The petitioner company manufactures and sells tyres, among other rubber goods, in India. It has its head-office at Bombay. One of its branch offices is at Madras with jurisdiction over the territorial area known as Madras District. The District extends over areas which lie outside the State, in Kerala, Mysore and Andhra Pradesh. The sub-depots at Ernakulam, Bangalore and Vijayawada are within the District of Madras.

On the recommendation of the Tariff Commission in 1953, the Government of India ordered a reduction in the sale price of tyres by 10 percent. The Tariff Commission pointed out in its Report that the proportion of administration, selling and distribution expense of the petitioner company was high, when compared with such charges incurred by other companies manufacturing and selling tyres in India. The petitioner company reorganised its methods of business, which resulted in a reduction in the amount of office work to be done in the Madras office. The petitioner found that to deal with the work on the reorganised basis twelve out of the thirty-three employees in the Madras office were in surplus of its requirements. On 22nd February, 1956 the petitioner company ordere