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TMI Blog1961 (11) TMI 34X X X X Extracts X X X X X X X X Extracts X X X X ..... of the unregistered company is correct. Appeal dismissed. - 225 OF 1959 - - - Dated:- 6-11-1961 - K. SUBBA RAO, J.C. SHAH, RAGHUBAR DAYAL AND J.R. MUDHOLKAR, JJ. R. Thiagarajan and P. Ram Reddy for the Appellant. K. Bhimasankaram, T.V.R. Tatachari, D. N. Mukherjee and B.N. Ghosh for the Respondent. JUDGMENT Raghubar Dayal, J. This is an appeal on certificate granted by the High Court of Madras. The question for determination in this appeal is whether foreign creditors of a firm which was incorporated in England and carried on business in India can prove their claims in the winding up proceedings of the firm as an unregistered company in India. The facts leading to the appeal are that the Vizianagaram Mining Co. Ltd. (hereinafter called "the company"), was incorporated in England, under the English Companies Act then in force, on December 8, 1894, the object of the company being to mine manganese ore and some other minerals in India. Its principal place of business in India was at Kodur, .Vizagapatam District. The company took certain land on lease from the Rajah of Vizianagaram, the appellant. Its business did not prove profitable and it was no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... India cannot get at the foreign assets and contributories, it is just that foreign creditors be not allowed to prove their debts here ; ( iii )even if foreign creditors can prove their debts in such winding up proceedings they should be allowed to prove only such debts which have some relation to the business of the company in India. On the other hand, it is contended for the respondents that the Indian creditors are free to prove their claims in foreign countries and, therefore, no prejudice is caused to them by allowing foreign creditors to prove their claims in the winding up proceedings in India, that the Act made no distinction between foreign and Indian creditors for the purpose of the proceedings under the Act and that in reality it is the main company which is being wound up though only with respect to the business conducted by it through its offices in India and, therefore, there should be no bar to the proving of their claims by the foreign creditors. We are of opinion that the High Court took the correct view of the legal position in holding that the foreign creditors could prove their claims in these winding up proceedings. Section 270 of the Act defines "unregist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the event of its being wound up". Section 166 provides for an application to the court for the winding up of a company. Any creditor or contributory is entitled to apply for the winding up of the company. No distinction is made between the creditors resident in India or outside India. Section 167 specifically states that an order for winding up of a company shall operate in favour of all the creditors and of all the contributories of the company as if made on the joint petition of a creditor and of a contributory. It is not possible, therefore, to urge successfully, that the order of winding up of an unregistered company does not operate in favour of all the creditors and of all the contributories of the company. All the creditors of the company can take advantage of the winding up of the company as operating in India when it has ceased to carry on business there. There is no reasonable basis for depriving them from participating in the distribution of the assets collected by the official liquidator in the winding up proceedings. All the creditors including the foreign creditors will get rateably out of the assets of the company which have been collected. When that company itself ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied on business whenever the business of the company has ceased to be profitable and the company is reduced to a position in which it is not expected to make good its liabilities. It is the company incorporated outside India which is really wound up as an unregistered company in this country. In fact, there is no separate unregistered company which is being wound up here. The various branch offices of the company in India cannot be deemed to be the branches of an independent unregistered company. Sub-section (3) of section 271 itself says that a company incorporated outside India may be wound up as an unregistered company when it ceases to carry on business in India. Further, there are no separate creditors or contributories of the so-called unregistered company. There are no separate creditors or contributories of the offices or branches of the company in India. All the creditors and contributories are really creditors and contributories of the company incorporated outside India and, therefore, all of them, on principle, should be able to do what creditors and contributories resident in India can do in the winding up proceedings. There has been case law with respect to the nat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Australia, stopped payment, and was ordered to be wound up in England. Meetings of the shareholders and creditors were held under the orders of the judge to ascertain their wishes as to the proposed scheme of reconstruction. The wishes of the creditors resident in Australia were obtained through proxy papers which were sent to those creditors. The creditors recorded their views on those papers and deposited them at the offices of the company at the principal cities in Australia. The particulars and number of the proxies for and against the scheme were telegraphed to the official receiver in England. It was found that if the votes of the Australian creditors were taken into consideration, the scheme had the necessary majority in its favour, but if they were excluded, the majority were against the scheme. The judge sanctioned the scheme. On appeal, objection was taken to the proceedings on several grounds. The objections did not include an objection similar to the one before us for determination, but considering the various objections, it was said at page 394 [1393] 3 Ch 385, 394 (CA) : "One knows that where there is a liquidation of one concern the general principle is ascertain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is completely futile: or is there another solution ? My Lords, I think that we are entitled to imply, indeed I think it is a necessary implication, that the dissolved foreign company is to be wound up as though it had not been dissolved and therefore continued in existence. This seems to me with respect the necessary result of saying that it shall be wound up in accordance with the provisions of the Act . . . I see nothing incongruous in the legislature saying in effect, we accept the existence of a foreign corporation coming to trade in this country; we shall only impose a condition of registration. But if the corporation does trade here, acquires assets here, and incurs debts here, we shall not accept its dissolution abroad without a stipulation that if desirable it may be wound up here so that its assets here shall be distributed amongst its creditors (I do not stay to consider whether its English creditors or creditors generally) and for the purpose of the winding up it shall be deemed not to have been dissolved ; for that event would defeat our municipal provisions for winding up a corporation. This does not appear to me to be recreating or reconstituting a new corporation : ..... X X X X Extracts X X X X X X X X Extracts X X X X
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