Holding

A lease for retreading tyres is not a lease for manufacturing purposes within Section 106, so the tenancy could be terminated by a 30‑day notice.

Summary

The plaintiff, a landlady, leased premises to the defendant for the business of retreading tyres at a rent of Rs.850 per annum. When the defendant defaulted on rent, the plaintiff served a 30‑day notice to terminate the tenancy. The defendant contended that the lease was for "manufacturing purposes" under Section 106 of the Transfer of Property Act, 1882, which would require a six‑month notice, rendering the notice invalid. The trial court, appellate court and High Court held that retreading tyres does not constitute manufacturing, as it does not produce a new or distinct article, and thus upheld the validity of the 30‑day notice. On appeal, the Supreme Court affirmed this view, stating that "manufacturing" requires a complete transformation resulting in a commercially different product, which retreading does not achieve, and dismissed the appeal.

Issues considered

Whether a lease of premises for the business of retreading tyres falls within the meaning of "manufacturing purposes" under Section 106 of the Transfer of Property Act, 1882.

Legislation cited

Subjects

Transfer of Property ActSection 106manufacturing purposeslease terminationnotice periodretreading tyreslandlord-tenantproperty law

Judgment

961

P. C. CHERIYAN A
v.
BARFI DEVI
October 16, 1979
[R. S. SARKARfA AND 0. CHINNAPPA REDDY, JJ.] B
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. c
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. D
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
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.
E
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 'manu-
facturing purpose' and, therefore, 30 days' notice given by the plaintiff to the-
defendant 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 G
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 I
H
3. The broad test for determining whether a process is a manufacturing pro-
c'ess, is whether it brings out a complete transformatio~ for the old components,
7-743SCX/79
/

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.
Ft·deral Co1nrnissio1ier of Taxation v. Jack Zinader Pro[Jrietary Ltd., (1948-
D 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.
E
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 1
G the only question that falls for consideration in this appeal by special
leave directed against a judgment, dated December 11, 1968, of the

H
Iligh Court of Allahabae.
stances :
Tue question arises in these circum-

The plaintiff-respondent Jet out the accommodation in dispute. at
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 eject-
rnent 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 sophisticat-
ed machinery _and results in b;ringing into being a distinct commercial
E
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 market-
able 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 F
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. G
Ltd.;(3) North Bengal Stores Ltd. v.. Member, Board of Revenue,
Benga/;( 4 ) and an Australian case; Federal Commissioner of Taxation
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. H
(4) (1938-50) I STC.157.
(5) (1948-49) 78 C.L.R. 336·
964 SUPREME COURT REPORTS
, [1980] 1 S.C.R>-

The expression "manufacturing purposes" has not been defined iIJ. J
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
B and there must be transformation; a new and different article mus1t
emerge having a distinctive name, character or use. This construc-
tion of the expression "manufacture" received the imprimatur of this
l
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 whe-
c ther 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 manu-
facturing some spare parts for repairing or reconditioning vehicies, yet
D 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.

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; on-
which the counsel bas staked a good deal in his argument.

In Jack Zinader (ibid), a furrier company received from customen>'
F fur garments which bad become too badly wqrn and damaged to be·
repaired, and, after removing the defective, parts, remodelled, for those-
customers respectively by various processes, what was left into modem-
styles of coats, fur capes, fur collars, fur coats and stoles having re-
gard to the extent, shape and nature of the available materials. Tbe-
mntcrials used by the company in remodelling were. except about five
G 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
H consisting of Dixon and Williams JJ. (Web J. dissenting) answered!

(I) (1968] 3 S.C.R. 21.
P. c. CllERIYAN v. BARF! DEVI (Sarkaria, J.) 965

this question in the affirmative. Dixon J. in his leading judgment A
l
(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 B
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 re-
pair and remodelling and does not claim s.ales tax in respect c
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
D
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 . ........... " E
"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 gar-
F
ment; 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 gar-
ment has been used only to provide the materials or somE> of
them from which the new fur garment has been made. It
"'
I is a thing of a different description both commercially and G
from the point of view of the wearer. It is a different en-
tity 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- B
(1) [1906] 2 K.B. 352 at p. 361.
966 SUPREME COURT REPORTS [1980] 1 S.C.R.

A tamer's tastes combine to distinguish tbe various descJip-
tions 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 pro-
duces another, he cannot be treated as having altered an exiSf-
ing 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
c 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
D 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
E r~reading process does not cause the old tyre to lose its origirial chara-
cter. The broad test for determining whether a process is
a manufacturing process, is whether it brings out a complete transfor-
mation for the old components so as tO' produce a commercially diffe-
rent article or commodity. This question as rightly emphasiseo by
the learned Judge in Jack Zinader, is largely one of fact. In the
F 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 in-
to being a commercially distinct or different entity. The old tyre retains
its original character, or identity as a ty.re. Retreading does not comp-
G letely 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
H were therefore, right in holding that the lease in the present case was
not for mannfacturing pu;rposes, and the tenancy had been rightly ter-
minated by thirty days notice.
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.

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