TMI Blog1950 (6) TMI 12X X X X Extracts X X X X X X X X Extracts X X X X ..... e bank was not transferred to India before the partition of the country, but it is said that, at the moment, all the directors and most of the shareholders are in India. They had set up an office in Delhi before reporting the fact to the Registrar of Joint Stock Companies under section 277 of the Act. After a scheme of arrangement had been sanctioned by this Court two further applications for the amendment of the scheme were made on 13th October, 1949, and 22nd October, 1949, respectively. The object of these petitions was to seek an extension of time. This necessitated the sanctioning of a new scheme. The question, therefore, arises whether this Court has jurisdiction to sanction such a scheme having regard to the provisions of section 276 of the Companies Act. The argument for the bank may be briefly summarised as follows: The petitioner company is to be treated as an unregistered company by virtue of the provisions of section 271 of the Act and is, therefore, liable to be wound up under Part IX of the Act. That being so, it is to be treated as a company for the purposes of section 153 because section 153(6) brings such companies within the purview of that section. Section 153 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ludes an unregistered company also. In sub-section (6) of section 153 it is provided that in the said section the expression 'company' means any company liable to be wound up under this Act, and an unregistered company is liable to be wound up under section 271 of the Act." There is no reference in this judgment to section 276 of the Act, but I cannot assume that this section was not present to the mind of the Honourable Judges. Their attention was drawn to section 271 and they had, therefore, before them Part IX of the Act. It can scarcely be argued that they were oblivious of the provisions of section 276. Indeed, the argument used by them seems to imply that they did read the provisions of this section and came to the conclusion that section 153 (6) contained an exception to the general rule of section 276. Another case cited before us was In re Travancore National and Quilon Bank Ltd. In this case the company in question was a bank with its registered head office in Travancore. The bank had complied with the requirements of section 277 of the Companies Act by filing with the Registrar of Joint Stock Companies, Madras, the necessary documents required by that section. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ecision in Civil Miscellaneous Nos. 172/L, 193/L and 194/L of 1949 is whether this Court has jurisdiction to sanction a scheme of arrangement in respect of the Frontier Bank Limited, with its registered office in Dera Ismail Khan (Pakistan). The Bank has set up an office at Delhi and has complied with the requirements of section 277 of the Indian Companies Act, 1913, hereinafter referred to as the Act. The facts, so far as material, are that on the 15th of November, 1948, a scheme of arrangement with regard to the Frontier Bank Limited, was sanctioned by the High Court at Lahore and a similar scheme of arrangement with regard to that Bank was sanctioned by this Court on the 15th of July, 1949, on a petition under section 153 of the Act. Now, in Civil Miscellaneous No. 172/L of 1949, the said Bank applies for the amendment of the scheme of arrangement sanctioned by the Court on the 15th of July, 1949. In Civil Miscellaneous No. 193/L of 1949 the Bank applies for permission to pay to the non-Muslim depositors of the Bank in India 50 per cent. of the amount due out of the first instalment under the scheme and in Civil Miscellaneous No. 194/L of 1949 the Bank asks the Court to amen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection the expression 'company' means any company liable to be wound up under this Act and the expression "arrangement" includes a reorganisation of the share capital of the company by the consolidation of shares of different classes or by the division of shares into shares of different classes or by both those methods, and for the purposes of this section unsecured creditors who may have filed suits or obtained decrees shall be deemed to be of the same class as other unsecured creditors. (7)An appeal shall lie from any order made by the Court exercising original jurisdiction under this section to the authority authorised to hear appeals from the decisions of the Court." Now, on the question of the construction of section 153 I have no difficulty. An application under section 153 of the Act has to be made to the "Court" which term, according to section 2 of the Act means "the Court having jurisdiction under the Act". Section 3 (1) which defines the expression "the Court having jurisdiction under the Act" reads: "(1) The Court having jurisdiction under this Act shall be the High Court having jurisdiction in the place at which the registered office of the company is situ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ore National and Quilon Bank, Ltd., Venkataramana Rao, J., said: "Under section 271, all the provisions of the Act with respect to winding up would apply to an unregistered company and a provision to avert a winding up will be a provision with respect to the winding up. A scheme under section 153 provides an alternative mode of winding up and it cannot be doubted that section 153 being a general law as to winding up is as much applicable to the winding up of a foreign company and the corresponding section of the English Act has always been employed to give effect to a scheme of compromise already arranged in a simultaneous winding up abroad." With very great respect I am unable to accept the view expressed in In re Travancore National and Quilon Bank Ltd. In the first place section 155 provides that the winding up of a company may be either by a Court or voluntary or subject to the supervision of the Court. The definition of the phrase "winding up" given under section 155 clearly shows that proceedings under section 153 of the Act are not proceedings with respect to the winding up of a company. In the second place, it appears from an examination of section 153 itself that proc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deciding that question in the affirmative Venkataramana Rao, J., said: "But if the expression 'Court' in section 153 of the Indian Companies Act is interpreted in the light of sub-sections (2) and (3) of the Act, this High Court will have no jurisdiction to entertain the application. But when the Legislature has intended that section 153 can be availed of even by a foreign company, we must so construe the expression 'Court' as to. make the right conferred on a foreign company and its creditors and members available to them. Further the definition of the word 'Court' in clauses (2) and (3) is to prevail only in the absence of anything repugnant to the subject or context. When the legislature itself has sought to give the 'company' a wide signification, it must also have meant to give the 'Court' a wide signification. The expression 'Court', in my opinion, in the case of an unregistered company including a foreign company would mean the Court in which the said company is 'liable to be wound up' and that is fixed by reference to section 271 and under section 271 this High Court will be the Court in which a foreign company is liable to be wound up. It seems to me, therefore, that this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied in section 162 or section 203 of the Act. Now, the view that I have expressed in the preceding paragraph receives support from the history of legislation on this point. Under section 2 of the Joint Stock Companies Arrangement Act, 1870, a company in the course of being wound up either voluntarily or by or under the supervision of the Court could alone apply for the sanction of a scheme of arrangement. The provisions contained in section 2 of the said Act have now been liberalised and at present a scheme of arrangement can be sanctioned with respect to a company which is not being wound up provided it is a company which, at the time of the making of an application under section 206 of the Companies Act, 1948 (11 and 12 Geo. 6, c. 38), hereinafter referred to as the English Act, satisfies the conditions specified in section 222 or section 278 of the English Act. Sections 153, 162 and 203 of the Act correspond to Sections 206,222 and 278 respectively of the English Act. In other words, whereas under section 2 of the Joint Stock Companies Arrangement Act, 1870, a scheme of arrangement could only be sanctioned in the case of a company that was in the course of being wound up under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Acts, Twelfth Edition. Footnote No. 7 seems to show that in the opinion of Buckley the expression "liable to be wound up" occurring in section 206 (6) of the English Act includes companies defined in section 399 of the English Act. Section 399 of the English Act corresponds to section 271 of the Act. That being so, it is said that according to Palmer and Buckley an unregistered company falls within section 206 (6) of the English Act. Now, the views expressed by Palmer proceed upon the Companies Act, 1929 (19 and 20 Geo. 5, c. 23). Sections 153, 338 and 342 of that Act corresponds to Sections 153, 271 and 276 of the Act (Indian Companies Act, 1913). That being so it is plain that the Court having jurisdiction under section 338 will have jurisdiction under section 153 of the Companies Act, 1929. Under the English Act, no difficulty arises because the definition of the expression "Court" in section 380 of the English Act is "the Court having jurisdiction to wind up a company under the Act." The definition in the Act is, how ever, different from the definition of the expression "Court" in section 380 of the Companies Act, 1929. Section 380 corresponds to section 455 of the Companies ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usiness; and the principal place of business situate in that province in which proceedings are being instituted shall, for all the purposes of the winding up, be deemed to be the registered office of the company." In section 455 of the English Act the expression "Court" used in relation to a company means the Court having jurisdiction to wind up" the company. Now, if the legislature had intended to give the expression "Court" appearing in section 153 a wide signification it would have given a special definition of that expression in section 153 of the Act. The legislature has, however, not conferred jurisdiction on the Court having jurisdiction to wind up a foreign company to act under section 153 of the Act. That being so, it follows that the expression "Court" in section 153 of the Act has the same meaning which has been given to the word "Court" in section 2 and section 3(1) of the Act. I now pass on to examine the view expressed in Mohan Lal Huja V. Chawla Bank Ltd. In that case Bhargava J., (Malik, C.J., concurring) said: "Now, we have to determine in what Court an application under section 153, Companies Act, relating to an unregistered company, can be filed. Unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ier part of this judgment, Cornelius, J., was inclined to hold that the expression "liable to be wound up" has a restricting effect, inasmuch as it confines the application of section 153 to companies whose condition is such that they are exposed to winding up. Cornelius J., however, thought that considering the opinion expressed in Rudow v. Great Britain Mutual Life Assurance Society, there was no escape from the conclusion that the provisions of section 153 of the Act are available in respect of unregistered companies. Now, in In re Traders Bank Limited, Lahore, Cornelius, J. has not noticed the definition of the word "company" in Sections 2 and 3(1) of the Act. Indeed, he has failed to consider the real question that arises in such cases, namely, the jurisdiction of the Court to act under section 153 of the Act. Clearly, this Court as the Company Court has no jurisdiction to act under the Act except in cases where jurisdiction has been conferred by the Act on this Court. Then Cornelius, J., has not correctly appreciated the view expressed in Rudow v. Great Britain Mutual Life Assurance Society. In that case Jessel, M.R., said: "But there are at the end of the secti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 76 of the Act renders inapplicable to unregistered companies the whole except Parts IX and V of the Act; (2)that provisions contained in section 153 of the Act are not provisions which respect to the winding up of a company and that being so the application of section 153 to a foreign company is excepted by section 276 of the Act; (3)that the expression "liable to be wound up" in section 153 (6) is not interchangeable with the expression "can be wound up" and that the special definition of the company given in section 153 (6) of the Act renders inapplicable the provisions of section 153 to companies which are not exposed to being wound up under section 162 or section 203 of the Act; and (4)that this Court not having jurisdiction in Pakistan has no jurisdiction to sanction a scheme of arrangement with respect to a company having its registered office in Pakistan. For the foregoing reasons I would answer the question arising in Civil Miscellaneous Nos. 172/L, 193/L and 194/L of 1949 in the negative. Kapur, J. I agree with the judgment of my learned brother Khosla, J., but as the point is of some importance I think I should give reasons for my opinion. The petitioner, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of shares of different classes or by the division of shares into shares of different classes or by both those methods, and for the purpose of this section unsecured creditors who may have filed suits or obtained decrees shall be deemed to be of the same class as other unsecured creditors." The word "company" appears again in section 153A and in sub-section (5) it is provided: "Notwithstanding the provisions of sub-section (6) of section 153, the expression 'company' in this section does not include any company other than a company within the meaning of this Act." Part IX of the Indian Companies Act deals with winding up of unregistered companies. Section 270 gives the meaning of "unregistered company." It runs as follows: "For the purposes of this Part, the expression 'unregistered company' shall not include a railway company incorporated by Act of Parliament or by an Act of the Central Government, nor a company registered under the Indian Companies Act, 1866, or under any Act repealed thereby, or under the Indian Companies Act, 1882, or under this Act, but save as aforesaid, shall include any partnership, association or company consisting of more than seven members." Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... " means " 'any company ' liable to be wound up under this Act." Now the framers of the Act must have had some object in adding these words because otherwise they would not have used this expression as the word company is defined in section 2 (2) of the Act. This opinion finds support from the fact that in the very next section i.e., section 153A, which deals with facilitating arrangements and compromises and applies to reconstruction of any company or to amalgamations, the definition of the word "company" is different and in that section it does not include "any company" other than the company within the meaning of this Act. In the English Companies Act, 1862, a provision such as that contained in section 153(6) of the Indian Companies Act did not exist. This Act was found to be insufficient to meet the needs of the companies and in 1870 an Act called "The joint Stock Companies Arrangement Act" was passed by the Parliament to facilitate compromises and arrangements between creditors and shareholders of joint stock and other companies in liquidation. In the English Act of 1908 in section 120, power to compromise with creditors and members was given where the company was or was n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an unregistered company there for the purposes of winding up is a company as defined in section 2 (2) of the Indian Companies Act, In other words, an unregistered company in the event of its being wound up has to be deemed to be a company within the meaning of section 2 (2) and that also only to the extent provided by Part IX. Unless we interpret this section in this way the result will be that we will have to hold that when the expression "company" was differently defined in the sections dealing with schemes of arrangements the legislature had no object behind it and that whatever be the words used it still remains the same definition as is given in section 2 (2) which I think it will be unreasonable for us to hold. That the expression "company" means any company liable to be wound up under this Act" is wider than that given in section 2(2) is supported by Palmer and Buckley. In Palmer's Company Precedents (15th Ed.), Part II, pp. 904-5, in regard to the expression "company" as used in section 153 (5) which corresponds to section 153 (6) of the Indian Companies Act it is stated: "Section 153 (5) says that the expression 'company' means in that section any company liable to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpanies Act) are included. That is the import of note 7 given at page 405 of Buckley. This learned author would include an unregistered company within the expression "company" as used in section 153 of the Indian Companies Act. The authority of these two authors is very great. In India section 153 has been applied to foreign companies and arrangements with Indian creditors have been allowed under the law. In In re Travancore National and Quilon Bank, Limited at p. 321, Venkataramana Rao, J., said: "Under the English Act it is clear therefore that the provision corresponding to section 153 of the Indian Companies Act is applicable to the case of foreign companies because a foreign company is a company liable to be wound up under the Act There can be no doubt that the Travancore National Bank though incorporated outside British India and therefore a foreign company, would be an unregistered company within the meaning of Sections 270 and 271 of the Act. An unregistered company is a company liable to be wound up under the Act. When the legislature itself has defined the expression 'company' and has given it a wide signification, there is no reason for excluding a foreign compa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ession "liable", the learned Judge held, could be understood to mean a state of being exposed or contingently subject to such sanction. It was held in that case then that section 153 would have no application to an unregistered company unless an order for winding up had first been made and this was because of section 276 of the Indian Companies Act. Reference was made to Rudow v. Great Britain Mutual Life Assurance Society. Dealing with this case the learned Judge says: "On appeal, the matter was considered in detail by Jessel, M.R. After citing the provisions of all the relevant sections the learned Master of the Rolls came to the conclusion that the expression 'being wound up in the phrase except in the event of its being wound up' means 'the provisions as to winding up' and 'he consequently decided that the provisions anterior to the actual order for winding up, relating to registered companies, were by the operation of section 204 made applicable to unregistered companies as well. It is well settled that the provisions of section 153 of the Indian Act apply equally to companies which arc in process of being wound up as to companies in respect of which a petition for winding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Master of the Rolls. The plaintiff's costs against the defendant society were taxed and paid, but no provision was then made for the costs of the defendant Wurth, who took summons against the plaintiff and the defendant society asking for payment of costs which were heard in Court by Bacon, V. C, and his Lordship ordered the plaintiff to pay to Wurth his costs of the action and that she should be at liberty to add what she had to pay to her own costs of the action which would be recoverable from the defendant society. The plaintiff having paid Wurth costs, took out execution for the recovery of those costs. The defendant society moved before Bacon, V.C., for an order restraining the plaintiff from issuing execution. The plaintiff objected that there was no jurisdiction to make the order under the 85th section of the Companies Act (which corresponds to section 169 of the Indian Companies Act). It was argued that the application being by the company and section 201 (present section 402 and Indian section 273) could not apply and the only section under which the Court could act would be section 85 (present section 226 and Indian section 169) and because in the case of unregiste ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d alone. Then the 201st section says. That 201st section was necessary, because, in the case of an unregistered company, you might sue the contributory as well as the company. The 85th section, when it is looked at, applies only to a registered company, and it is on the application of the company, or a creditor, or a contributory. But this is not on the application of the company, but the application of a creditor only, and it restrains proceedings against the contributory or company, and it is for a different purpose, and on the application of a different person, and, standing alone without the subsequent section which I am going to mention, I think it would still be held not to interfere with the application of the 85th section. But any question on that part of the Act is got rid of by the provisions of the 204 th section, that .Therefore it is quite plain that so far the 85th section applies to an unregistered company. But there are these latter words at the end of the section upon which the Vice-Chan, cellor relied, that 'an unregistered company shall not, except in the event of its being wound up, be deemed to be a company under this Act, and then only to the extent pro ..... X X X X Extracts X X X X X X X X Extracts X X X X
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