not having been guilty of contributory negligence, he was entitled to recover.

18. It is important to note that Mr. <NAME> had repeatedly complained to his employers about the defect in the starting gear of the car. But the defect was not removed. The last time he complained about the defect to his employers, he was told: "Well we do not want you to be laid up, Use the car this week, as no other car is available. I will then have it seen to when you get back and you can go your next round by rail". It was in compliance with this direction of the employer that Mr. <NAME> started on his journey in the car, with the starting gear still defective.

19. In the instant case, it was neither alleged not proved by the claimant that he was peremptorily required by his employer or any superior officer to use the jeep with its defective tyres on that rainy day and thus run the risk of being injured. The claimant has not alleged, much less proved, (1) that the official work for which he had to travel on that day was so urgent and paramount that he could not, as a devoted and faithful servant of the state, avoid, and (2) that in the circumstances, he had no choice but to use this very defective jeep. It is apparent from the letter written by the claimant to the controller that there were several <ORG> transport vehicles under his control.

He has not alleged that all the other vehicles were unserviceable and in a more unroadworthy condition than the jeep concerned. Indeed, it was never the claimant's case that the exigencies of the official mission to be performed by him were so urgent and imminent that he had no choice but to travel in this defective jeep, except at the cost of committing dereliction of the official duty and the consequent incurrence of displeasure of the master. There was no proof that the master had done some act either by issuing peremptory direction to the servant to use this defective vehicle on that day and thereby expose him to danger, or had in any manner put the servant in that dangerous situation which he could not, by the exercise of ordinary diligence or discretion, avoid.

20. In (1921) 2 KB 674, it has no-where been laid down that the master's Liability is absolute and is not dependent on his personal negligence towards the servant. Mr. Justice <NAME>, who decided this xase, agreed that in order to cast liability on the master it was not necessary to prove that the master knew of the danger and that the servant was ignorant of the danger. In this opinion, both these branches of the proposition as enunciated in <NAME>'s case, (1884) 13 QBD 259, were erroneous. The learned Judge further observed:-

"I do not think it was ever essential not is it now essential to show that the master has actual knowledge of the danger or defect. The action against the master by a servant for negligence was based., as it purported to be based, on negligence and not on knowledge. It may well be that negligence could not in certain cases be shown without proof of knowledge. It may also be that once knowledge was shown the inference of negligence would be drawn. But proof of knowledge was only a useful method of proving negligence. Negligence could exist and can exist without actual knowledge by the master of the danger or defect. Indeed the absence of knowledge may itself be the basis of the charge of negligence.

The relationship between master and servant normally places upon the master the duty of care towards his servant...........

Now what does the duty of care involve? The answer is supplied by the well-known words of <NAME> in <ORG>, (1856) 11 Ex 781, 784, where he defines negligence as "the omission to do something which a reasonable man, guided upon those considerations which ordinarily regulate the conduct of human affairs, would do, or doing something which a prudent and reasonable man would not do." Subject to the observation in <NAME>, (1893) 1 QB 491, the words of <NAME>, are still a useful guiding rule.

It follows therefore that a master may be liable for a danger or defect (causing hurt to his servant) not only where he knew but where he ought to have known of it. The negligence may be either (a) where he knows and negligently fails ro remedy, or (b) where he ought to have known but negligently fails in acquiring knowledge and therefore negligently fails to remove the danger or defect."

21. Thus, from what has been quoted above, it is quite clear that negligence on the part of the master is still the basis of an action for compensation in cases of this kind. In the case before me, the master was not apprised of the fact that the tyres of all the vehicles, including the jeep in question had become unserviceable. Secondly, it was not the master who put the servant in that situation. It was the claimant's own negligence that exposed him to that danger. The claimant's negligence consists first in not placing the indent in time in the prescribed form, and further allowing the jeep to be taken out in that road unworthy condition on a rainy day. Thus, the rule in <NAME>'s case, 1921-2 KB 674 does not advance the proposition expounded Mr. <NAME>.

The general rule is that the plaintiff must establish some negligence or a breach of duty by the defendant towards him and its causal connection with his injury. I do not agree that the case is covered by the principle or res ipsa loquitur. This rule has been very succinctly stated in the leading English case, Scott V. London and <ORG> (1865) 3 H & c 596. There the plaintiff, a customs officer, went inti the defendant's docks on business and in passing from one door way to another, six bags of sugar which were hung by a chain, fell on him. It was held that on these facts negligence of the defendant's servant could be inferred. The rule applicable to such cases was enunciated as follows:-

"Where the thing is shown to be under the management of the defendant or his servants, and the accident is such as in the ordinary course of things does not happen it those who have the management use proper care, it affords reasonable evidence in the absence of explanation by the defendant, that the accident arose from want of care."

22. In case before, me the vehicle concerned was not under the 'management' of the appellant-state or its servant, the driver, It was registered in the name of the superintendent of Police Gurdsapur, and was under his control . that is to say, it was under the, management of the claimant himself, and the accident would not have happened if the claimant, who had the management and control, used proper care either to get the tyres replaced in time or to avoid using this dangerously unsafe vehicle on that rainy day. The accident occurred for want of care on the part of the claimant himself. The rule of res ipsa loquitur , (which for the sake of convenience maybe called the rule of presumptive negligence on part of the defendant), has therefore, no application to the facts of the <ORG> case.

23. It is not necessary for me to over-burden this judgment by discussing all the cases cited by Mr. <NAME>. It would suffice to say that their facts were entirely different.

24. For all the reasons aforesaid, I have no hesitation in holding that the claimant was not entitled to any compensation. In the result, I would allow this appeal, and dismiss the claimant's application, leaving the parties to bear their own costs throughout.

25. SSG/D.V.C.

26. Appeal allowed.