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TMI Blog2011 (4) TMI 1208X X X X Extracts X X X X X X X X Extracts X X X X ..... s, and its principal place of business is in the United Kingdom. Respondent Nos.1 and 2 are companies incorporated under the Companies Act, 1956. The petitioner and respondent No. 2 hold 24 per cent and 76 per cent respectively of the issued subscribed and paid-up equity capital of respondent No. 1. 4. The respondent's contention is that the petitioner, a foreign company, within the meaning of section 591(1)(a) of the Companies Act, 1956, has established a place of business in India, but has failed to comply with the provisions of section 592 and is, therefore, not entitled to institute the above petition in view of section 599 thereof. Sections 591 and 599 read as under :- "591. Application of sections 592 to 602 to foreign companies.-(1) Sections 592 to 602, both inclusive, shall apply to all foreign companies, that is to say, companies falling under the following two clauses, namely :- (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 es ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2 for the purpose of carrying out the said business. The reference to the petitioner is an obvious error for Willis Asia-Pacific Ltd., as I will indicate later. The petitioner and Willis Asia-Pacific Ltd., are part of the Willis Group. (B) The petitioner and respondent No. 2 entered into a Joint Venture Agreement (JVA) dated 20-3-2003. In view of the then prevailing cap of foreign direct investment in the insurance sector, the petitioner subscribed to only 26 per cent of the equity shares in the company and respondent No. 2 subscribed to the remaining 74 per cent equity shares of the company. I will refer to the relevant clauses of the JVA, while dealing with the submissions. 6. Mr. DeVitre's case is this. The petitioner is a foreign company incorporated outside India. It has established a place of business in India by incorporating respondent No. 1 on 31-10-2000; by in any case being part of the Willis Group which incorporated respondent No. 1 in India through Willis Asia-Pacific Limited; by, in any case, acquiring 26 per cent of the equity shares of respondent No. 1 in March 2003 and under the joint venture relied upon by the petitioner, having management rights viz., of appoi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ure business and to date, on account of its goodwill and business connections it introduced, brought into the joint venture, business constituting almost 80 per cent of the turnover of the company as against the petitioner contributing only about 20 per cent of the turnover and that once the business of respondent No. 1 was established substantially on account of its goodwill and business connections, the name of the first respondent was changed to its present name, Willis India Insurance Brokers Private Limited, in the year 2006. Respondent No. 1 may well benefit by the use of the petitioner's group name "Willis" as a part of its corporate name. Under the provisions of the JVA, the petitioner and respondent No. 2 may bring to bear their experience, expertise and connections in the field to ensure the efficient running/management and growth of respondent No. 1. 10. The valuable inputs of the petitioner and respondent No. 2 are, however, only to enhance the first respondent's business. It is, nevertheless, the business of respondent No. 1 and not of the petitioner and respondent No. 2 who are but investors therein by having subscribed to its shares. Much more is required to go th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Reserved matters.-Any decision relating to any of the following matters shall require the vote in favour of Shareholders representing seventy five per cent (75 per cent) of the total issued equity share capital of the Company at a general meeting of the Company properly convened and held: 11.1.1 any change in the memorandum and articles of association or in the capital structure of the Company or the issue of further Shares or the creation of any options to subscribe for or acquire Shares; 11.1.2 the issue by the Company of any debenture or loan stock (whether secured or unsecured) or the creation of any mortgage, charge, lien, encumbrance or other third party right over any of the Company's material assets or the giving by the Company of any guarantee or indemnity to or becoming surety for any third party; 11.1.3 any arrangement for any joint venture or partnership or for the acquisition of the whole or substantially the whole of the assets and undertaking of the Company or an acquisition by the Company of any part of the issued share capital or of the assets and undertaking of another company; 11.1.4 any change in the nature of the Business; 11.1.5 the merger, acquisition ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efit scheme in relation to the Company's employees, or the making of any contribution to any third party scheme for the provision of retirement benefits; 11.2.13 the making, granting or allowing of any claim, disclaimer, surrender, election or consent for taxation purposes; 11.2.14 establishing any bonus, profit sharing share option or other incentive scheme for director or employee of the Company." 14. Under clause 6.3 of the JVA, the petitioner is entitled to appoint two Directors and respondent No. 2 is entitled to appoint three Directors, despite the fact that the petitioner holds only 26 per cent of the equity shares. Further, under clause 6.13 of the JVA, no resolution may be passed at a Board meeting unless at least one Director appointed by each, the petitioner and respondent No. 2 is present and the majority of Directors vote in favour of the resolution, including at least one of the petitioner's Directors. Clause 6.16 authorizes the petitioner to appoint and remove certain directors and officers, a right which otherwise vests in the majority of the Board of Directors or the shareholders. Clause 11.1 ensures that decisions relating to the matters specified therein are n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Shareholders with any applicable laws and regulations binding on any of them. 10.2 Subject to any applicable local laws and regulations, the parties intend that the Company will be covered under the Willis Group Limited professional indemnity insurance policy and it shall comply with Willis Group policies and procedures in respect of errors and omissions and shall pay a reasonable share of premium on the basis of an equitable allocation across all companies covered by the policy and taking account of the total premium income of the Company, retained brokerage and the number of employees. The Company will procure a local professional indemnity insurance policy where necessary to ensure compliance with local legal requirements. 10.3 The Shareholders shall procure that the Company will provide such information and such access at all reasonable time to persons or premises as any of the Shareholders shall reasonably require in order to: 10.3.1 satisfy itself that the provisions of clause 10.1 are being implemented; and/or 10.3.2 allow it to comply with any obligations to which it is subject under the laws and regulations referred to in clause 10.1.3. 10.4 The Shareholders shall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ectives of a party entering into a JVA is to draw upon the management techniques/skills and business models of the other. 18. Mr. DeVitre relied upon clause 4.3 of the JVA as an admission of the petitioner having conducted business in India. Clause 4.3 reads as under:- "4.3 The parties agree that existing business conducted by Willis and BA in relation to clients resident in India shall upon renewal be conducted by the Company." 19. The clause, at the highest, establishes that the petitioner conducted business in India. It does not support the contention that the petitioner did so by establishing a place of business in India. It is significant to note that section 591(1)(a) applies not to companies that carry on business in India, but to companies that establish a place of business in India. 20. Mr. DeVitre relied upon the first sentence of paragraph 3 of the petition which reads as under:- "The Company was incorporated under the provisions of the Act on or around 31-10-2000 as a joint venture company between Willis and BA for the purpose of carrying out business as a composite broker as defined under Insurance Regulatory and Development Authority (Insurance Brokers) Regulatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No. 1 when it was incorporated on 31-10-2000. Ultimately, from about 20-3-2003, the petitioner and respondent No. 2 were the shareholders of respondent No. 1. What is relevant is the shareholding when the petition was filed. At that time, neither the petitioner nor any member of the Willis Group had established a place of business in India for the reasons already stated. 25. The judgment of a learned Single Judge of the Delhi High Court in Tumlare Software Services (P.) Ltd. v. Magic Software Services [2001] 34 SCL 232, relied upon by Mr. Chagla is, however, not relevant to the facts of the present case. The learned Judge held that for the bar under section 599 to operate, the company must have a specified or identifiable place at which it carries on business and that at the time of signing the contract, it must have a permanent location from where it habitually and regularly carries on business. The question there was whether by merely appointing a constituted attorney, a company could be said to have established a place of business. The learned Judge held in the negative. The question in the present case is entirely different as is evident from the above discussion. 26. The ap ..... X X X X Extracts X X X X X X X X Extracts X X X X
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