1950 (6) TMI 12 - HC - Companies Law

Summary

Issues Involved:
1. Jurisdiction of the Court to sanction a scheme of arrangement for a company with its registered office in Pakistan.
2. Applicability of Section 153 of the Indian Companies Act to unregistered companies.
3. Interpretation of Section 276 in relation to unregistered companies.

Detailed Analysis:

1. Jurisdiction of the Court to Sanction a Scheme of Arrangement for a Company with its Registered Office in Pakistan:
The primary issue was whether the High Court of Punjab had jurisdiction to sanction a scheme of arrangement for the Frontier Bank Limited, whose registered office was in Dera Ismail Khan, Pakistan. The bank had complied with Section 277 of the Indian Companies Act and set up an office in Delhi. The Court had previously sanctioned a scheme on 15th July, 1949, and further applications for amendments were made.

The argument against jurisdiction was based on Section 276, which states that an unregistered company shall not be deemed a company under the Act except in the event of its being wound up. This implied that the Court might not have jurisdiction under Section 153 for sanctioning a scheme of arrangement.

2. Applicability of Section 153 of the Indian Companies Act to Unregistered Companies:
The petitioner argued that the bank should be treated as an unregistered company under Section 271 and thus liable to be wound up under Part IX of the Act. Section 153(6) states that "company" means any company liable to be wound up under the Act, which includes unregistered companies.

The opposing view argued that Section 276 limits the application of the Act to unregistered companies only for winding up purposes, and thus Section 153 does not apply.

3. Interpretation of Section 276 in Relation to Unregistered Companies:
Section 276 explicitly states that an unregistered company shall not be deemed a company under the Act except for winding up purposes. The interpretation of this section was crucial in determining whether Section 153 could apply to unregistered companies.

Analysis by Judges:

Khosla, J.:
Khosla, J. concluded that Section 153(6) provides an exception to Section 276. He argued that since an unregistered company is liable to be wound up, it falls within the scope of Section 153(6). He cited previous cases where schemes of arrangement were sanctioned for unregistered companies, supporting his view that Section 153(6) includes such companies.

Harnam Singh, J.:
Harnam Singh, J. disagreed, emphasizing that the Court's jurisdiction is defined by the location of the registered office, which in this case was in Pakistan. He argued that Section 276 restricts the application of the Act to unregistered companies only for winding up purposes, and Section 153 does not apply. He also pointed out that proceedings under Section 153 are not considered as winding up proceedings.

Kapur, J.:
Kapur, J. agreed with Khosla, J., providing additional reasoning. He highlighted that the expression "company" in Section 153(6) is broader and includes any company liable to be wound up under the Act, which encompasses unregistered companies. He referenced English law and previous judgments to support his view that Section 153(6) applies to unregistered companies.

Conclusion:
The Full Bench concluded that Section 153(6) of the Indian Companies Act does apply to unregistered companies, and thus the High Court of Punjab had jurisdiction to sanction a scheme of arrangement for the Frontier Bank Limited. The question referred to the Full Bench was answered in the affirmative.