P. C. Cheriyan v. Barfi Devi

961 P. C. CHERIYAN _v._ BARFI DEVI _October_ 16, 1979 [R. S. SARKARfA AND 0. CHINNAPPA REDDY, JJ.] _Transfer_ _of_ _Property Act_ 1882 (4 _of_ 1882) _S._ _106-Lease_ _of_ _Premises for_ _carrying on business_ _of_ _retreading_ _of_ _tyres-Whether_ _lease for 'manufacturing_ _purposes' within_ S. 106. _Words and Pflrases-'Manufacturing purposes'-Meaning_ _of-Transfer_ _of_ _Property_ _Act_ 1882, _S._ 106. The plaintiff (respondent) let out the accommodation in dispute at a rent of Rs. 850/- per annum to the defendant (appeIIant) who was doing the busi· ness of retreading of tyres in the said premises. The defendant defaulted in payment of rent, and the plaintiff sent one month's notice terminating the tenancy .. Thereafter, the plaintiff instituted a suit for recovery of arrears of rent and ejectment against the defendant. The suit was contested, on the ground that the premises in. dispute had been let out for manufacturing Purposes and in view of s. 106, Transfer of Property Act:" the lease could be terminated by the landlady only by six months nof..,e A B ###### c D E _1_ expiring with the end of the year of tenancy and since the plaintiff had served only 30 days' notice, the. same was invalid and ineffective to terminate the . tenancy. The Trial Court and the First Appellate Court concurrently decreed the suit for arrears of rent as well as for ejectment which was confirmed by the High Court. All the Courts below held that the retreading of tyres, is not a 'manufacturing purpose' and, therefore, 30 days' notice given by the plaintiff to thedefendant for terminating his tenancy was valid. _, ID the defendant's appeal to this Court on the question whether a lease of F - a premises for carrying on the business of retreading of tyres is a lease for 'n1anufacturing purposes~ within the contemplation of s. 186 Transfer of Pro perty _Act._ HELD": I. The Courts below were right in holding that the. lease in the present case was not for 'manufacturing purposes', and the tenancy -had been rightly terminated by thiity days' notice. [966 HJ 2. The expression. 'manufacturing purposes' has _not_ been defined in the Transfer of Property Act. It has therefore, to be construed in its popular sense. 'Manufac.ture' implies a change but every change is not manufacture. Something more is necessary. There must be transformation; a new and different atticle must emerge haying a distincti"Te name, char<icter. or use. [964 A-BJ 3. The broad test for determining whether a process is a manufacturing proc'ess, is whether it brings out a complete transformatio~ for the old components, 7-743SCX/79 G _I_ H / 962 SUPREME COURT REPORTS [1980] **1** S.C.R. **A** **so** **as to produce a commercially different article or commodity.** **This:** **question** **is** **largely one** **of** **fact.** **[966** **F]** **As** **a result of retreading,** **an** **old** **tyre does not become a different. entity, nor** **acquires a new identity. The retreading process does not cause the** **dd** **tyre** **to lose** **its** **original character,** **nor** **brings** **into being a commercially** d~titrct **or** **different entity.** **The old tyre retains its basic structure,** **origin31** **ch::.tractec** **and** **B** **identity,** **as** **a** **tyre,** **although** **retreading** **improves** **its** **performance** **and** **serviee-** **ability.** **Retreading** **of old** **tyres** **is** **just** **like** **resoling of** **old** **shoes.** **Just** **ili** re~ **soling** **of** **old shoes does not produce a commercially different entity,** **so** **from** **retreading no** **ne\\r·** **or distinct article emerges.** **[966 E-G]** **4. Definitions** **of** **'manufacture' given in other enactments, such as,** **in** **the** Factories Act er the Excise Act should not be blindly applied while illterpre**C** **tin2 the expression 'manufacturing purposes'** **in** **s.** **106** **of** **the Transfer** **of Pro-** **perty** **Act, because** **in** **some ether enactments such as the** **ExCise** **A.ct,.** **the term** **'manufacture' has been given an extended meaning by including** **in** **it** **'repairs',** also. [967 A-Bl _South Bihar Sugar Mills_ v. _Union_ _of India,_ [1968] 3 SCR 21, referred to. ###### • #### **_1_** ,., ~ '' ## .. **D** E _**Ft·deral Co1nrnissio1ier**_ _**of**_ _**Taxation**_ **v.** _**Jack Zinader Pro[Jrietary Ltd.,**_ **(1948-** 49) 78 C.L.R. 336; distinguished. _Allenbury Engineers Ltd._ v. _Ramakrishna Dalmia and Ors.,_ [1973] 2 S.C.R. _251;_ applied. CIVIL ArPELUTE JURISDICTION : Civil Appeal No. 1722 of 1969. Appeal by Special Leave from the Judgment and Order dated 11-12-1968 of the Allahabad High Court in Second Appeal No. 969/ **67.** _M. M._ _Abdul_ _Khader, R. Salis, Vijay_ _K._ _Pandita_ and _E._ _C._ _Agar-_ _wala_ for the Appellant. _Jitendra_ _Sharma_ and _V._ P. _Clumdluiry_ for the Respondent. The Judgment of the Court was delivered by SARKARIA, J.-WheU1er a lease of a premises for carrying on the business of retreading of tyres is a lease; for "manufacturing purpooes" within the contemplation of Section 106, Transfer of Property Act, is G the only question that falls for consideration in this appeal by special leave directed against a judgment, dated December 11, 1968, of the Iligh Court of Allahabae. Tue question arises in these circum**stances** _:_ The plaintiff-respondent Jet out the accommodation in dispute. at **H** a rent of Rs. 850/- per annum to the defendant who was doing the business of retreading of tyres in the said premises. The d6fendant defaulted in payment of rent. The plaintiff, therefore, sent one P. c. CHER!YAN _v._ BARF! DEVI _(Sarkaria, J.)_ 963 rno11th's notice to the defendant terminating his tenancy. Thereafter. **A**, the plaintiff instituted a suit for ;recovery of arrears of rent and ejectrnent against the defendant. The suit was resisted, _inter_ _alia,_ on the ground that the premises in dispute had been let out to him for manufacturing purposes and ill view of Section 106, Transfer of Property Act, therefore, the lease **B** coald be terminated by the landlady only by six months' notice expiring with the end of tho year of tenancy, and since the plaintiff had served -0nly 30 days' notice, the same was invalid and ineffective to terminate the tenancy. The trial Court and the First Appellate Court concurrently decreed the suit for arrears of rent as well as for ejectment. **C** The only ground urged before the First Appellate Court and the High Court was that the tenancy being for manufacturing purposes, could not be terminated by one month's notice. All the courts below negatived this contention and have concurrently held that the retreading uf tyres, is not a manufacturing! purpose and, therefore, 30 days' notice **D** given by the plaintiff toi the defendant for terminating his tenancy, was >ialid. Mr. Khader, learned counsel for the defendant-appellant, conteiids 1hat the process of retreading old tyres, involves the nsei of sophisticated machinery _and results in b;ringing into being a distinct commercial commodity. It is argued that the essential test of a manufacturing pro-cess is that it must bring ab-Ou~ a change in the character, quality or user of the old material processed so as to produce a distinct marketable article, but it is not necessary that the old material should comple tely lose its identity. It is nrged **that** **the** **High** **Court** was in _enor in taking the view that from the process of retreading old tyres a commercially different article does not emerge. In support of t11e proposition that a process by which a useless article becqmes useful >and its character ov use is changed is a manufacturing prncess, counsel has cited _Commissioner_ _of_ _Sales Tax, U.l'._ v. _Dr. Sukh Deo;(')_ _Al/enburry Engineers Pvt. Ltd._ v. _Ramakrishna Dalamia_ _&_ _Ors.;(2)_ _State_ _of_ _Maharashtra_ v. _The Central Provinces Manganese Ore_ _Co._ _Ltd.;(3) North Bengal Stores Ltd._ v .. _Member, Board_ _of_ _Revenue,_ _Benga/;(_ _[4]_ _)_ and an Australian case; _Federal Commissioner_ _of Taxation_ **E** **F** **G** **H** v-. _Jack Zinader Proprietary Ltd._ ( [5] ). (I) [1969] I s.c.R. 710. ·(2) [1973] 2 S.C.R. 257· (3) [1977] 1 S.C.R. 1002. (4) (1938-50) I STC.157. (5) (1948-49) 78 C.L.R. 336· B ##### c D 964 SUPREME COURT REPORTS, [1980] 1 S.C.R> The expression "manufacturing purposes" has not been defined iIJ. the Transfer of Property Act. It has therefore, to be construed in its popular sense. According to the Permanent Edition of 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, Jabour and manipulation. But something more is necessary and there must be transformation; a new and different article mus1t emerge having a distinctive name, character or use. This construction of the expression "manufacture" received the imprimatur of this Court in _South Bihar Sugar Mills_ v. _Union_ _of_ _India.(')_ But the case. directly in point is _Allenburry Engineers Ltd._ v. _Ramakrishna Dalamia,_ ibid; wherein the.question for consideration before this Court was whether the lease in favour of _Allenbury Engineers_ was for "manufacturing purposes" within the meaning of Section 106, Transfer of Property Act. On the facts of that case, answering the question in the negative, this Court held that even\ though t11e lessees were manufacturing some spare parts for repairing or reconditioning vehicies, yet the dominant purpose of t11e lease was one of the storage and resale of the vehicles after repairing and reconditioning them; and that manufac-. tnring of spare parts was merely incidental tO' the main purpose of re-. pairing or reconditioning the vehicles for disposal. J # l Since the instant case is covered by the ratio of _Allenbury_ _Engi-_ E _neers,_ it is not necessary to discuss all the cases cited by Mr. Khader. Nevertheless, it will be proper to notice briefly one case, namely, _Federal·_ _Commissioner_ _of_ _Taxation_ v. _Jack Zinader Proprietary Ltd,_ ibid; onwhich the counsel bas staked a good deal in his argument. F G H In _Jack Zinader_ (ibid), a furrier company received from customen>' fur garments which bad become too badly wqrn and damaged to be· repaired, and, after removing the defective, parts, remodelled, for thosecustomers respectively by various processes, what was left into modem styles of coats, fur capes, fur collars, fur coats and stoles having regard to the extent, shape and nature of the available materials. Tbemntcrials used by the company in remodelling were. except about five per cent of the linings, confined to .those available from the customer's·. garment. If. new linings were required the customer supplied them. The question for decision before the High Court of Australia was:; whether fur coats, stoles, capes and collars formed by remodelling fur garments are foc the purposes of the Sales Tax Assessment Act (No. 1), 1930-1942, goods "manufactured sold". The Court by a m'l;Ority consisting of Dixon and Williams JJ. (Web J. dissenting) answered! (I) (1968] 3 S.C.R. 21. l I "' P. c. CllERIYAN _v._ BARF! DEVI _(Sarkaria,_ J.) 965 this question in the affirmative. Dixon J. in his leading judgment A (at p. 343), after quoting with approval the dictum of Darling J. in _McNicol_ v. _Pinch,(')_ that "the essence of making or of manufacturing is that what is made shall be a different thing from that out of which it is made", observed : "The first and, it may be thought, the decisive question in the case, is therefore whether the garments which result from the process of remodelling are different things, that is are different goods, from the garments that the customer hands over. This perhaps is rather a question of fact than of law ........ The Commissioner distinguishes between repair and remodelling and does not claim s.ales tax in respect of repair even although it may mean some change in, for example, the length of the garment. We are told that an old or worn fur coat is remodelled into a modern style of coat, 'that a fur necklet is remodelled into a stole and a fur neck!et or fur stole is remodelled into a cape. A full length fur coat may be converted into a saunter' o.r the somewhat similar 'swagger' coats which are considerably shorter but full and often flared at,the bottom. 1\ut the conversion may be to a jacket, which is coatee, which is less than waist length an(! fits more closely and usually is not fastened in **front .** ........... " "On the side of the taxpayer it is contended that these procedures do not change the identity of the garment but only some of its characteristics. The custome.r hands in a fur garment and takes away a fur garment. It is altered and renovated but it is still a fur garment; it is her fur garment; it is the fur garment she brought to the furriers. On the side of the Commissi<¥Jer it is said that a different fur garment has been brought into existence. The old fur garment has been used only to provide the materials or somE> of them from which the new fur garment has been made. It is a thing of a different description both commercially and from the point of view of the wearer. It is a different entity and has a new identity. Goods have therefore been ·produced. " "On the whole, the Commissioner's view appears to be the more correct. The work of the furrier is to use skins to fonn garments. Fashion, commercial usage and his cus (1) [1906] 2 K.B. 352 at p. 361. **B** ##### _c_ **D** **E** F G **B** 966 SUPREME COURT REPORTS [1980] 1 S.C.R. tamer's tastes combine to distinguish tbe various descJiptions of garment he makes and to compel the recognization of them as separate categories of goods. When he takes skins made up into the description of fur garment and produces another, he cannot be treated as having altered an exiSfing thing without producing a new one. He has made a diJferent article." Williams J., agreed with Dixon J., that the question at issue was one of fact aud degree and that the process concerned involved manu· facture of goods into different goods from their second-hand compo nents. The learned Jndge rejected the argument on behaif of the taxpayers that the work could be described as a mere repair or modifi· cation of the goods which did not affect their original character, with the observation that "once the work done causes the goods to lose this charaCter th<>y become 'goods' within the meaning of the Act." It will be seen that _Jack Zinader's_ case bears no analogy with the present case. The facts of that case were materially different. There, from the serviceable components taken out from old gannents, the furrier by his skill and Jabour made garments od' different design and description both commercially and from the point of view of the wearer. But in the instant case, by retreading an old tyre does not become a different entity, nor acquires a new identity. The r~reading process does not cause the old tyre to lose its origirial character. The broad test for determining whether a process is a manufacturing process, is whether it brings out a complete transformation for the old components so as tO' produce a commercially different article or commodity. This question as rightly emphasiseo by the learned Judge in _Jack Zinader,_ is largely one of fact. In the case before ns, all the courts below have concurrently answered this question in the negative. In our opiniqn, this finding of the courts below is unassailable. The retreading of old tyres does not bring into being a commercially distinct or different entity. The old tyre retains its original character, or identity as a ty.re. Retreading does not completely transform it into another commercial article, although it improve Jts performance and serviceability as a tyre. Retreading of old tyres is just like resoling oil old shoes. Just as resoling of old shoes, does not produce a comme.rcially different entity having a different identity, so from retreading no new or distinct article emerges. The old tyre retains its basic structure and identity. The courts below were therefore, right in holding that the lease in the present case was not for mannfacturing pu;rposes, and the tenancy had been rightly terminated by thirty days notice. A ###### c D E F G H ' ### r ··· P. c. CHERIYAN _v._ BARF! DEVI _(Sarkaria,_ _!.)_ 967 Before parting with this judgment, we may sound a note of caution, A that definitions of "manufacture" given in other enactments, such as, in the Factories Act or the Excise Act should not be blindly applied while interpreting the expression "manufacturing purposes" in Section 106, of the Transfer of Property Act. In some enactments, for instance b the Excise Act, the tcrm "manufacture" has been given an extended meaning by including in it "repairs", also. B For the foregoing reason~, the appeal fails and is dismissed w~'.h costs. N.V.K. _Appeal dismissed._ \