Court case(1861) 5 Bom HCR App 1

A servant of the plaintiff company was driving a carriage drawn by a pair of horses belonging to the company along a road in Calcutta. Some workmen employed in the Government Dockyard at Kidderpore were carrying a heavy piece of iron, part of a steamer's funnel, along the road for the purposes of the dockyard. As the carriage approached, the men, through negligence, dropped the iron with a loud noise; one of the horses was struck by it and injured. The plaintiff company sued the Secretary of State for India in Council, who under s. 65 of the Government of India Act 1858 could be sued as the East India Company could have been, for the damage caused by the negligence of the Government's servants.

Sir Barnes Peacock CJ held the Secretary of State liable. The East India Company had a double character: it was invested with powers of government (sovereign powers), and it also carried on trading and other undertakings. It would not have been liable for acts done by its servants in the exercise of sovereign powers - acts which could not lawfully be done except by a sovereign or a person to whom sovereign powers had been delegated, such as making war and peace. But where an act was done in the conduct of undertakings which might be carried on by private individuals without any such powers, the Company was liable for the negligence of its servants like any other employer. Maintaining a dockyard and carrying materials through the streets for it was such an undertaking, so the Government was liable.