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TMI Blog1971 (8) TMI 160X X X X Extracts X X X X X X X X Extracts X X X X ..... ish 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 in Burma. During the 1939-45 war, when the Japanese conque ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry 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 the 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 busin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stitute 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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 refe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wer 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 [1876] 1 Ex D 428 ; 1 TC 88 . This view was confirmed by the House of Lords in the leading case of De Beers Consolidated Mines v. Howe [1906] AC 455, 458 (HL). 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ess 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 [1937] 1 All ER 216 (PDA). In the case of P. S. Anant Narayan v. Massey Ferguson Ltd. (Canada) [1965] 1 MLJ 550 (Mad.) , 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 submitte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re 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 AIR 1966 SC 634. 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 object ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pany 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bed 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, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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