Sections 591 to 608
FOREIGN
COMPANIES
[1976] 46 COMP. 587 (BOM)
HIGH COURTof BOMBAY
v.
British Burmah Petroleum Co. Ltd.
NAIn, J.
AUGUST 11, 1971
S.J.
Sorabjee, P.M. Mukhi and V.R. Chhatrapati for the appellant.
At
the hearing of notice of the motion dated 26th December, 1970, the defendants
have proposed three issues as to jurisdiction to be tried as preliminary issues
under section 9A, Civil Procedure Code, as applicable to the State of
Maharashtra. None of the defendants has filed its or his written statement. I
have, however, allowed the defendants to take all their objections as to
jurisdiction of this court at this stage.
It
will be necessary for the appreciation of the contentions taken by the
defendants that some facts which are not in dispute be stated. The plaintiffs
are some of the shareholders of the 1st defendant, the British Burma Petroleum
Co. Ltd. (hereinafter for the sake of brevity referred to as "the
company"). The company was incorporated as a limited company in England in
1910. It has its registered office in London. It has established a place of
business in Bombay and has its head office in India in Bombay. The company has
delivered to the Registrar of Companies, Bombay, from time to time the
necessary returns required to be filed with him by a foreign company under the
provisions of the Companies Act, 1 of 1956 (hereinfater referred to as
"the Companies Act"). In the said returns the company has nominated
F.S. Panthaki, who is the secretary of the company, as a person authorised to
accept on behalf of the company service of all processes and any notice or
other documents required to be served on the company. The said Panthaki resides
and works for the company in Bombay. 95% of the shares of the company are held
in India. The company was formed, inter alia, for carrying on business of
acquiring, prospecting for, developing, refining and selling mineral oils and
to acquire shares in certain existing companies doing similar business ir
Burma. During the 1939-45 war, when the Japanese conquered Burma, the
installations of the company were destroyed by military action taken by
retreating British forces. Thereafter, for some time the company tried to
recover compensation for this loss from the British Government. Although the
company succeeded in litigation, ulimately an Act of British Parliament was
passed and the hopes of the company to recover any compensation came to an end.
At a general meeting of the company held in Bombay on 13th December, 1965, it
was proposed to wind up the company, but that meeting had to be postponed. In
1970 some of the shareholders of the company filed in this court Company
Petition No. 76 of 1970 for winding up the company, inter alia, on the ground:
(a) that the business of the company had
come to an end and thereafter the company had been carrying on business of
advancing money on the pledge of shares of other companies called badli business and had also been buying shares of
other companies in order to acquire control of such other companies. It was
alleged in the petition that the said business was ultra vires the objects clause in the memorandum of
association of the company; and
(b) that the said business was being carried on by the directors
who were illegally elected and were, therefore, no better than meddlers. The
said petition was admitted by me by an order dated 30th June, 1971, taking a
prima facie view that these allegations were correct. The said petition is now
fixed for final hearing. Before the said petition was admitted and during its
pendency the directors of the company who were alleged to have been illegally
elected called a general meeting of the company on 8th December, 1970, and
amended the objects clause in the memorandum of association of the company so
as to provide for other businesses. This was subsequent to the filing of this
suit. The plaint in the suit was thereafter amended so as to challenge the
validity of the said amendment of the objects clause in the memorandum of
association of the company also.
The present suit was filed
on 30th November, 1970. In the suit the plaintiffs have prayed for a
declaration that defendants Nos. 2 to 7 are not entitled to act as directors of
the company, that the said directors have illegally drawn remuneration, that
accounts be taken of such illegal drawings and that the said directors be
directed to return such amount as may be found due on taking such accounts. The
plaintiffs have also prayed for a declaration that the resolution passed at the
general meeting on 8th December, 1970, amending the objects clause in the
memorandum of association was illegal and void. Certain injunctions and other
reliefs have also been prayed for.
It must be stated that the
plaintiffs and their supporters are minority shareholders. The plaintiffs have
filed this suit in a representative capacity representing themselves and other
shareholders who take the same view of the matters as the plaintiffs do. The
defendants Nos. 2 to 7 have also been sued for themselves and as representing
other members who take a view dissenting from the plaintiffs. The defendants
Nos. 2 to 7 have majority on their side. These defendants have in their
affidavits on this notice of motion denied that they have been illegally acting
as directors and have also denied that the resolution dated 8th December, 1970,
amending the objects clause in the memorandum of association of the company is
void or illegal. The notice of motion dated 26th December, 1970, is for interim
reliefs pending the hearing and final disposal of the suit.
The preliminary issues as
to jurisdiction proposed by the defendants are the following:
"(1) Whether this hon'ble court has jurisdiction to
entertain and try the suit for the reliefs claimed therein in respect of the
affairs of the 1st defendant company or its directors, the 1st defendant
company being incorporated and registered in U.K.?
(2) Whether this hon'ble court has jurisdiction
to entertain and try this suit with regard to the validity of the resolution
dated 8th December, 1970, and of the meeting held on that date?
(3) Whether
this hon'ble court has pecuniary jurisdiction to entertain and try the
suit?"
In
the plaint the plaintiffs have alleged that the business of the company for
which it was formed has come to an end and at present the directors who have
illegally seized power are carrying on business which is ultra vires the
objects clause in the memorandum of association of the company. They have
alleged that the company is carrying on business in speculative badli
transactions which are ultra vires the objects of the company and that the
persons in control are frittering away the moneys of the company and borrowing
moneys to provide for purchase price of shares of other companies and
speculating in shares. The defendants do not deny that the company has entered
into several badli transactions and has borrowed moneys and also has bought
shares in other companies. They, however, contend that this is sound and
legitimate business which is intra vires the objects of the company. The fact
is that all the meetings at which, according to the plaintiffs, some defendants
were illegally elected as directors or at which the impugned resolution dated
8th December, 1970, was passed, were admittedly held in Bombay. With regard to
the jurisdiction of this court, paragraph 58 of the plaint recites as under:
"The
impugned resolution purporting to convene extraordinary general meeting for 8th
December, 1970, has been voted for and/or allegedly passed in Bombay. The
notice and circular dated 3rd November, 1970, are issued by defendants Nos. 2,
3, 4 and 5 in Bombay. The extraordinary general (meeting) is proposed to be
held in Bombay. The defendants Nos. 2, 3, 4 and 5 reside and carry on business
in Bombay. The whole cause of action has arisen in Bombay. The first defendant
company has its principal place of business in Bombay. This hon'ble court has
jurisdiction to try the suit". (The word "meeting" in brackets
supplied).
I
shall now deal with preliminary issue No. 1. A plain reading of the issue
proposed on behalf of the defendants shows that sthe entire objection as to
jurisdiction is based on the fact that the company is incorporated and
registered in England. During the course of arguments, however, ±he defendants
did take points as to jurisdiction based on the company's carrying on business
in Bombay, its dwelling in Bombay, and the cause of action or part of it
arising in Bombay. As I have heard both sides on all these points, I shall deal
with them.
The
first contention taken by Mr. Nariman on behalf of the defendants is that
certain provisions of the Companies Act imply that this court has only a limited jurisdiction over the affairs of a foreign
company and that such jurisdiction does not extend to the validity of general
meetings and the validity of appointment of its directors. He, inter alia,
referred to Part X of the Companies Act relating to winding up of unregistered
companies. He conceded that this court would have jurisdiction to wind up the
company if it has been carrying on business in India and ceases to carry on
business in India within the meaning of section 584 of the Companies Act. He
then referred to Part XI which makes certain provisions with regard to
companies incorporated outside India. Section 592 provides that if such
companies "establish a place of business within India" within 30 days
of the establishment of the place of business, they must deliver to the
Registrar for registration certain documents, including the full address of the
office of the company in India which is to be deemed its principal place of
business in India. He particularly emphasised the provisions of section 599
which provides that failure by a foreign company to comply with the provisions
of Part XI, including delivery to the Registrar for registration of certain
documents, "shall not affect the validity of any contract, dealing or
transaction entered into by the company or its liability to be sued in respect
thereof; but the company shall not be entitled to bring any suit, claim any
set-off, make any counter-claim or institute any legal proceeding in respect of
any such contract, dealing or transaction, until it has complied with the
provisions of this part". The argument of Mr. Nariman based on this
section was that by implication the provisions of this section meant that a
foreign company could only be sued in respect of contracts, dealings or
transactions entered into by such company and not in respect of anything else.
He went further and argued that any relief in respect of the constitution or
management of the company was outside the jurisdiction of Indian courts. I am
afraid I am unable to accept this contention. In my opinion, section 599 merely
creates a disability. Section 69 of the Indian Partnership Act, 1932, creates
certain disabilities for partnership firms which are not registered under the
provisions of the said Act in respect of suits arising from contracts, but does
not save such firms from being sued in respect of such contracts. This
disability lasts as long as a partnership firm is not registered. Similarly,
section 599 of the Companies Act creates certain disabilities in respect of the
foreign companies which have not filed returns under section 592 and complied
with the other provisions of Part XI until they comply with such provisions.
The disability is that such companies shall not be entitled to bring any suit,
claim any set-off or make any counter-claim or institute any legal proceeding
in respect of contracts, dealings or transactions. The section expressly
provides that this shall not affect the validity of such contract, dealing or
transaction entered into by such foreign company or the liability of the company to be
sued in respect thereof. This does not mean that a foreign company cannot be
sued in respect of matters which do not arise out of contracts, dealings or
transactions. In my opinion, a foreign company even if it does not comply with
the provisions of Part XI of the Companies Act can be sued in respect of all
matters in respect of which courts in India have jurisdiction otherwise.
Section 599 does not touch or affect the jurisdiction of courts in India. This
section does not create a right to sue a foreign company, nor does it
extinguish or limit such right. It only creates partial disability in respect
of defaulting foreign companies where they intend to file suits in India.
Mr.
Nariman also invited my attention to the proviso to section 589(2) of the
Companies Act which states that an unregistered company shall not, except in
the event of its being wound up, be deemed to be a company under the said Act
and then only to the extent provided by Part X of the Companies Act. I am not
here concerned with the question as to which parts of the Companies Act are
applicable to a foreign company and which are not, nor am I concerned with the
question whether at the hearing of the suit with regard to the matters raised
by the plaintiffs, the law of England or the law of India will apply. Section
589(2) does not affect the jurisdiction of the courts in India over foreign
companies which are otherwise liable to be sued in India.
The
other contentions taken on behalf of the defendants which do not really arise
from the issue No. 1 as framed, but have been argued, are the following. The
first contention is that the company did not at the commencement of the suit
carry on business in Bombay within the meaning of clause XII of its Letters
Patent. It is not denied by the defendants that they have delivered to the
Registrar of Companies at Bombay documents under section 592 of the Companies
Act. Such documents are to be delivered to the Registrar only by foreign
companies "which establish a place of business within India".
Further, such documents are to be delivered "within thirty days of the
establishment of the place of business". By delivering these documents to
the Registrar, the defendants have admitted that the company has established a
place of business within India. The fact that documents are to be delivered not
before but within 30 days after the establishment of the place of business
indicates that the place of business was already established in Bombay before
the delivery of documents. Under the said section, the name and address of F.
S. Pan-thaki has been furnished as a person resident in India authorised on
behalf of the company to accept service of processes and other papers. The said
section provides that the full address of the company so furnished by the
company shall be deemed its principal place of business in India. Section
602(c) provides that the expression "place of business" includes a
share transfer or share
registration office. It is admitted by the company that its share transfer or
share registration office is in Bombay. There is, therefore, no doubt that the
company has its place of business in India in Bombay.
The
contention on behalf of the defendants, however, is that it is not enough that
the company should have a registered place of business in Bombay. It is pointed
out that Explanation II to section 20, Civil Procedure Code, which provides
that a corporation shall be deemed to carry on business at its sole or
principal office in India does not apply to clause XII of the Letters Patent
and that, therefore, for the purpose of clause XII of the Letters Patent of
this court the company should be actually carrying on business in Bombay. It is
not in dispute that the badli business of advancing money on pledge of shares
and the business of investing money in the shares of other companies has been
and is being actually carried on by the company in Bombay. The defendants,
however, argue that because the contention of the plaintiffs is that the said
business is ultra vires the objects clause in the memorandum of association of
the company, it is no business at all for the purposes of clause XII of the
Letters Patent. Business is a habitual occupation, profession or trade in which
a person engages in the hope of making a profit. It cannot be denied by the
defendants that what the company has been carrying on is business. It is true
that the plaintiffs contend that the said business is ultra vires the company,
but they do not contend that such business is either immoral or illegal. On the
other hand, the defendants contend in this suit and the company has contended
in the winding-up petition that the said business is not only legitimate but is
also intra vires the objects of the company. The defendants are, therefore,
contradicting themselves by contending in the suit and the winding-up petition
that the said business is intra vires the company and for the purpose of the
preliminary issue that the said business is ultra vires the company. In the
order dated 30th June, 1971, admitting the winding-up petition, I have merely
taken a prima facie view that the said business is ultra vires the company.
This is not a final view of the matter which can only be taken either at the
final hearing of the winding-up petition or at the final hearing of this suit.
In the mean-while, what remains are the contentions of the parties with regard
to the nature of this business. Even if the said business be ultra vires the
objects clause in the memorandum of association of the company, it is neither
mala in se nor mala quia prohibita. It is neither wrong in itself, i.e., immoral,
nor wrong because it is prohibited by the law of the land, i.e., illegal. It is
merely business which the company by its constitution cannot carry on and has
none the less been carrying on. In my opinion, carrying on such business will be carrying
on business within the meaning of clause XII of the Letters Patent so as to
confer jurisdiction on this court.
The
defendants also contend that a part of the cause of action of this suit has
arisen in England and no prior leave of the court to institute this suit having
been taken under clause XII of the Letters Patent, this court will have no
jurisdiction. If my finding that the company is carrying on business in Bombay
is correct, this question may not really arise. But the point has been argued
at length and I shall deal with it. According to the defendants the company
being a British company it is governed by the law of England. The law of
England must in India be proved as a question of fact. Cause of action means
every fact which, if traversed, it would be necessary for the plaintiff to
prove in order to support his right to the judgment of the court. The
defendants contend that the law of England, if statutory, is made by Parliament
of England and, if common law, is made by judges in England. The law of England
being a question of fact must be traversed and proved and is, therefore, a part
of the cause of action which has arisen outside India.
Section
20 of the Contract Act, IX of 1872, provides that an agreement is void where
both parties are under a mistake as to a matter of fact. Section 21 of the said
Act provides that a mistake as to foreign law has the same effect as a mistake
of fact. This section by itself does not make foreign law a question of fact.
It merely makes a mistake as to foreign law a mistake of fact for the purpose
of avoiding agreements on the ground of mutual mistake. Section 38 of the
Indian Evidence Act, 1872, provides that when the court has to form an opinion
on foreign law, a statement of such law contained in law books published under
the author of that country or report of a ruling of the courts of such country
even privately published is relevant. Section 45 of the said Act further
provides that when the court has to form an opinion upon a point of foreign
law, the opinion upon such point of persons specially skilled in such foreign
law is a relevant fact. In England proof of foreign law by direct reference to
books and reports as provided in section 38 of the Indian Evidence Act is not
allowed. According to English rule the ordinary method of proving a point of
foreign law is by calling witnesses skilled in the law of that country.
Therefore, in England foreign law is regarded as a question of fact. In India a
mistake as to foreign law "has the same effect" as a mistake of fact
for the purpose of avoiding a contract under section 20 of the Contract Act.
Section 21 does not provide that a question of foreign law is a question of
fact or a mistake as to it is a mistake of fact. Foreign law may be proved
either by direct reference to books printed or published under the authority of
foreign Government or by reference to law reports even privately published or
by the evidence of experts
specially skilled in such law. In India a question of foreign law is not a
question of fact, but at best may be so regarded for certain purposes. In any
case foreign law is not a part of the cause of action in a suit which arises in
the country where such foreign law prevails. A cause of action may arise under
it or because of its violation. It does not accrue specially to a plaintiff. It
merely governs certain matters and may be applied inside or outside the
country. It is not a part of the cause of action under clause XII of the
Letters Patent. It is not contended by the defendants that any other part of
the cause of action has arisen outside Bombay.
Mr.
Sorabjee, on behalf of the plaintiffs, has tried to meet the objections as to
jurisdiction by contending that the company also "dwells" within the
jurisdiction of this court within the meaning of clause XII of the Letters
Patent. Now, to dwell literally means to make one's abode, live or reside at a
particular place. On behalf of the defendants it is contended that only a
natural person can dwell at a place and not a juristic person like a corporation.
There is considerable substance in this contention. In England the residence of
a corporation has been considered for the purpose of income-tax law because
residence is the basis of liability for income-tax. The question has been
discussed in Cheshire's Private International Law, 8th edition, at pages 186 to
190. According to this text, a company is regarded by the law as resident in
the country where the centre of control exists, i.e., where the seat and
directing power of the affairs of the company are located. The place of
incorporation is only one of the evidentiary facts to be considered in the
course of ascertaining where the control resides. This test of control was
first laid down in England in the case of Cesena Sulphur Cc v. Nicholson.
This view was confirmed by the House of Lords in the leading case of De Beers
Consolidated Mines v. Howe.
The company in that case was incorporated in South Africa, where the whole of
the profits were made from the mining and disposal of diamonds. The directors
met both in South Africa and in London, but the majority of them resided and
met in London, and it was found as a fact that the chief control of the
company's affairs resided in the hands of the London board. The profits, though
arising entirely from the raising and sale of diamonds in South Africa, were
subject to income-tax. Lord Loreburn in a well-known passage said:
"In
applying the conception of residence to a company we ought, I think, to proceed
as nearly as we can upon the anology of an individual. A company cannot eat or
sleep but it can keep house and do business. We ought, therefore, to see where
it really keeps house and does business......... The decision of Kelly C.B. and
Huddleston B., in the Calcutta Jute Mills Co. v. Nicholson
and Cesena Sulphur Co. v. Nicholson,
now thirty years ago, involved the principle that a company resides, for the
purpose of income-tax, where its real business is carried on. Those decisions
have been acted upon ever since. I regard that as the true rule, and the real
business is carried on where the central management and control actually
abides."
It
would, therefore, appear that for the purposes of income-tax liability the
residence of a corporation is in the country where it is in fact controlled and
not necessarily where according to its constitution it ought to be controlled.
In the case of the defendant No. 1 company, although its registered office is
in London and it is incorporated in England, the company is in fact controlled
in Bombay where it has its head office and an established place of business and
where the directors reside, where 95% of its shareholding is and where its
general meetings and meetings of board are held. It is also an admitted fact
that the company is assessed to income-tax in Bombay. I am, however, unable to
take the view that this principle of "keeping house" can be equated
with "dwelling" within the meaning of clause XII of the Letters
Patent.
Mr.
Sorabjee also tried to meet the objection as to jurisdiction on the ground that
the company had, firstly, by nominating a person to receive service of the process
of courts in India and, secondly, by pleading on merits although "without
prejudice" in the affidavits-in-reply to this notice of motion and,
thirdly, by not raising the objection as to jurisdiction at the hearing of the
first notice of motion in this suit dated 30th November, 1970, which was
decided in favour of the defendants on 8th December, 1970, submitted to the
jurisdiction of this court. He also claimed that the defendants have waived the
objection to jurisdiction. In the case of Employers' Liability Assurance
Corporation Ltd. v. Sedgwick Collins and Company Ltd,
the House of Lords held by a majority judgment of 4 out of 5 Law Lords that the
Russian company by putting on the file of the Registrar of Companies in London
the name of a person authorised to accept service of process on its behalf
agreed to submit to the jurisdiction of the court and that, therefore, it must
be assumed that the Russian Government would, according to the comity of
nations, recognise the judgment as effective. Mr. Sorabjee did not cite to me
the provisions of English law under which the courts in England assume
jurisdiction. It would also appear to me that in this case the House of Lords
was considering the effect of the judgment of an English court in Russia. This
takes us to the realm of private international law. The jurisdiction of courts
in India is governed by the municipal law of this country and not by private
inter-national law. I am, therefore, unable to derive any help from the above
case or the case of The Madrid.
In
the case of P.S. Anant Narayan v. Massey Ferguson Ltd. (Canada),
a single judge of the Madras High Court has held that having regard to the
private international law and the provisions of sections 592 to 596 of the Companies
Act and on account of the returns submitted by the 2nd defendant company to the
Registrar, it must be held that the said defendant was present in Madras and
had submitted in advance to the jurisdiction of the High Court; in addition the
2nd defendant having pleaded on merits also, must be held to have submitted to
the jurisdiction. The learned judge held that although no part of the cause of
action arose in Madras the Madras High Court had jurisdiction under clause XII
of the Letters Patent to entertain the suit. I am afraid I am unable to agree
with the learned judge. The judgment of the learned judge may be binding on the
defendants in Canada by private International law, but whether it is valid in
India must be determined solely by the municipal law of India and by clause XII
of the Letters Patent in the case of Bombay and Madras High Courts.
With
regard to the law in India on the point of submission of a person to
jurisdiction of a court, it is only in respect of suits on foreign judgments
that the question of submission to the jurisdiction of a court can arise under
private International law. Where a suit is instituted in India on the judgment
of a foreign court, effect will be given to the judgment though that court has
no jurisdiction over the defendant, if the defendant appeared and defended the
suit brought against him in that court without making any objection to its
jurisdiction, for having taken a chance of a judgment in his favour. So far as
suits in India which are not filed on foreign judgments, in my opinion, the
submission of a person to the jurisdiction of a court in India will not confer
on a court in India jurisdiction if otherwise it has no jurisdiction by virtue
of carrying on business, residence, dwelling or arising of cause of action or
part of it. Nominating a person in India to receive processes under section 592
of the Companies Act may amount to advance submission to the jurisdiction of a
court if the judgment is being enforced or sued upon abroad. Filing such
returns would certainly be evidence of the fact that the company had
established a place of business in India but not of the fact that it was
actually carrying on business in India. Submission to the jurisdiction of a
court is quite apart from the provisions of section 21, Civil Procedure Code,
under which a defendant may be prevented from taking an objection as to
jurisdiction in the appellate or revisional court if such objection was not
taken in the court of first instance at the earliest possible opportunity.
Section 21, Civil Procedure Code, is, however, not applicable to chartered High
courts and is not applicable to this court. Mr. Sorabjee invited my attention
to the judgment of the Supreme Court in the case of Bahrein Petroleum Co. Ltd.
v. P.J. Pappu.
The judgment of the court was delivered by Bachawat J. The judgment states:
"But
section 21 is a statutory recognition of the principle that the defect as to
the place of suing under sections 15 to 20 may be waived. Independently of this
section, the defendant may waive the objection and may be subsequently
precluded from taking it."
In
another passage his Lordship states:
"If
the defendant allows the trial court to proceed to judgment without raising the
objection as to the place of suing and takes the chance of a verdict in his
favour, he clearly waives the objection, and will not be subsequently permitted
to raise it. It is even possible to say that long and continued participation
by the defendant in the proceedings without any protest may, in an appropriate
case, amount to a waiver of the objection. But in this case we find no conduct
of the defendants which amounts to a waiver or which precludes them from
raising the objection."
The
case before the Supreme Court was one falling strictly under section 21, Civil
Procedure Code. Sections 15 to 21, Civil Procedure Code, do not apply to this
court. The Supreme Court has undoubtedly held that independently of these
sections, the defendant may waive the objection. In the case before me the
defendants have not even filed their written statement. The suit has not
proceeded to judgment. It is true that they did not take objection at the
hearing of the first motion. But in my opinion they have taken it early enough.
In this case there has been no long or continued participation by the
defendants in the proceedings without any protest. In my opinion, there has
been no waiver in fact.
In
the case of Nokar Dibyaswari Debi v. Narayan Lin Kumari Debi,
on a petition for revocatioa of leave granted under clause XII, it was held
that the defendant had submitted to the jurisdiction of the court. There is
considerable difference between raising the plea of submission in answer to an
application for revocation of leave and in raising the plea on an issue of
jurisdiction where no leave is required. Mr. Sorabjee has also referred to the
judgment in the case of Ramanlal v. Ramgopal,
where under section 21 it was held that participation in proceedings amounted
to submission to jurisdiction of the court. But this case also directly fell
under section 21, Civil Procedure Code. On issue No. 1, I hold that this court
has jurisdiction to entertain and try the suit.
I
now come to issue No. 2. This issue does not cover the whole suit, but only
that part of it which pertains to the declaration and injunction sought in
respect of the resolution dated 8th December, 1970, amending the objects clause
in the memorandum of association of the company. The argument is based on
section 5 of the English Companies Act, 1948, which pertains to the mode in
which and the extent to which the objects of a company may be altered. Under
section 17 of the Companies Act, 1956, after a company passes a special
resolution altering its memorandum with regard to its objects, it has to seek
the confirmation of the court of the said resolution. This was the law in
England prior to 1947. The law was changed in 1947 and the changed law was
re-enacted in the Companies Act, 1948. Under section 5 of the English Companies
Act, 1948, the company may by special resolution without the subsequent
approval of the court alter the objects of the company. Under sub-section (2)
of section 5, holders of not less in the aggregate than fifteen per cent, in
nominal value of the company's issued share capital may file an application to
the court for cancellation of the alteration. Such application has to be filed
within 21 days. Sub-section (4) provides for the purchase of the interest of
the dissentient members. Sub-section (7) provides that if no application under
sub-section (2) is made, the altered memorandum should be filed with the
Registrar of Companies within 15 days. If such an application is made, notice
must be given to the Registrar of that fact, and when the order of the court is
made, it must be filed within 15 days. The period for filing the returns may be
extended by the court. But an application to court under sub-section (2) is not
the only mode of impugning the alteration. Sub-section (9) provides that the
validity of an alteration of the provisions of a company's memorandum with
respect to the objects of the company may be questioned either under section 5
itself "or otherwise", before the expiration of 21 days after the
date of the resolution in that behalf. Subsection (9), therefore, obviously contemplates
other remedies provided they are taken within 21 days. Sub-section (9) does not
create the other remedy. It merely recognises the fact of the existence of
other remedies but it limits the time for adopting such remedy to 21 days. The
sub-section further provides that if any proceedings are taken otherwise than
under section 5(2), necessary notices and copy of the final order provided for
by aab-section (7) shall be filed with the Registrar of Companies. According to
Mr. Sorabjee, the present suit falls within the ambit of section 5(2). It has
been filed within 21 days and Mr. Sorabjee informs me that necessary notice has
been filed with the Registrar of Companies in London.
It
is contended on behalf of the company by Mr. Nariman that the right of suit is
created by section 5(9). I am unable to accept this contention. Sub-section (9)
in my opinion merely recognises the fact of existence of another remedy apart from the application under
sub-section (2). Based on his first contention, he contended that the courts in
England in creating right of action could not have legislated
extra-territorially for courts outside the country. The proposition that the
British Parliament legislates only for its own country is beyond question. But
if the right of action or suit is not created by sub-section (9) the question
of the British Parliament enacting for other countries does not arise. But even
if the right of suit is created by section 5(9) it makes no difference unless
the legislation creating the right limits its remedy to British courts. If the
courts in India by the municipal law of India have jurisdiction to entertain
such a suit by virtue of the cause of action having arisen here or by virtue of
the company dwelling or residing or carrying on business here, there can be no
objection to that jurisdiction. Mr. Nariman contended that the short period of
21 days provided for filing a suit indicated that the suit must be filed in
England. The plaintiffs have been able to file this suit in the short period of
21 days without getting an extension of that period from the courts in England.
This contention does not appear to me to be correct. Mr. Nariman further argued
that if the returns in respect of such proceedings have to be filed in England
within the time prescribed by section 5, it follows that the suit must be filed
in England. I am unable to accept this contention also. It may be that the
decree, if any, passed in this suit may have to be filed with the Registrar of
Companies in London. It would be undoubtedly true that if such return is not
filed in time, only the British courts can extend the time for filing the same
in England. It is also true that if the return is not filed within time the
British courts by refusal to extend time may make the decree of this court nugatory.
But I do not think I am concerned with these matters. It may be that in some
cases where there is no reciprocal obligation to enforce decrees of Indian
courts the courts abroad may refuse to enforce decrees of Indian courts on the
ground that Indian courts had no jurisdiction in private international law to
entertain such a suit although according to the municipal law of India they had
such jurisdiction. But that does not affect the jurisdiction of the courts in
India. Mr. Nariman also raised the bogey that a British company may have
established places of business in countries abroad and if questions pertaining
to its constitution are raised in ten courts abroad, this may result in
conflicting decisions. In the first instance, I presume that if the law of
England is applied is applies by various courts abroad, the result may be the
same although it may be arrived at in ten different countries. But even if this
is not so, I am afraid, it does not affect the jurisdiction of the courts of a
country if by the municipal law of the country the courts of such country have
jurisdiction to entertain an action. In the result, I hold that this court has
jurisdiction to entertain
this suit with regard to the validity of the resolution dated 8th December,
1970, and of the meeting held on that day in Bombay.
Lastly,
I come to issue No. 3. This is concerned with the pecuniary jurisdiction of
this court. It is contended by the defendants that the suit is of the value of
less than Rs. 25,000 and is cognisable by the Bombay City Civil Court, and,
therefore, it is excluded from the jurisdiction of this court. In paragraph 59
of the plaint, it is stated as under:
"The
plaintiffs value all the reliefs claimed by several prayers herein including
reliefs in prayer 60 (b-1) in the plaint at Rs. 26,000 for the purpose of the
court fees and jurisdiction and the plaintiffs pay court fees
accordingly."
According
to this paragraph the reliefs in all the prayers including the relief with
regard to the accounts and decree for amount found due on taking such accounts
in prayer (b-1) as well as for the declarations and injunctions sought are
collectively valued at Rs. 26,000. Actually, court fee has been paid on Rs.
26,000 in respect of claim for accounts and money decree alone. With regard to
six prayers for declarations and injunctions the suit has been valued at Rs.
300 each in accordance with the Bombay Court Fees Act, section 6(iv)(f), as
amended by the Bombay Act, 9 of 1970, as reliefs therein are not capable of
monetary valuation. Suit for accounts would fall under section 6(iv)(i) of the
Bombay Court Fees Act and it would be for the plaintiff to value such relief.
Court fee has actullay been paid on Rs. 27,800. But whether the suit is valued
at Rs. 26,000 or Rs. 27,800 it would fall outside the jurisdiction of the
Bombay City Civil Court, and, therefore, within the jurisdiction of this court.
For the purpose of jurisdiction the aggregate of the value of several reliefs
has to be taken into consideration. I, therefore, hold that this court has
pecuniary jurisdiction to entertain and try this suit.
All
the three preliminary issues of jurisdiction having been decided against the
defendants, they will pay to the plaintiffs the costs of hearing on the
preliminary issues.
[1955]
25 Comp Cas 37 (CA)
[1954] 3
W.L.R. 688
v.
Grant Advertising
Inc.
Jenkins,
Hodson and Romer L. JJ.
October 21, 22, 25, 1954
J.G.S. Hobson for the American company.
N.E. Wiggins for
the plaintiff.
In addition to the cases referred to in the judgments the following cases were cited in argument on the question to which this report relates: Dunlop Pneumatic Tyre Co. Ltd. v. Actien-Gesellschaft fur Motor und Motorfahrzeugban vorm. Cudell & Co.; The Madrid.
Jenkins L.J., having stated the facts set out above and read sections 406,407, 412 and 414 of the Companies Act, 1948, as set out above, continued: The American company did not comply with the provisions of section 407, for the simple reason that it never occurred to them that they had established a place of business in Great Britain. If they had established such a place of business, the appropriate mode of service was that indicated by section 412; that is to say, by leaving the document in question at, or sending it by post to, any place of business established by the company in Great Britain.
In these
circumstances, two questions have been argued both before the judge and before
us. The first question is whether the American company had at anytime
established a place of business in Great Britain, the place suggested, if there
was one, where the company had so established a place of business being 36
Grosvenor Street. The second question arises in this way: admittedly, the
allegation that the American company had established a place of business at 36
Grosvenor Street depends entirely on the duties assigned to the plaintiff as director
of the company for the sterling area, and the activities which he pursued as
the holder of that office at 36 Grosvenor Street. He resigned that office on
February 1, 1953. Thereafter nothing was going on at 36 Grosvenor Street, and
there were no physical indications at that address, on the strength of which it
could be claimed that it was a place of business established by the American
company. The second question, therefore, is whether, even if the plaintiff were
to succeed in showing that the company had at any time established a place of
business at 36 Grosvenor Street, the service relied on could be good, inasmuch
as, admittedly, 36 Grosvenor Street had ceased to be a place of business
established by the company before the date on which the writ was served.
[His Lordship considered the evidence pertinent to the question whether the American company had at any time established a place of business in Great Britain (a matter which does not call for report). [His Lordship concluded:] The plaintiff on this evidence has wholly failed to show that the American company ever established a place of business within Great Britain.
That is sufficient to dispose of this case without considering the second question whether, assuming that by reason of the plaintiff's employment and activities at 36 Grosvenor Street, the American company had established a place of business in Great Britain, service on them at that place of business could be validly effected under section 412 of the Act, having regard to the admitted fact that from and after the plaintiff's departure and resignation from the office of regional director for the sterling area, no ground remained for holding that 36 Grosvenor Street was a place of business established by the company in the sense of a then existing place of business established by the company. But as this second question has been argued before us, and Vaisey J. has expressed his view on it, I think it is right that I should consider it briefly.
The question is whether the words "any place of business established by the company in Great Britain" in section 412 mean any existing place of business established by the company, or mean any place where the company has at any time established a place of business: in other words, in order to make the service in accordance with section 412 a good service, is it necessary to be able to say of the place where service is effected that at the time when it is effected, "This is a place of business established by the company in Great Britain", or is it enough if it can be shown of the place where service is effected that at the time when it is effected, "This was at one time a place of business of the company, although it is no longer such"?
Some light on that question is, I think, thrown by the language of section 406, which states that that section and "the next eight following sections shall apply to all oversea companies," and then proceeds to define oversea companies as "companies incorporated outside Great Britain which, after the commencement of this Act, establish a place of business within Great Britain, and companies incorporated outside Great Britain which have, before the commencement of this Act, established a place of business within Great Britain and continue to have an established place of business within Great Britain at the commencement of this Act." A distinction is there indicated between companies which establish a place of business within Great Britain after the commencement of the Act and companies which have established a place of business within Great Britain before such commencement, in that the latter, in order to come within section 406, must continue to have an established place of business within Great Britain at such commencement. That throws some light on the construction of section 412, for it does not seem to accord with the view that, for the purposes of that section, once a company has established a place of business it must always remain a place of business established by the company.
Apart from that indication, the grammatical meaning of the language of section 412, "by leaving it at or sending it by post to any place of business established by the company in Great Britain," to my mind requires that the place of service should be a place which is then established at the time of the service as a place of business of the company. The other construction would lead to somewhat absurd results. A company might establish a place of business, carry on business there for a time, and then might cease to do business there, leaving no trace at all of any continued business connexion with the former address. The legislature could hardly have intended that, in such a case, service could be effected at the former place of business of the company, for service at that place would not be in the least likely to bring the proceedings to the notice of the company. Again, an oversea company might occupy successively a number of places of business, moving perhaps from Birmingham to Newcastle and thence to London. If section 412 is construed as meaning service at any former place of business, then a person desirous of effecting service on a company in the case which I have supposed might effect good service by leaving the document at the premises in Birmingham or Newcastle, without troubling about those in London, though that would be the one place at which the company intended to be served was in fact carrying on business, and was the one place at which a process could be served with reasonable certainty that it would be brought to the notice of the company.
Vaisey J. took a different view, and he did so largely on the strength of Sabatier v. Trading Company, a decision of Clauson J. To my mind, there is an essential and vital distinction between that case and the present. Sabatier v. Trading Company3 was decided in 1927, when the relevant Act was the Companies (Consolidation) Act, 1908. That Act contained in section 274 provisions corresponding to those of section 407 of the Act of 1948; that is to say, there was a provision to the effect that every company incorporated outside the United Kingdom which established a place of business within the United Kingdom should file with the registrar of companies, among other things, "the names and addresses of some one or more persons resident in the United Kingdom authorized to accept on behalf of the company service of process and any notices required to be served on the company"; but there was no provision comparable to section 412 of the present Act, which provides a method of service which can be used in the case of a company which has not filed with the registrar of companies the names and addresses of persons who are authorized to accept service. In Sabatier v. Trading Company the company in question had filed with the registrar of companies the name of a person authorized to accept service; and it was held that service on that person was good, even if the company had ceased to carry on business in the United Kingdom before the date on which such service was effected.
The conclusion reached by Clauson J. is thus stated in the head-note. "Held, (1) that upon the evidence, the defendant company, at the date of the service of the writ upon A. [The managing director of the defendant company] had a place of business within the United Kingdom, within the meaning of section 274 of the Companies (Consolidation) Act, 1908, and that service upon A. was effective service upon the company; and (2)"—and this is the material part of the case—"that, even if the company had not at the date aforesaid a place of business within the United Kingdom, yet upon the true construction of the section and applying the principles of the decision in Employers' Liability Insurance Corporation v. Sedgwick, Collins & Co. such service was effective service upon the company."
In my view, the second decision in Sabatier v. Trading Company4 has no application to the present case. Where, in compliance with section 407 or its predecessor, the name and address of some person authorized to accept service on behalf of the company is delivered to the registrar of companies, then, by the Act, service on that person is made good service, so long as his name continues on the file, and the person effecting service is in no way concerned with the question whether the company has at that time a place of business in Great Britain. The service can be effected on the very person whose name has been filed as the name of the person authorized to accept service. Where section 412 is in question, service must be effected at a place of business established by the company, and, in my view, if the company no longer has a place of business established at the place where service is sought to be effected, the language of the section is not complied with.
Mr. Wiggins, for the plaintiff, argued that the principles of Sabatier v. Trading Company4 ought to be applied, as otherwise an oversea company which failed to comply with the provisions of the Act would get an advantage from its own wrong, inasmuch as if it had complied with the Act it could have been served by service on the person whose name had been filed for that purpose. In my view, that argument carries little weight. The question is, what is the mode of service which must be followed in order to satisfy section 412. I think it must, according to the terms of the section, be service at an existing place of business established by the company. Whether the place at which service is sought to be effected is an existing place of business for that purpose must, no doubt, depend on the facts of any particular case. There might, for instance, be an oversea company which had traded at a particular place and had contracted, and otherwise carried on business by correspondence, on notepaper bearing the address of that place, or had allowed its name to appear in a telephone directory or in some other form of directory as carrying on business at that address. In such a case where a company has held itself out as carrying on business at a given address, it may well be that if the company has done nothing in the way of giving notice to the contrary to persons dealing with it, any such person, for the purpose of service, might be entitled to assume that the place thus held out by the company as a place of business established by it was still such a place of business, even if the company had ceased actually to carry on business there. But this is not a case of that sort, and, in my view, it cannot be said that, at the time when service was effected at 36 Grosvenor Street, that that was a place of business established by the American company.
I have not referred to the various authorities quoted to us in the course of the argument on the first question. Those authorities show that the question whether a place of business has been established here or not is a question of fact to be determined on the evidence in each particular case, and on the evidence here the establishing of a. place of business was not, in my view, made out. On the second question also, I feel obliged to differ from Vaisey J. and to hold that, even if I am wrong on the first question, the service effected at 36 Grosvenor Street was not good service under section 412.
For these reasons I would allow this appeal, and direct that an order should be made setting aside the service of the writ in this action.
Hodson L.J. I agree with the judgment which my Lord has delivered on both questions raised on this appeal, and although we are differing from the judgment of the judge, I cannot usefully add anything.
Romer L.J. I also agree with my Lord's judgment on both points. On the first point I have nothing to add beyond saying that it is plain to me that the plaintiff assumed the burden in this matter of showing that the American company did, at all events at one time, carry on business in this country, and inasmuch as the only way in which it ever carried on business, if it did so at all, depends on the plaintiff's own activities, the plaintiff's reticence on the question of what those activities were prevents him, in my opinion, from discharging the onus which he undertook.
On the question of section 412, it appears to me that, taking the language of the proviso to that section by itself, there is no warrant for including in the word "company" a company which at some time previously had established a place of business, but no longer had one at the date of the writ. The contrary argument involves reading the words at the end of the proviso as though they had read "a place of business established, or which had at any earlier time been established, by the company in Great Britain", and there appears no justification for reading into the proviso words which are not there; the prima facie construction is supported by the language of section 406.
The intention which underlies all procedure with regard to substituted service is that the defendant will probably get to hear of the proceedings. That was very clearly laid down by this court in the well-known case Porter v. Freudenberg, in which the full Court of Appeal dealt with an action against an enemy alien. One of the points which Lord Reading C.J., who delivered the judgment of the court, considered was that of substituted service. He said: "In order that substituted service may by permitted, it must be clearly shown that the plaintiff is in fact unable to effect personal service and that the writ is likely to reach the defendant or to come to his knowledge if the method of substituted service which is asked for by the plaintiff is adopted." Later he said: "Our English procedure has hitherto been laudably superior to the Continental in not permitting that which may be called constructive service,' such as, for example, by public notices or advertisements, whereby a defendant may be condemned unheard because he has no knowledge of the proceedings against him."
If service of a writ or some other document is effected at the place of business which a foreign corporation actually has in this country, or on a nominee whom it has registered, the probability is that service at such place of business, or on such nominee, will become known to the corporation; but service at a place which has ceased to be the place of business, and which may well have passed, and probably will have passed, into the ownership of some third person, would seldom come to the notice of the foreign corporation, and this consideration, as against the general background of the substituted service procedure, supports the view, if any support be needed, that the proviso to section 412 must be given the meaning which its language naturally bears, and not the artificial meaning which the plaintiff sought to attribute to it in this case. I, accordingly, agree that the appeal should be allowed.
[1976] 46 Comp.Cas.532 (Bom)
High Courtof Bombay
v.
Bank of America
VIMADALAL, J.
FEBRUARY 24, 1976
S.P.
Bharucha and J.B. Chinai for the Respondent.
Vimadalal,
J.—The plaintiff,
who by profession is a medical man, has filed this suit against the Bank of
America, National Trust and Savings Association, a corporation incorporated in
the United States of America having an office in Bombay, which is its principal
place of business in India as recorded in the office of the Registrar of
Companies under section 592(1)(e) of the
Companies Act, 1956. The plaintiff's case is that the defendant-bank had issued
between October, 1966, and July, 1967, three time certificates of deposit in
the name of the plaintiff for three different amounts aggregating to 46,020.86
U.S. Dollars, each of which was to mature six months after the date of its
issue, and was to carry interest at the rate of 5 per cent per annum. The
plaintiff's case in paragraph 16 of the plaint is that, while in London, on
26th September, 1967, he happened to lose the said three time certificates of
deposit which he had kept in one envelope, and in paragraph 19 of the plaint,
it is stated that the plaintiff thereafter requested the defendant-bank to
issue duplicates of the lost instruments. In paragraph 20 of the plaint, it is
stated that the defendant-bank at its International Banking Office at San
Francisco office, however, informed the plaintiff that before the said time
certificates of deposit were replaced by it the plaintiff should furnish an
indemnity bond by a Corporate Bonding Company, and in paragraphs 68 to 72 of
the plaint, it is stated that the plaintiff, being in urgent need of funds and
it being necessary for him to join his ailing wife in London who was in
considerable distress, was under those circumstances forced to execute
indemnity agreements covering the replacements of the said time certificates of
deposit. It may be mentioned that there is a clause in the said indemnity
agreements which provides that they could be legally enforced in Punjab in
India as well as in California in the United States of America. On these facts,
the plaintiff has filed the present suit in this court for a declaration that
the said indemnity agreements were not enforceable and had no effect as against
the plaintiff, and for a decree for 72,000 U.S. Dollars, with interest thereon
at the rate of 6 per cent per annum from the date of the suit till recovery
thereof. The plaintiff has claimed the said amount as and by way of
compensation and damages on the ground that the defendant-bank had no right to
insist on his furnishing any indemnity bond as a condition of furnishing
replacements of the said time certificates of deposit. In paragraph 115 of the
plaint, the plaintiff has given particulars of the said sum of 72,000 U.S.
Dollars which he has claimed as and by way of compensation and damages from the
defendant-bank. Without going into the details, it may be stated that the said
compensation and damages are claimed by the plaintiff from the defendant-bank
for mental distress, worry and anxiety and injury to feelings and deterioration
in health, for loss of income from private practice during the period from
December 1, 1967, to July 6, 1968, for loss of opportunity to exercise the
profession between those dates, for travelling expenses as well as for
cancellation of certain business arrangements and other expenses.
The defendant-bank has
filed a written statement in paragraph 2 of which it has objected to the
jurisdiction of this court to entertain and try the
suit. In the said written statement, the defendant-bank has also denied its
liability on merits, but in view of the fact that I have framed, in the first
instance, only an issue in regard to jurisdiction and have decided to try it as
a preliminary issue, it is unnecessary for me to set out the defence of the
defendant-bank on merits to this somewhat curious suit. The preliminary issue
which I have framed is as follows:"
"Whether this court
has jurisdiction to try the suit".
As, in my opinion, the
whole suit might be disposed of on this issue which is a pure issue of law
only, I have postponed the settlement of the issues of fact until after that
preliminary issue has been determined, a course which is in accordance with the
provisions of Order 14, rule 2 of the Code of Civil Procedure.
At the hearing of the
preliminary issue, it was made clear to me at the very outset that it is common
ground that no part of the cause of action, in the present suit, has arisen
within the jurisdiction of this court. The submissions of the plaintiff who
appeared in person before me on the issue of jurisdiction were two-fold, viz,
(1) the defendant-bank which is a corporation incorporated in the U.S.A. has,
admittedly, office in Bombay which is its principle place of business in India,
and can, therefore, be sued in this court by reason of the provisions of clause
12 of the Letters Patent of this court; and (2) the defendant-bank has, in any
event, submitted to the jurisdiction of this court by what it has done both
before and after the filing of this suit. It will be convenient to dispose of
the second point relating to submission to jurisdiction first as, in my
opinion, there is no substance in the same. It was submitted by the plaintiff
that the note of the defendant-bank which amounted to waiver of the objection
as to jurisdiction, even before this suit was filed, were that there was,
admittedly, a clause in the agreements of indemnity under which the suit could
be filed in California in the U.S.A. or in the State of Punjab in India; that
the defendant-bank had, admittedly, registered with the Registrar of Companies
under section 592 of the Companies Act, 1956, and the same address at which
processes could be served upon it in India; and that it had, in fact, been
doing business at its branch office at Bombay in India. In my opinion, even a
cursory perusal of the clause in the agreements of indemnity which is relied
upon would show that it applies only to a suit to enforce the indemnity, which
is not the nature of the present suit, and that, in any event, it cannot
possibly confer any right on the plaintiff to file this suit in Bombay which is
not one of the places specifically mentioned in the said clause. The delivery
of the name and address at which processes could be served on the
defendant-bank in India as required by section 592 of the Companies Act, 1956,
cannot possibly amount to waiver of the objection in regard to jurisdiction,
for the simple reason that it was something
which the defendant-bank was bound by law to do and was not a matter of
volition on its part. In my opinion, the mere fact that the defendant-bank was
doing business at Bombay in India also cannot amount to its having submitted to
the jurisdiction of the court, no matter what may be the nature of the suit
filed against it. The plaintiff has further contended that by filing an
appearance in the present suit without protest, and by filing a written
statement in which the defences have been set out on merits, the defendant-bank
has submitted to the jurisdiction of this court, at any rate, after the suit
was filed. The decision of the Supreme Court in the case of Bahrein Petroleum Co Ltd. v. P.J.
Pappu,
in my opinion, provides a complete answer to
that contention of the plaintiff. In that case also, the first time an
objection to jurisdiction was taken in the suit itself was in the written
statement in which the defendants had also pleaded on merits (see para. 5).
Holding that the defendant in the said case had at no stage waived or abandoned
their objection to the jurisdiction of the court in which that suit had been
filed, it was stated by the Supreme Court as follows (para. 4):
"If the defendant
allows the trial court to proceed to judgment without raising the objection as
to the place of suing and takes the chance of a verdict in his favour, he
clearly waives the objection, and will not be subsequently permitted to raise
it. It is even possible to say that long and continued participation by the
defendant in the proceedings without any protest may, in an appropriate case,
amount to a waiver of the objection. But, in this case, we find no conduct of
the defendants which amounts to a waiver, or which precludes them from raising
the objection".
These observations of the
Supreme Court leave no room for doubt that not only is there no obligation on a
defendant who objects to the jurisdiction of the court to file an appearance
under protest, but that the filing of a written statement in which, after
objecting to jurisdiction, the defendant also pleads to the merits of the
plaintiff's case, does not amount to waiver of the objection to jurisdiction.
The filing of an appearance under protest and not filing a written statement is
a course which is adopted when a party desires to apply for stay of a suit
under section 34 of the Arbitration Act, but that is because the filing of an
appearance simpliciter or filing a written statement might amount to taking
"steps in the proceedings" within the terms of section 34 of the
Indian Arbitration Act, 1940. No such question can, however, arise when an
appearance, or a written statement objecting to the jurisdiction of the court,
is filed by a defendant in a suit, unless an application under section 34 of
the Arbitration Act is made in that suit. Following the decision of the Supreme
Court in the Bahrein Petroleum Company's case,
I hold that there can be no waiver of the objection to jurisdiction, if the
defendant files a written statement in which he objects to the jurisdiction of
the court, though he may also plead in the same written statement to the merits
of the plaintiff's case. That is precisely what has happened in the present
case, and I must, therefore, reject the plaintiff's contention that the
defendant has submitted to the jurisdiction of the court by filing a written
statement in which he has also pleaded to the averments in the plaint on
merits.
That brings me to the
question as to whether this court has jurisdiction to try the suit in view of
the fact that the defendant-bank has admittedly a branch office in Bombay at
which it transacts normal banking business. The plaintiff contends that the
defendant-bank could be said to "carry on business" in Bombay within
the terms of clause 12 of the Letters Patent by reason of the fact that it has
a branch office in Bombay at which it carries on its normal banking activities.
It has been held by the Supreme Court in the case of Union of India v. Ladulal
Jain
that the expression "voluntarily resides or personally works for
gain" occurring in section 20 of the Code of Civil Procedure cannot be
appropriately applied to the case of the Government but that the mere fact that
the expression "carries on business" is used in that section along
with the said expression, does not mean that it would apply only to such
persons to whom the other two expressions regarding residence or personally
working for gain would apply (para 7). It was observed in the judgment in the
said case (para. 6) that the principle behind the provisions of clauses (a) and
(b) of section 20 of the Code of Civil Procedure was that the suit should be
instituted at a place where the defendant is able to defend it without undue
trouble. These observations of the Supreme Court in paragraphs 6 and 7 of its
judgment apply also to clause 12 of the Letters Patent of this court. The sole
contention raised before the Supreme Court in Ladulal Jain's case2
was that the running of railways by the Union of India cannot be said to amount
to its carrying on business and that, therefore, the fact that the headquarters
of the railway administration in question were located within the jurisdiction
of the court in which the suit was filed did Dot give it jurisdiction under
section 20 of the Code of Civil Procedure. Rejecting that contention, It was
held by the Supreme Court (paras, 11 and 16) that the running of railways was
"business" and the Union of India could be sued in the appropriate
court within whose territorial jurisdiction the headquarters of the railway
concerned were situated. The expression "voluntarily resides or personally
works for gain" which is also used in clause 12 of the Letters Patent of
this court, obviously, cannot apply to a bank but, having regard to the view
taken by the Supreme Court in Ladulal Jain's case,
it must be held that from that it cannot follow that the expression
"carries on business" which also occurs in clause 12 would apply only
to such persons to whom the other two expressions would apply. If the
Government can carry on business, as held by the Supreme Court in Ladulal
Jain's case4 a fortiori a bank can carry on business within the
terms of clause 12, and, indeed, there would be no difficulty if the bank in
question in the present case was a bank incorporated in this country. The
difficulty really arises because the defendant bank is admittedly one which has
been incorporated in the U.S.A. and the present suit is, admittedly, one in
which the whole cause of action has arisen in San Francisco and/or London and,
therefore, clearly outside the jurisdiction of this court.
The fact that the
defendant-bank which is a foreign company registered in the U.S.A. has got registered
with the Registrar of Companies in this country, the particulars which it is
required to deliver to the Registrar under section 592 of Companies Act, 1956,
cannot make its branch office or offices in India a distinct legal entity from
the defendant-bank which is a foreign corporation. The question, therefore, is
whether that foreign corporation can be sued in this court in respect of a
cause of action which has admittedly arisen wholly outside our country. If a
foreign corporation were to get itself registered under the Companies Act,
1956, in this country, there could be no doubt that it could thereafter be said
that it itself carries on business in this country. The precise question for my
decision, however, is as to what is the position in regard to jurisdiction, if
a foreign company does not get itself registered under the Companies Act in
this country and, without doing so, carries on business in this country through
a branch office or offices, one of which may be registered as its principal place
of business in India under section 592 of the Companies Act. The English cases
on the point do not afford assistance because the problems in the case of a
foreign corporation has, as far as England is concerned, been to define the
circumstances in which service of the writ is permissible (Cheshire's Private
International Law, 9th edition, page 81), In England the service of the writ is
the foundation of the court's jurisdiction and, in action in personam, the
position is that whenever a defendant can be legally served with a writ, the
court has jurisdiction to entertain an action against him". Hence in an
action in personam, the rules as to the legal service of a writ define the
limits of the court's jurisdiction" (Dicey on the Conflict of Laws, 9th
edition, pages 158-159). A foreign corporation which has a branch office in
England at which it carries on business can be served with the writ at that
branch office in the manner provided in Order 65, rule 3 of the Rules of the
Supreme Court in England by reason of the
provisions of section 407(1)(c) read with section 412 of the English Companies
Act, 1948. At common law, a foreign corporation which is so served with the
writ is treated as being present in England for the purpose of jurisdiction,
but the rule of English Common Law under which the rules as to the legal
service of a writ define the limits of the court's jurisdiction over foreign
corporations was never applied in India prior to the commencement of our
Constitution and cannot, therefore, be held to have been preserved under
article 372(1) of the Constitution. Indeed, it appears to me that the situation
of a foreign corporation being sued in India in respect of a cause of action
which arose abroad was never contemplated when the Queen granted the Letters
Patent to this court in 1865, or when the legislature enacted section 20 of the
Code of Civil Procedure in the year 1908. Section 20 of that Code contains a
specific provision in Explanation II thereof that a corporation is to be deemed
to carry on business at its sole or principal office in India, or in respect of
a cause of action arising at any place where it has also a subordinate office
at such place. That Explanation does not find place in clause 12 of the Letters
Patent of this court. In my opinion, however, both clause 12 of the Letters
Patent of this court as well as section 20 of the Code of Civil Procedure
embody provisions of municipal law dealing only with the domestic jurisdiction
of the courts of this country. To hold otherwise and to apply section 20 as
well as clause 12 in the matter of jurisdiction over foreign corporations would
lead to the curious result that there would be two different rules of private
international law on that point, one for chartered high courts, and another for
the remaining courts in the country. There cannot be two differing rules of
private international law applicable on the same point in the same country.
There is no judicial decision which has been brought to my notice either by the
plaintiff or by the learned counsel for the defendant-bank which lays down what
should be the rule of private international law to be applied to a case like
the present one in our country. In Ladulal Jain's case,
which had already been cited above, the Supreme Court was concerned with the
jurisdiction of courts located in India. That was also the position in the
Bahrein Petroleum Company's case,
which has also been cited above, as the final order of the Supreme Court which
confirmed the orders of the trial court and the District Court returning the
plaint for presentation to the proper court clearly shows. An order returning
the plaint for presentation to the proper court can be made under Order 7, rule
10 of the Code of Civil Procedure only in cases in which the proper court to
which the plaint is to be presented is situated in this country. That, indeed,
is one more reason why clause 12 of the Letters Patent as well as section 20 of
the Code of Civil Procedure must be held to
embody only rules of municipal law, for if a court holds that it has no
jurisdiction by reason of either of those provisions, it would have to make an
order returning the plaint under Order 7, rule JO of the Code of Civil
Procedure which, it may be stated, has now been made applicable to this court
also. Reliance was sought to be placed upon the observations of a single judge of
the Calcutta High Court in the case of Babulall Choukhani v. Caltex (India)
Ltd.
but the judgment in the said case cannot be of any assistance for determining the
question now before me. The facts of the said case show that the company in
question was registered outside India, that its principal office in India was
in Bombay, that it had a branch office in Calcutta and that the whole cause of
action had arisen in Calcutta itself. The question as to whether the said
company being a foreign company could be sued in India was not raised at all in
the said case, but the only contention advanced was that it could be sued in
Bombay where it had its head office in India, and not at Calcutta where it had
its "district office" (see para. 16). Applying clause 12 of the
Letters Patent, it was held (para. 23) that, with no such "legal
fiction" in clause 12 as is to be found in Explanation II to section 20 of
the Code of Civil Procedure, it had to be held that the company did carry on
business also at Calcutta and could, therefore, be sued there. Moreover, the
cause of action in the said case had arisen in Calcutta. Reliance was also
sought to be placed upon the judgment of a Division Bench of the Allahabad High
Court in the case of
Guardian Assurance Co. v. Shiva Mangal Singh
in which it was stated that no authority had
been cited in support of the proposition that a foreign company cannot carry on
business in another country, and that, on the other hand, there were clear
authorities in support of the contrary proposition. There can be no quarrel
with that proposition in regard to a business transaction entered into by a
foreign corporation in India which gives rise to the cause of action in a suit.
A reference to the facts of the said case clearly shows that the policy of
insurance under which the claim was made against the foreign insurance company
was issued by it at Calcutta under the signatures of their director and local
managers where, therefore, a part of the cause of action arose. The said case
did not relate to a foreign company being sued in respect of a came of action
which had wholly arisen abroad, which is the question with which I am concerned
in the present case.
What then is the proper
rule to be applied in this country as a rule of private international law in
cases in which a foreign company, that is, a company incorporated, in a foreign
country, is sought to be sued in respect of a cause of action that has arisen
wholly outside India, as in the present case. Private international law has
been described as meaning, "the rules voluntarily chosen by a given State
for the decision of cases which have a foreign complexion" and private
international law is not the same in all countries, there being no one system
that can claim universal recognition (Cheshire's Private International Law, 9th
edition, pages 5 and 9). As stated in the very first Chapter of Cheshire's
Private International Law, the said book is concerned solely with private
international law as it obtains in England, that is to say, with the rules that
guide an English court whenever it is seized of a case that contains some
foreign element. There is undoubtedly in motion a process of ameliorating the
lack of unanimity among the various systems of private international law by
means of international conventions, but the best way of ensuring recognition of
a rule of private international law to be adopted by a country is that such
rule should be rational and not one that might lead to injustice. The question,
therefore, is what is the rational rule that should be "voluntarily
chosen" by our country for the purpose of deciding the question of
jurisdiction that arises in the present case. As already stated above, there is
no reason why the peculiar rule of English private international law based on
the service of the writ should be adopted in this country. If causes of action
arising out of business done by foreign corporations anywhere else in the world
are to be entertained in our country by adopting the rule contained in clause
12 of the Letters Patent as a rule of private international law normally by
reason of the fact that those foreign corporations may have a branch office
within our country, it would lead to the absurd result that a suit could be
filed by any person, including a foreigner, in Bombay against the Bank of
America in respect of a cause of action relating to a transaction that may have
arisen wholly in London, or Hongkong, or anywhere else in the world, such rule,
if adopted as a rule of private international law by us, would not command
recognition in foreign countries. In my opinion, the proper course to follow in
a case like the present one is to extend the rule of municipal law contained in
Explanation II to section 20 of the Code of Civil Procedure, which our
legislature has itself thought to be a rational rule to be applied by courts in
the exercise of their domestic jurisdiction, to cases like the present one by
adopting it as a rule of private international law. Such a rule would not lead
to injustice and would receive recognition in foreign countries. I, therefore,
hold that a court in this country has no jurisdiction over a company
incorporated in a foreign country merely by reason of the fact that such
foreign corporation may have an office within the jurisdiction of such court,
except in respect of cause of action arising at the place where its office is
located. I also hold that in applying that rule, the fact that the office in
question may have been registered with the Registrar of Companies as the principal place of
business of such foreign corporation in India under section 592(1)(a) of the Companies
Act, 1956, would make no difference. Applying that rule to the admitted facts
of the present case, I hold that this court has no jurisdiction to entertain or
try the present suit. The preliminary issue framed by me must, therefore, be
answered in the negative and against the plaintiff, and the plaintiff's suit is
dismissed with costs.
[2004]
51 scl 191 (Kar.)
High Court of Karnataka
N.
Kumar, J.
October 27,
2003
In respect to any
matter relating to a foreign company,
Court where foreign company’s principal place of
business is situated would have jurisdiction in respect
of any matter relating to such foreign company
Section 10, read with section 597, of the
Companies Act, 1956 - Court - Jurisdiction of - Whether in case of unregistered
companies, that is, foreign companies which carry on business in India, it is
principal place of business of such companies which is decisive factor to
decide a domicile of such company and High Court with a jurisdiction over such
a principal place of business will have jurisdiction in respect to any matter
relating to that company - Held, yes - Whether registered office of foreign
company shall be deemed to be its principal place of business in India - Held,
yes - Whether merely because as a statutory requirement documents are filed
with Registrar of Delhi for registering in terms of section 597(1), that does
not mean that a foreign company being registered in that office High Court of
Delhi only has jurisdiction over that company - Held, yes
The
petitioner-foreign company having its branch office at Bangalore had proposed
to enter into a scheme of arrangement, with the transferee-company. The board
of directors of the petitioner-company had approved the scheme of arrangement
and it was also approved by the shareholders and creditors. The
petitioner-company had presented the instant petition under sections 391 and
394 for sanctioning the scheme. However, the Regional Director, Department of
Company Affairs, on his appearance filed a report contending that the
petitioner was a registered company having its registered office in the
Sultanate of Oman and having a place of business in India at Bangalore but it
was registered with the Registrar of Companies, NCT at Delhi under section 592,
and, therefore, the petition filed by the petitioner-company in the High Court
of Karnataka was not maintainable as the petition ought to have been filed
before the High Court of Delhi. It was further contended that the jurisdiction
of the High Court is analogous to the jurisdiction of the Registrar of
Companies where the registered office of the company is situated, i.e., where
the company is registered and, therefore, it was not correct to file the
company petition by the transferor-company before the High Court of Karnataka
as the said company’s Indian office/business was registered with the Registrar
of Companies, NCT at Delhi.
A conjoint
reading of the provisions dealing with Court, company and the jurisdiction of
the Court and where the registered office of the company is to be situated,
makes it very clear that in deciding which Court has the jurisdiction over the
company, what is relevant is the place at which the registered office of the
company is situate. It is that Court where the registered office is situated
which has the jurisdiction in respect to any matter relating to a company. The
law lays stress on the place at which the registered office of the company is
situated and not where the company is registered. It is because the provisions
of the Act apply not only to the company registered under the Act, but they
also apply to certain legal entities which are not registered under the Act,
but which are deemed to be the companies. [Para 6]
For the purpose
of registration of a foreign company, Registrar means the Registrar having
jurisdiction over New Delhi and if they intend carrying on business at a place
outside New Delhi and have the principal place of business, in that context the
documents mentioned in section 597 shall be delivered to the Registrar of the
State in which the principal place of business of the company is situated.
In respect of
foreign company which is registered outside India, though it is expected to
register that company by filing necessary documents with the Registrar having
jurisdiction over New Delhi, the registered office of such company shall be
deemed to be its principal place of business in India. Insofar as foreign
companies are concerned, the Legislature has consciously made departure insofar
as place of registration and place of registered office is concerned. A
registered office of foreign company be situated in a State outside the place
of registration of the company, namely, New Delhi. Therefore, in respect of
foreign companies, though the registration takes place with Registrar having
jurisdiction over New Delhi, registered office can be situated outside the
jurisdiction of New Delhi. In view of the language employed in section 10 in
finding out which Court has jurisdiction in respect of any matter relating to
the foreign companies, it is that Court where its principal place of business
is situated which has the jurisdiction, because its principal place of business
is deemed to be the registered office of the foreign company. [Para 7]
Therefore, it
is not the registration of the company under the Act within the jurisdiction of
a particular Court which decides the jurisdiction of the Court to entertain in
respect of any matter relating to a company but it is the place where the
registered office is situated which decides the territorial jurisdiction of the
court to decide the matters relating to the company. Insofar as a foreign
company is concerned, it is the place where its principal place of business is
situated which is deemed in law to be its registered office which decides the
jurisdiction of the Court. In other words, the Court where the foreign
company’s principal place of business is situated would have jurisdiction in
respect of any matter relating to such foreign company. [Para 8]
Therefore, in
the case of a company registered under the Act it is the place where the
registered office is situated which will have jurisdiction to entertain the
proceedings against such company. In the case of unregistered companies, that
is, the foreign companies which carry on the business in India it is the
principal place of business of such companies which is the decisive factor to
decide a domicile of such company and High Court with a jurisdiction over such
a principal place of business will have jurisdiction to entertain the petition
under the Act. Merely because, as a statutory requirement the documents are
filed with the Registrar of Delhi for registering in terms of section 597(1),
that does not mean that a foreign company being registered in that office the
High Court of Delhi only has jurisdiction over the said company. If that
argument were to be accepted in respect of unregistered companies which are
incorporated outside India, it is only the Delhi High Court which would have a
jurisdiction over all such foreign companies. If that was the intention of the
Legislature, the said intention could have been made explicit by enacting a
specific provision under the Companies Act though Chapter XI deals exclusively
with foreign companies. On the contrary, section 600 categorically states that
insofar as foreign companies are concerned, the Registrar means the Registrar
of Companies at Delhi. The Registered Office means the principal place of
business where that company is situated and carries on business. It is the
registered office which decides the jurisdiction of any High Court to entertain
the petition under the Companies Act. If that is so as the principal place of
business is the registered office of a foreign company, the High Court within
whose jurisdiction such registered office/principal place of business is
situated would have jurisdiction to proceed under the Act in respect of such
company. Therefore, there was no substance in the points raised on behalf of
Registrar of Companies. The High Court of Karnataka had jurisdiction to
entertain the petition in view of the fact that the principal place of business
of the petitioner-company in India was at Bangalore. [Para 9]
In the scheme of
amalgamation, the interest of the shareholders, creditors, employees and public
was fully taken care of and their interest had been fully secured. 100 per cent
of the shareholders had approved the scheme of arrangement. The statutory
requirement as contemplated under section 391(2) had been complied with. The
RBI had granted permission to the petitioner-bank to carry on the business in
India and had also granted necessary permission for merger of the petitioner’s
Bangalore Branch with the transferee-company. The Bombay High Court (Panaji
Bench) sanctioning the scheme of amalgamation on a petition filed by the
transferee-company had held that all the statutory requirements had been
complied with and there was no legal impediment to according a sanction and
that the sanction was not only in the interest of shareholders, creditors of
the petitioner-bank, but was also in public interest. [Para 11]
The company
petition was allowed. [Para 12]
Case referred to
Frontier Bank
Ltd., In re [1951] 21 Comp. Cas. 1 (Punj.) (para 8).
Naganand
for the Petitioner. Veerendra Sharma for the Respondent.
1. The petitioner is
a Company incorporated under the laws of Oman and having its designated office
at Post Box No. 134, Postal Code 112, Ruwi, Sultanate of Oman. The petitioner-company
set up a Branch Office at Bangalore vide licence No. (BG) No. 1/97-98 dated
March 16, 1998 issued by the Reserve Bank of India under section 22(1) of the
Banking Regulation Act, 1949 to carry on banking business in India. They have
no other branches or establishments in India except at Bangalore. The
authorised share capital of the petitioner-company as on March, 2003, is
7,50,00,000 Rial Omani equivalent to 922 crores 50 lakhs of Indian Rupees.
Issued, subscribed and paid up capital is 4 crores 9 lakhs 37,480 Rial Omani
equivalent to 603 crores 16 lakhs 10,040 Indian Rupees. The object of the
petitioner-company is to carry on commercial and investment banking business,
including the financing of trade and projects, etc. as set out in the Memorandum
of Association. The petitioner-company is carrying on business through
Bangalore Branch since 1998 which is situated at No. 29, Infantry Road,
Bangalore-1, which is the principal place of business of the petitioner-company
in India. The Company by name Centurion Bank Limited which hereinafter referred
to as a Transferee Company was incorporated on June 30, 1994, as Public Limited
Company under the provisions of the Companies Act, 1956, having its registered
office at Durga Nivas, Mahatma Gandhi Road, Panaji-403001, Goa. The Transferee
Company has built up key strength in retail banking, apart from offering a
range of corporate banking and treasury products. The management of the
Transferee Company believes that the Transferee Company can progress at a
faster rate with the infusion of additional capital. In line with this the
Transferee Company has proposed to enter into a Scheme of Arrangement, inter
alia which includes transfer of undertaking of the Bangalore Branch of the
petitioner-company by restructuring and recapitalisation of the Transferee
Company. The Board of Directors of the Transferee Company by a Resolution dated
23rd April, 2003, approved the proposal for restructuring and recapitalisation
of the Transferee Company. The Board of Directors of the Transferor Company
approved the draft Scheme of Arrangement vide Board Resolution dated 28-12-2002
a copy of which is produced as Annexure-A. The said Scheme of Arrangement,
inter alia provides for transfer and vesting of business of the Bangalore
Branch of the Transferor Company in the Transferee Company and a reorganisation
of the Equity Share Capital of the Transferee Company and recapitalisation of
the Transferee Company.
2. The
petitioner-company presented an application No. 453/2003 before this Court
under sections 391 to 394 of the Companies Act, 1951, requesting this Court to
permit them to convene meetings of shareholders and creditors of the
petitioner-company. This Court by order dated 9th July, 2003, granted the
permission sought for. Accordingly the meeting of the creditors of the
petitioner-company was convened and held on 4th August, 2003, at Bangalore. The
said meeting was attended by 311 persons and they represented a debt of Rs. 76
crores 35 lakhs 44,884. Out of the same 310 ballot papers representing 66
crores 84 lakhs 69,280-72, the value of debt has voted in favour of the Scheme
while one ballot representing Rs. 50,75,604 was found to be against the Scheme
of Arrangement. In other words, the Scheme of Arrangement was approved by the
creditors constituting 99.68 per cent in number and representing about 99.24
per cent of the value of debts presented and voted.
3. Similarly the
meeting of the shareholders was also convened on 19th August, 2003, at 5.00
p.m. at International Hotel, Shatt Al Qurum, Muscat. Out of 36 shareholders 17
persons were present representing 36 crores 18 lakhs 7,890 shares of whom all
voted in favour of the Scheme of Arrangement. In the other words, the scheme
was approved by the shareholders constituting 100 per cent of the value of the
shares, out of 17 persons casting the ballots for 36 shareholders. It is
submitted that there are no investigation proceedings in addition to the
proceedings under sections 235 to 251 of the Act of 1956. After the aforesaid
meeting the chairman of the Company has filed his report before this Court.
4. Thereafter the
petitioner-company has presented this petition under section 394 of the
Companies Act for sanctioning of the Scheme. After the Petition was admitted
notice was ordered to Regional Director, Department of Company Affairs,
Southern Region, Chennai. After service of notice he entered appearance and
submitted a report. In the said report it is contended that the petitioner is a
registered company having its registered office in the Sultanate of Oman and
having a place of business in India at Bangalore but it is registered with the
Registrar of Companies, National Capital Territory at Delhi, pursuant to
section 592 of the Companies Act, 1956 and he is looking after the compliance
of various provisions of the Companies Act, 1956 relating to Foreign Companies
carrying on their business in India and therefore the petition filed by the
petitioner-company in this court is not maintainable as the petition ought to
have been filed before the High Court of Delhi. It is further contended that
the jurisdiction of this Court is analogous to the jurisdiction of the
Registrar of Companies where the registered office of the company is situated,
i.e., where the Company is registered and therefore it is not correct to file
the company petition by the Transferor Company before this court as said
company’s Indian Office/business is registered with the Registrar of Companies,
NCT at Delhi. It was further submitted that if there are any legal or any other
proceedings pending against the Transferor Company, it will be known only to
the Registrar of Companies, NCT at Delhi, and not to Registrar of Companies at
Bangalore. Therefore it was submitted that a direction be issued to the
petitioner-company to approach the Delhi High Court and dispose of this
petition accordingly.
5. In view of the aforesaid facts the
points that arise for my consideration is :
(1) Whether the High Court of
Karnataka has jurisdiction to entertain this petition under sections 391 to 394
of the Act of a Foreign Company which is having its principal place of business
at Bangalore ?
(2) If this Court has got jurisdiction
whether a case for sanctioning of the Scheme has been made out ?
Learned counsel appearing for the petitioner-company
contended that in so far as company registered under the Companies Act is
concerned it is the High Court where the registered office of the company is
situate which has jurisdiction to entertain a petition under sections 391 to
394 of the Act. In the case on hand, that is a company registered in a country
outside India which is carrying on the business in India, it is High Court
where the principal place where such company is carrying on business which got
jurisdiction to entertain the petition. As admittedly, the principal place of
business of the petitioner-company in India, is at Bangalore, and therefore
this Court has jurisdiction to entertain this petition. The Registrar of
Companies, Delhi and Haryana, where in terms of section 597(1) of the Companies
Act, the papers and documents have been filed, it does not amount to
registering the company there. As such the contentions of the respondent is
without any substance. In support of his contentions he has relied upon the
provisions of the Act as well as several decisions which will be referred to
while discussing the said point. Learned counsel appearing for the respondent
contends that as under section 597(1) of the Companies Act as documents of a
Foreign Company is required to be delivered to the Registrar of Companies at
New Delhi which means the Registrar of Companies at New Delhi has jurisdiction
to entertain the petition under section 391. This Court has no jurisdiction to
entertain the petition.
6. In order to
appreciate these contentions it is necessary to have a look at some provisions
of the Companies Act which has a bearing on the subject. Section 2(11) defines
the “Court” under the Act. According to the said definition, the ‘Court’ means
with respect to any matter relating to a Company other than any offence against
this Act, the Court having jurisdiction under this Act with respect to the
matter relating to that company as provided under section 10. The word
‘company’ has been defined under section 2(10) of the Act. According to the said
definition the Company means the Company as defined under section 3 of the Act.
Section 3 in turn defines a company, means a company formed and registered
under this Act or an existing company as defined in clause (ii). Then section
10 which deals with the jurisdiction of Courts under the Act, which states that
the Court having jurisdiction under this Act shall be High Court having
jurisdiction in relation to the place at which the registered office of the
company concerned is situate, except to the extent to which jurisdiction has
been conferred on any District Court or District Courts subordinate to that
High Court in pursuance of sub-section (2) and sub-section (2) deals with the
jurisdiction of the District Courts. Section 13 of the Act deals with the
requirement with respect to memorandum which states that the memorandum of
every company shall state the State in which the registered office of the
Company is to be situated. Therefore a conjoint reading of the aforesaid
provisions which deals with Court, company and the jurisdiction of the Court
and where the registered office of the company is to be situated, makes it very
clear that in deciding which Court has the jurisdiction over the company, what
is relevant is the place at which the registered office of the company is
situate. It is that Court where the registered office is situate which has the
jurisdiction in respect to any matter relating to a company. What is to be
noticed here is the law lays stress on the place at which the registered office
of the company is situate and not where the company is registered. It is
because the provisions of the Companies Act applies not only to the company
registered under the Act, but they apply to certain legal entities which are
not registered under the Act, but which are deemed to be the companies. In
fact, Part-X of the Act deals with unregistered companies and Part-XI deals
with companies incorporated outside India.
7. In that
background, now we have to find out whether a company which is incorporated
outside India, in other words, a Foreign Company, in respect of any matter
relating to such foreign company, which Court in India would have jurisdiction.
In that regard, Part-XI of the Act which deals with company incorporated
outside India is to be looked into. Section 591 of the Act deals with
application of sections 592 to 602 to a Foreign Company which reads as under :
“(a) companies incorporated outside India which, after the
commencement of this Act, establish a place of business within India; and
(b) companies incorporated outside India which have, before the
commencement of this Act, established a place of business within India and
continue to have an established place of business within India at the
commencement of this Act.
(2) Notwithstanding anything contained in
sub-section (1), where not less than fifty per cent, of the paid-up share
capital (whether equity or preference or partly equity and partly preference)
of a company incorporated outside India and having an established place of
business in India, is held by one or more citizens of India or by one or more
bodies corporate incorporated in India, or by one or more citizens of India and
one or more bodies corporate incorporated in India, whether singly or in the
aggregate, such company shall comply with such of the provisions of this Act as
may be prescribed with regard to the business carried on by it in India, as if
it were a company incorporated in India.” [Emphasis supplied]
Section 592 deals
with documents etc., to be delivered to the Registrar of Foreign Companies
carrying on business in India, which reads as under :
“Documents, etc., to be delivered to Registrar
by foreign companies (carrying on business in India).—(1) Foreign companies
which, after the commencement of this Act, establish a place of business within
India shall, within (thirty days) of the establishment of the place of
business, deliver to the Registrar for registration—
(a) a certified copy of the charter, statutes, or memorandum and
articles, of the company or other instrument constituting or defining the
constitution of the company; and if the instrument is not in the English
language, a certified translation thereof;
(b) the full address of the registered or
principal office of the company;
(c) a list of the directors and secretary of the company,
containing the particulars mentioned in sub-section (2);
(d) the name and address or the names and addresses of some one or
more persons resident in India, authorised to accept on behalf of the company
service of process and any notices or other documents required to be served on
the company; and
(e) the full address of the office of the company in India which is
to be deemed its principal place of business in India.
(2) The list referred to in clause (c) of
sub-section (1) shall contain the following particulars, that is to say:—
(a) with respect to each director
(i) in the case of an individual, his present name and surname
in full, any former name or names and surname or surnames in full, his usual
residential address, his nationality, and if that nationality is not the
nationality of origin, his nationality of origin, and his business occupation,
if any, or if he has no business occupation but holds any other directorship or
directorships, particulars of that directorship or of some one of those
directorships; and
(ii) in the case of a body corporate, its corporate name and
registered or principal office; and the full name, address, nationality, and
nationality of origin, if different from that nationality of each of its
directors;
(b) with respect to the secretary, or where
there are joint secretaries, with respect to each of them—
(i) in the case of an individual, his present name and surname,
any former name or names and surname or surnames, and his usual residential
address; and
(ii) in the case of a body corporate, its
corporate name and registered or principal office :
Provided
that, where all the partners in a firm are joint secretaries of the company,
the name and principal office of the firm may be stated instead of the
particulars mentioned in clause (b) of this sub-section.
(3) Clauses (2) and (3) of the Explanation to
sub-section (1) of section 303 shall apply for the purpose of the construction
of references in sub-section (2) to present and former names and surnames as
they apply for the purposes of the construction of such references in
sub-section (1) of section 303.
(4) Foreign companies, other than those
mentioned in sub-section (1), shall if they have not delivered to the Registrar
before the commencement of this Act the documents and particulars specified in
sub-section (1) of section 277 of the Indian Companies Act, 1913 (7 of 1913),
continue to be subject to the obligation to deliver those documents and
particulars in accordance with that Act.” [Emphasis supplied]
Section 597
deals with offices where documents to be delivered which reads as under :
“Office where documents to be delivered.—(1)
Any document which any foreign company is required to deliver to the Registrar
shall be delivered to the Registrar having jurisdiction over New Delhi, and
references to the Registrar in this Part except in sub-section (2) shall be
construed accordingly.
(2) Any such document as is referred to in sub-section
(1) shall also be delivered to the Registrar of the State in which the
principal place of business of the company is situate.
(3) If any foreign company ceases to have a
place of business in India, it shall forthwith give notice of the fact to the
Registrar, and as from the date on which notice is to be given, the obligation
of the company to deliver any document to the Registrar shall cease, provided
it has no other place of business in India.”
Sub-section (4)
of section 600 which is very relevant reads as under :
“(4) In applying the sections referred to in
sub-sections (1), (2) and (3) to a foreign company as aforesaid, references in
those sections to the Registrar shall be deemed to be references to the
Registrar having jurisdiction over New Delhi, and references to the registered
office of the foreign company shall be deemed to be references to its principal
place of business in India.” [Emphasis Supplied]
A reading of
the aforesaid provisions makes it very clear, in terms of section 591 of the
Act, sections 592 to 602 of the Act applies to Foreign Companies which are
incorporated outside India which after commencement of this Act, establishes a
place of business within India. Section 592 deals with Foreign Companies who
have established a place of business in India, within thirty days from such
establishment shall deliver to the Registrar for registration of the documents
mentioned therein. Clause (b) of sub-section (1) of section 592 deals with full
address of the registered or principal office of the company. Section 597 of
the Act states that the documents enumerated in section 592 shall be delivered
to the Registrar having jurisdiction over New Delhi and reference to the
Registrar in this part shall be construed accordingly. In other words, when a
foreign company establishes business and wants to carry on business in India it
shall get itself registered in India by delivering copies mentioned in section
592(1) to the Registrar having jurisdiction over New Delhi. Sub-section (2) of
section 597 further makes it clear, in the event of such Foreign Company not
carrying on business at New Delhi or if it does not have a principal place of
business at New Delhi, then those documents mentioned in section 592 shall be
delivered to the Registrar of the State in which the principal place of
business of the company is situated. Therefore, for the purpose of registration
of Foreign Company, Registrar means the Registrar having jurisdiction over New
Delhi and if they intend carrying on business outside New Delhi and have the
principal place of business, in that context the documents mentioned in section
597 shall be delivered to the Registrar of the State in which the principal
place of business of the company is situated. Sub-section (4) of section 600 makes
it abundantly clear that in applying the sections referred to in sub-sections
(1), (2) and (3) to a Foreign Company as aforesaid, references in those
sections to the Registrar shall be deemed to be references to the Registrar
having jurisdiction over New Delhi, and references to the registered office of
the Foreign Company shall be deemed to be references to its principal place of
business in India. Therefore, in respect of Foreign company which are
registered outside India, though they are expected to register those company by
filing necessary documents in the Registrar having jurisdiction over New Delhi,
the registered office of such company shall be deemed to be its principal place
of business in India. In so far as Foreign Companies are concerned, the Legislature
has consciously made departure in so far as place of registration and place of
registered office is concerned. A registered office of Foreign company be
situated in a State outside the place of registration of the company, namely,
New Delhi. Therefore, in respect of Foreign companies, though the registration
takes place at Registrar having jurisdiction over New Delhi, registered office
could be situated outside the jurisdiction of New Delhi. In view of the
language employed in section 10 in finding out which Court has jurisdiction in
respect of any matter relating to these foreign companies are concerned, it is
that Court where its principal place of business is situated has the
jurisdiction, because its principal place of business is deemed to be the
registered office of the foreign company. In this context it is useful to refer
to few judgments on the point which are rendered under the provisions of the
old Act.
8. In fact, dealing
with the contention Madras High Court in the case of Travancore National &
Quilon Bank, In re [1939] 9 Comp. Cas. 50 (sic) has held as under :
“The registration of the company is not for
all purposes of itself decisive. The question in each case is, where is it that
the real business of the company is carried on ? According of the answer to
that question, the company’s domicile must in the main be determined.”
The Punjab High
Court in the case of Frontier Bank Ltd., In re [1951] 21 Comp. Cas. 1 has held
thus :
“. . .The High Court at Punjab in India has
jurisdiction under section 153 of the Indian Companies Act, 1913, to sanction a
scheme of arrangement in respect of a company whose registered office is in
Pakistan and which has complied with the requirements of section 277.” (p. 1)
Therefore, it is
not the registration of the Company under the Act within the jurisdiction of a
particular Court which decides the jurisdiction of the Court to entertain in
respect of any matter relating to a company but it is the place where the
registered office is situate which decides the territorial jurisdiction of the
Court to decide the matters relating to the company. Insofar as foreign company
is concerned it is the place where its principal place of business is situated
which is deemed in law to be its registered office which decides the
jurisdiction of the Court. In other words the Court where the foreign company’s
principal place of business is situated would have jurisdiction in respect of
any matter relating to such foreign company.
9. From the aforesaid
Judgments and the aforesaid provisions of the Companies Act it becomes clear
that in the case of a Company registered under the Companies Act where the
registered office is situate will have jurisdiction to entertain the proceeding
against such company. In the case of unregistered companies that is the Foreign
Companies which carry on the business in India it is the principal place of
business of such companies which is the decisive factor to decide a domicile of
such company and High Court with a jurisdiction over such a principal place of
business will have jurisdiction to entertain the petition under the Act. Merely
because, as a statutory requirement the documents are filed with the Registrar
of Delhi for registering in terms of section 597(1) of the Act, that does not
mean that a Foreign Company being registered in that office the High Court of
Delhi only has jurisdiction over the said company. If that arguments were to be
accepted in respect of an unregistered Companies which are incorporated outside
India it is only the Delhi High Court which will have a jurisdiction over all
such Foreign Companies. If that was the intention of the Legislature the said
intention could have been made explicit by enacting a specific provision under
the Companies Act though Chapter XI deals exclusively with Foreign Companies.
On the contrary section 600 of the Act categorically states that in so far as
Foreign Companies are concerned the Registrar means the Registrar of Companies
at Delhi. The Registered Office means the principal place of business where
that company is situated and carries on business. It is the registered office
which decides the jurisdiction of any High Court to entertain the Petition
under the Companies Act. If this is so as the principal place of business is
the Registered Office of a Foreign Company, the High Court within whose
jurisdiction such Registered Office/principal place of business is situate has
jurisdiction to proceed under the Act in respect of such company. In that view
of the matter, I do not find any substance in the points raised on behalf of
the respondent on behalf of Registrar of Companies. This Court has jurisdiction
to entertain the petition in view of the fact that the principal place of
business of the petitioner-company in India is at Bangalore.
10. In so far as
sanctioning a scheme proposed by the petitioner-company is concerned the
proposed scheme provides for adequate capital to the transferee company by the
proposed amalgamation which results in deployment of high quality management
resources along with enhanced risk management, corporate governance and
customer service which in turn also results in restoration of investor and
depositors confidence in the Transferee company and would strategically
reposition the Transferee Company by enhancing value for all the stakeholders.
The said proposal also envisages certain advantages to the Transferor company
viz., an ability to service non-resident Indians in Oman who hail from various
parts of India rather than from Bangalore alone owing to a wider network of
branches as compared to a single branch in Bangalore and expression of a long
term commitment to invest greater resources in India and promote trade and
project finance from international trade involving India and also to promote greater
flow of investments between India and the gulf region. On the Scheme becoming
affective, all staff and employees of the petitioner Bank relating to its
Bangalore Branch in service on the Effective Date who are willing shall be
deemed to have become staff and employees of Transferor Company from the
appointed date without any break in their service and on the basis of
continuity of service, and the terms and conditions of their employment with
the Transferor Company shall not be less favourable than those applicable to
them with reference to petitioner-Bank. Under the terms and conditions the net
worth of the Bangalore Branch of Bank Muscat after deducting therefrom cash and
cash equivalents, is Rs. 15 crores. Under the terms the petitioner-company has to
contribute a sum of Rs. 75 crores, as reduced by the grant of consideration
viz., 15 crores which is the net worth of the Bangalore Branch of the
petitioner-company to the Transferee Company by subscribing in cash equity
shares of the Transferee Company having face value of Re. 1 each of Transferee
Company at a premium of Rs. 3 per share. On receipt of the said contribution
the Transferee Company shall issue and allot to the shareholders of the
petitioner-company such number of equity shares but not exceeding 37.50 crores
Equity Shares in aggregate, of the face value of Re. 1 each at a premium of Rs.
3 per share and credited as fully paid up and equate the funds contributed by
existing principal shareholders in accordance with clause 14.1 of the Scheme the
interest of the shareholders of the petitioner-company unit at Bangalore is
taken care of with effect from the appointed date of debts of Assets and
Liabilities contingent or otherwise duties and obligations relating to
Bangalore Branch of the petitioner-company is on the—of the business on the
preceding the appointed day whether or not provided in the Books of Bank,
Muscat. All other liabilities relating to Bangalore which arises or accrues on
or before the appointed date or up-to the appointed date shall be deemed to be
liabilities and obligations of the Transferee Company.
11. All contracts,
deeds, bonds and other instruments entered into between the Bangalore Branch of
the petitioner-company with third party shall be fully binding on the
Transferee Company as if the same is executed by them in their favour.
12. Thus, a reading of
the Scheme makes it very clear that the interest of the shareholder, creditors,
employees and public is fully taken care of and their interest has been fully
secured. 100 per cent of the shareholders have approved the scheme of
arrangement. The statutory requirement as contemplated under section 391(2) has
been complied with. The Reserve Bank of India has granted permission to the
petitioner bank to carry on the business in India and has also granted
necessary permission for merger of the petitioner’s Bangalore Branch with the
Transferee Company by letter dated 6th August, 2003. The Bombay High Court
(Panaji Bench) sanctioning the Scheme of Amalgamation on a Petition filed by the
Transferee Company No. 9- Co.P.No. 9 of 2003 by an order dated 5/12th
September, 2003 has held that all the statutory requirements have been complied
with and there is no legal impediment for according a sanction and the sanction
is not only in the interest of shareholders, creditors of the petitioner-Bank,
but is also in public interest. under the circumstances, in pursuance to the
Public notice issued notifying the hearing date which was duly published no
shareholder, creditor or any person has appeared before this Court opposing the
Petition. I am of the view that sanction sought for has to be accorded.
Accordingly, I pass the following order :
Company
petition is allowed. That the scheme of arrangement as at Annexure-A is hereby
sanctioned so as to be binding on the shareholders, and creditors of the
petitioner and the Transferee Company.
Office is
directed to draw a decree in Form No. 42.