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Civil Appeal No. 22-D of 1959, decided on 20th January 1960 (at Dacca).

(On. appeal from the judgment and decree of the High Court of East Pakistan, Dacca, dated the 4th July 1958, in Civil Rule No. 408 of 1958).

Civil Procedure Code (V of 1908), S. 20, Explanation II- Corporation deemed to carry on business (1) at its sole or principal office, irrespective of whether cause of action arose there, (2) at place where it has subordinate office provided cause of action accrues at that place-Interpretation of statues-"Explanation" Function of.

Held, that despite the words shall be deemed', in Explanation II to section 20, Civil Procedure Code in terms defines the words carries on business' used in clauses (a) and (b) of the section, and means that where the defendant is a corporation, it is deemed to be carrying on business at its sole or principal office irrespective of whether the cause of action has arisen there, as well as at the place where it has its subordinate office, provided the cause of action arises there.

Bhola Nath Aggarwala and another v. The Empire of India Life Assurance Co., Ltd. A I R 1948 Lah. 56 ref.

An Explanation is enacted by the legislature to explain what otherwise would be doubtful or ambiguous. To the extent that it explains a stipulated situation its function is definitive inasmuch as it clarifies or defines the legal position in a supposed state of facts.

Ahmed Sobhan, Advocate Supreme Court, instructed by Avazuddin, Attorney for Appellant.

Abu Md. Abdullah and S. M. Hossain, Advocates Supreme Court, instructed by A. N. M. Nasiruddin, Attorney for Respondent.

Dates of hearing : 22nd and 25th January 1960.

.-This is an appeal by special leave from the judgment of a Division Bench of the High Court of East Pakistan at Dacca reversing in exercise of its revisional jurisdiction a finding by the Trial Court that' it had jurisdiction and directing the plaint in the suit to be presented to a Court of competent jurisdiction.

The appellant, Messrs Rahmania Trading Company, instituted against the respondent Messrs Eagle Star Insurance Company Limited, a suit in a Court at Chittagong on an insurance policy.

The respondent is a foreign company but has been registered under the Pakistan Law, with its head office in Karachi. Messrs Shaw Wallace (Pakistan) Ltd. are the principal agents of the Company in Chittagong. It is common ground that no cause of action arose within the jurisdiction of the Chittagong Court. The Subordinate Judge in whose Court the suit had been instituted found on the evidence that the respondent was carrying on business in Chittagong and that therefore the Court had the jurisdiction to try the suit. On revision the High Court has reversed this finding and held that the Chittagong Court had no jurisdiction as the defendant was not proved to be carrying on business at Chittagong. In the present appeal the sole question, and it is a very important legal question, is whether the second ex planation to section 20 of the Civil Procedure Code has the effect of restricting or of widening the meaning of the words carries on business' used in clauses (a) and (b) of the section. The High Court seems to be of the opinion, though no authority is cited in support of it, that the explanation is not restrictive but has the effect of extending the liability of a corporation to be sued at a place where it has its principal office or at a place where it has a subordinate office provided in the latter case the cause of action accrues there. We regret we are unable to share this view. Section 20 is as follows;----

" Subject to the limitations aforesaid, every suit shall be instituted in a Court within the local limits of whose jurisdic tion ---- .

(a) the defendant, or each of the defendants where there are more than one, at the time of the commencement of the suit, actually and voluntarily resides, or carries on business, or, personally works for gain ; or

(b) any of the defendants, where there are more than one, at the time of the commencement of the suit, actually and voluntarily resides, or carries on business, or personally works for gain provided that in such case either the leave of the Court is given or the defendants who do not reside or carry on business, or personally work for gain, as aforesaid, acquiesce in such institution ; or

(c) the cause of action, wholly or in part, arises.

Explanation I.-----Where a person has a permanent dwelling at one place and also a temporary residence at another place, he shall be deemed to reside at both places in respect of any cause of action arising at the place where he has such temporary residence.

Explanation II---A corporation shall be deemed to carry on business at its sole or principal office in the Provinces and the Capital of the Federation or, in respect of any cause of action arising at any place where it has also subordinate office, at such place."

An Explanation is enacted by the legislature to explain what otherwise would be doubtful or ambiguous. To the extent that it explains a stipulated situation its function is definitive inasmuch as it clarifies or defines the legal position in a supposed state of facts. Therefore, despite the words shall be deemed' Explana tion (2) in terms defines the words carries on business' used in clauses (a) and (b) of the section, and means that where the defendant is a corporation, it is deemed to be carrying on business at its sole or principal office irrespective of whether the cause of action has arisen there, as well as at the place where it has its subordinate office, provided the cause of action arises there. This appears to us to be its plain meaning.

Of the cases cited by the appellant none is in point except Bhola Nath Aggarwal and another v. The Empire of India Life Assurance Co. Ltd. (A I R 1948 Lah. 56) but it goes against his own contention and supports the view we are taking. Khosla J. observed there;

"It is, therefore, clear that the corporation can be said to carry on business at the head office or at the place where it has a branch in respect of a cause of action which arises, wholly or in part, at the place where the branch office is situated. If no part of the cause of action arises at the place of the branch office, the corporation cannot be said to transact business at that place. This is the only possible inter pretation of Explanation II, and not a single case cited before me has taken the contrary view. Therefore, the Courts at Lahore, can only have jurisdiction if it can be shown that the cause of action, wholly or in part, arose within the jurisdiction of the Lahore Courts, otherwise the suit must be instituted at Bombay ' where the head office is situated or at some place where the cause of action, wholly or in part, arose."

We consider this to be a correct statement of the function of the Explanation.

We might, however, mention that we are not called upon to and do not decide the question whether a corporation can be sued in a place where the whole or a part of the' cause of action arises if it has neither its principal officer nor a subordinate office there. Nor is it necessary for us to express any opinion on the question whether the Explanation also controls the words "carries on business" in section 19. It is sufficient to state that since the cause of action did not accrue at Chittagong and the defendant's principal office is at Karachi, the Chittagong Court had no jurisdiction. The result is that we dismiss the appeal with costs, though on grounds which did not find favour with the High Court.

A. H. Appeal dismissed.

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