JUDGMENT Bhargava, J.
1. This is an appeal by Mohan Lal Huja and some other creditors of the Chawla Bank, Ltd,, which will hereafter be referred to as the bank, against an order, dated 17th January 1949, made by a learned Judge of this Court, in exercise of the original company jurisdiction of the Court, under Rule 153, Companies Act (VII [7] of 1913).
2. The Chawla Bank, Ltd., was incorporated In British India as a joint stock company, under the Indian Companies Act, in the year 1932, with its registered office at Bannu in the North-West Frontier Province. At the time of its incorporation, the share capital of the bank was Rs, 2,00,000, divided into 4,000 shares of Rs. 50 each; but in 1945 the capital was raised to Rs. 10,00,000, divided into 20,000 shares of Rs. 50 each. The paid up capital amounted to Rs 3.59,400. In course of time the bank was a flourishing concern, and was able to establish thirteen branch and pay offices at various places in the North-West Frontier Province and in the Punjab. In the early part of 1947, in view of the communal disturbances, which preceded the partition of British India, into India and Pakistan, the bank opened a branch at Dehra Dun with the permission of the Reserve Bank of India.
3. As a result of the partition the North-West Frontier Provinces and the western portion of the Punjab, which formed part of British India, became part of Pakistan. After 15th August 3.947, the bank became a company registered under the Indian Companies Act in its application to Pakistan, read with the India (Adaptation of Existing Indian Laws) Order, 1947. Thereafter, the bank was registered in India, under Section 277 of the Act, in its application to India, as one of the companies established outside British India.
4. Some of the branches of the bank were closed before 15th August 1947, and the remaining branch and pay offices, with the exception of Dehra Dun branch, were closed before the end of the year 1947. The head office at Bannu continued to make remittances to Dehra Dun branch; but eventually it also had to be closed. The majority of the creditors of the bank migrated from Pakistan to India. The managing director of the bank shifted to Dehra Dun, and started controlling the affairs of the bank from there. The bank continued to function until 26th January 1948; and thereafter suspended payment as it was unable to cope with the demands of its creditors.
5. Then the proceedings, which have given rise to this appeal, were commenced. On 11th May 1948, an application, under Section 153, Companies Act, was filed in this Court on behalf of the bank by its managing director, Mr. L. D. Kapoor, stating that it was necessary to take immediate steps to enable the bank to restart its normal business and for the speedy realisation of the amount due to the creditors of the bank and that with that object a scheme of arrangement had been drawn up, which the directors considered feasible and which had the sanction of the majority of the creditors behind it, In the application it was pointed out that although the registered office of the bank was at Bannu, the central office, the principal place of business where the administrative business of the bank was being carried on, was at Dehra Dun; that the governing body and about 95 per cent. of the depositors and creditors of the bank had shifted to Dehra Dun and that for all intents and purposes the domicile of the bank was at Dehra Dun within the jurisdiction of this Court. The prayer in the application was that the Court might "direct meetings of creditors and members of the bank to be called, held and conducted in such manner as the Court directs" and to sanction the proposed scheme after it had been adopted by the requisite majority of depositors and share holders.
6. The salient features of the proposed scheme wore these : The amount due to each creditor as on 26th January 1948, the day upon which the bank suspended payment, will be reduced by 17 1/2 per cent. and the balance of 82 1/2 per cent, will be satisfied by (a) paying to, the creditors 50 per cent. of the amount due to. them in two instalments within one year; (b) by paying a further 25 per cent. in three instalments spread over the ensuing three years;¦ (c) by allotting to each creditor fully paid up shares equal to 7 1/2] per cent. of the amount due to. the creditor on 26th January 1948. There are certain special provisions made for the benefit of creditors for small sums. It is provided that the assets of the bank shall be divided into two; funds to be called respectively, the "old fund" and the "new fund," the latter consisting of the: sum of Rs. 2,25,000 which is to be utilised for the purpose of the business of the bank which is to be restarted. The remaining assets of the; bank which constitutes the "old fund" are to be set aside for the purpose of meeting the liabilities of the bank to its creditors in accordance; with the provisions of the scheme. No dividends are to be paid to share-holders until the final instalment has been paid to, the creditors; and no interest is to be paid on the amounts due to creditors after 26th January 1948; but creditors are to be entitled to elect from their' number two persons to be directors of the bank.
7. When the application along with the proposed scheme was presented before the learned Judge he considered the question whether this Court had jurisdiction to entertain the application and recorded his opinion that the Court had the jurisdiction. An order was made directing that separate meetings of creditors and share-holders be held on 18th and 25th July 1948, respectively, at the time and place specified in it; that Mr. S.S. Dhavan should preside over the meeting of the creditors and Mr. Manohar Lal Bagai to preside over the meeting of the share-holders and that notices of the meetings together with a printed copy of the scheme be issued, served and published in the manner laid down in the order. The notices, which were accompanied by proxy forms, were duly issued, served and published.
8. The meetings were held and the pro-posed scheme was amended. The amended scheme was filed in this Court along with the application, dated 2nd September 1948, and a prayer was made on behalf of the bank that the scheme as amended be approved. Notices were again issued to all concerned.
9. On 21st October 1948, Mohan Lal Huja, the appellant, who is a creditor as well as a. share-holder of the bank, filed an affidavit in this Court, wherein he raised the following objections : This Court had no jurisdiction to sanction the proposed scheme as the registered office of the bank was at Bannu, and at Dehra Dun there was only a branch office of the bank. The proposed scheme was unsatisfactory and impracticable and had not the support of the majority of the creditors and share-holders of the bank. The procedure adopted at the meetings was irregular and the whole thing was rushed through.
10. An affidavit on more or less similar fines was also filed by the appellant, Jagannath Sharma, on the same date. He raised further objections that the proposed scheme would, not be enforceable in Pakistan; that under the scheme the creditors would not get their entire amount; and that there was no chance of the bank working successfully under the management of the present directors, who had no experience, and the managing director had made advances to his relations and friends, and thereby they had lost the confidence of the creditors.
11. The allegations contained in these affidavits were refuted by the counter-affidavits filed by the managing director and another creditor named Parmanand Chikkar.
12. It appears that an objection was raised on behalf of Mohan Lal Huja that the assets of the bank set apart to constitute "old fund" were insufficient. Thereupon the learned Judge appointed Messrs. Basant Ram and Sons, Registered Accountants, to prepare a statement of assets and liabilities of the bank and to report upon the main features of the proposed scheme. The auditors' report, which is dated 7th January 1949, is on the record and appears to have been filed in this Court a few days before the arguments were heard by the learned Judge.
13. On a consideration of the materials placed before him, the learned Judge found that the objections raised by Mohan Lal Huja and Jagannath Sharma to the proposed scheme bad no substance and that the scheme was fair and reasonable. Accordingly, he sanctioned the scheme and incorporated therein certain safeguards to which the managing director, acting on behalf of the bank, assented.
14. This appeal purports to have been filed on behalf of 66 persons, who are said to be the creditors of the bank. The memorandum of appeal is signed by Mr. Gopi Nath Kunzru. The vakalatnama of Mr. Kunzru apparently contains the names of all the 66 persons; but it has been signed by Mohan Lal Huja and Jagannath Sharma, who had filed objections before the learned Judge, and five other persons, Consequently, this appeal must be treated as having been filed on behalf of the seven creditors (assuming all of them to be creditors) only.
15. In this appeal the order made by the learned Judge has been challenged on three grounds. In the first place, it has been contended that this Court had no jurisdiction to entertain the application and to make the order under Section 163, Companies Act. It appears that the plea of want of jurisdiction was raised in the affidavits filed by Mohan Lal and Jagannath; but it does not seem to have been pressed at the time of arguments before the learned Judge as it is not mentioned in the various objections, which were pressed before him. However, as the point has been raised before us, by learned Counsel, we may briefly express our opinion.
16. The circumstances in which the application was filed in this Court are mentioned in para. 9 of the application, dated 11th May 1948. It is stated therein:
Though the registered office of the bank Is in Bannu (N.-W. F. P.) yet the central office, the principal place of business, i. e., the place where the administrative business of the corporation is carried since last 8 months is at Dehra Dun. The brain which controls its operations, the governing body which meets in bodily presence for exercising the powers conferred on it, and the payment to all its migrated depositors and creditors, who number more than 95% in amount was made at Dehra Dun is within the jurisdiction of this Hon'ble Court and, therefore, this Hon'ble Court can also entertain this application. The Bank, in anticipation of the troubles resulting from partition of the country, applied to the Judicial Commissioner's Court at Peshawar for change of registered office and actually motices were issued but due to subsequent unfortunate happenings it was impossible to attend Courts in Pakistan and the application was dismissed in default. To all intents and purposes Dehra Dun is the domicile of the corporation. It is extremely difficult and injurious to the depositors and others if proceedings are taken in Pakistan since circumstances do not allow for the smooth working of the scheme of arrangement.
17. Dr. Farnsworth in his book "The Residence and Domicil of Corporations (1939 Edn.)" has deduced the following principles from the decisions of the Courts and dicta of the Judges in cases where the topic was only indirectly material and to the views of English writers on Private International Law:
By reference to first principles it has been enunciated that, at that moment of its being brought into existence, a corporation acquires a domicil of origin in the country to whose law it owes its being; since the status or personality of a corporation is always dependent upon its recognition by these laws and since, upon any proper analogy with an individual, lex domicil determines for a corporation, as for a natural person, its status and, in general, its capacities or incapacities, this domicil of origin remains fixed and unalterable as long as the juristic person is recognised as such in the country of its establishment, Though, in given circumstances, the necessary factum of residence and animus of indefinite continuance of such residence in another country may exist, which, in the case of an individual, would suffice to enable a domicil of choice to be acquired in such country, yet in. law this acquisition is not possible since it would attach to a corporation a status and a personality dependent upon the laws of the country of its new domicil and this we have seen cannot be.(p. 273) The learned author has pointed out that the unanimous opinion of the leading English textbook writers that the domicil of a corporation is the place where central control and management is exercised, or alternatively where its administrative centre is situate, has been shown to be fallacious for two reasons. Firstly, and more important, because this definition has been enunciated without reference to the legal consequences flowing from the attribution to a corporation of a domicil in a country other than that of its incorporation; such an attribution would give a corporation a status or personality dependent upon the laws of a country other than that to which it owes its being and this has been demonstrated to be impossible. In the second place, those writers who consider that the same criteria determine both the residence and the domicil of a corporation err even more, since such a principle could well result in a corporation being at the same time domiciled-as it could admittedly be resident-in two-countries; this we have seen is not possible since the domicil of a corporation must be determined, as was its residence, by way of analogy to the individual, and its domicil must therefore be unique -moreover, such a view would give a corporation a status dependent simultaneously on the laws of more than one country, a quite impossible conception.
18. Therefore,, the domicile of a corporation is one but it may have its "residence" at more than one place. The same author has stated at page 151:
The principle that has been evolved in English law -and as we shall see also in American law, though to a somewhat different degree and upon other lines-has been that if a foreign corporation is carrying on business in this country at a fixed place, either through its own officers or through agents who have authority to make binding contracts here for it, then such a corporation is "resident", "present," or "found" here in such a way as to be able to be served with a writ and thereby to become amenable to the jurisdiction of the Courts of this country.
19. As we have seen above, after 15th August 1947, the position of the Bank was that of a company established outside India and the Bank got itself registered under Section 277, Companies Act. In his affidavit filed on 11th May 1948, the Managing Director had stated that the principal place of business from where the administration of the Bank was being carried on was located at Dehra Dun. Therefore, the Bank must have got itself registered with the Registrar of the Joint Stock Companies in the United Provinces. Consequently, although the registered office of the bank remains in Bannu (N. W F. P.), the principal place of business registered with the Registrar of the Joint Stock Companies of these provinces is Dehra Dun.
20. It has been argued by the learned Counsel for the appellants that an application under Section 153, Companies Act, has to be made to the "Court," which term according to Section 2 (3) of the Act "means the Court having jurisdiction under this Act:" and that Sub-section (1) of Section 3 lays down that:
The Court having jurisdiction under this Act shall be the High Court having jurisdiction in the place as which the registered office of the company is situate.
This obviously refers to a ease where jurisdiction of Courts have to be determined with reference to the domicile of a corporation. Hence the application could have been filed in the Court of the Judicial Commissioner of the North West Frontier Province and not in this Court.
21. The word used in Section 3(1), Companies Act, is "company," which term has been defined in Section 3(2) of the Act to mean: "A company formed and registered under this Act or an existing company." It has to be seen whether a company established outside India, that is to say, a foreign company, is covered by the definition.
22. After the separation of Burma and Aden from British India a new Section 2A was inserted in the Indian Companies Act by the Government of India (Adaptation of Indian Laws) Order 1937, making provisions about the companies registered in Burma and Aden before the separation. The section is in these terms:
Notwithstanding anything in the last preceding section, a company which was immediately before the separation of Burma and Aden from India a company as defined by the said section, being a company the registered office whereof is in Burma or Aden-.
(a) shall be deemed for the purposes of this Act to be a company registered and incorporated outside British. India, and
(b) shall not, unless the subject-matter or context so (requires, be included in the expressions "company" "existing company," "public company" and private company.
Provided that; (i) for the purposes of Section 277 of this Act such a company shall, for a period of six months from the separation, be deemed to be a company incorporated and registered in British India"; (ii)....
23. Now, after the partition the situation is governed by the India (Adaptation of Existing Indian Laws) Order, 1917, and the consequences similar to those indicated in Section 2A quoted above would follow. The bank will be considered a company registered and incorporated outside India and shall not, unless the subject-matter or context so requires, be included in the expressions " company," " existing company," "public company" and private company as defined in Section 2 of the Act.
24. The position of the bank, after its registration in these provinces under Section 277, Companies Act, would be that of an "unregistered company. Section 270 of the Act defines an 'unregistered company" thus:
for the purposes of this part, the expression 'unregistered company' shall not include a railway company incorporated by Act of Parliament or by an Indian law, nor a company registered under the Indian Companies Act, 1866 (X [10] of 1866), or under any Act appealed thereby, or under the Indian Companies Act, 1882 (VI [6] of 1882), or under this Act, but save as aforesaid shall include any partnership, association or company consisting of more than seven members.
The bank is not a company incorporated or registered in the manner referred to in the said section. True the bank was registered in British India, under the Indian Companies Act, in its application to the whole of British India, but now, after the partition, the bank cannot be considered as a company registered under the Act in its applicability to India. The fact that the bank has now been registered with the Registrar of the Joint Stock Companies or the United Provinces under Section 277 of the Act points so the same conclusion.
25. In Re: Strauss and Co. Ltd. A.I.R. (24) 1937 Bom. 15, it was observed:
A foreign company, though registered outside British India, but which is not registered under this Act, will then be an unregistered company under the Act...'company' in this part (part IX) of the section can only mean and must mean a body which has no corporate existence, not being registered under the Act. lint a foreign company is a corporate body and a legal entity, and under the law it can sue and be sued here as such. . . . scheme of the section (Section 270) is this; that all bodies having corporate existence under the Acts in force in India do not come within the meaning of unregistered company but all bodies having no corporate existence under those Acts are included within the expression unregistered company.
Therefore, as a company consisting of more even members the bank must be considered as an "unregistered company" and as such it is not covered by the definition of "company" given in Section 2 (2), Companies Act.
26. It may be pointed out in passing that the expression "company" in Sub-sections (1) and (2) of Section 153, Companies Act, cannot be confined to companies formed and registered under the Act, or an existing company but it includes 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.
27. Now, we have to determine in what Court an application under Section 153, Companies Act, relating to an "unregistered company" can be filed. Under the general law it must be filed in the High Court to whose jurisdiction the company has submitted or made itself amenable or within whose jurisdiction the principal place of business of such a company is situate. Admittedly, after the orderly progress of the bank was jeopardised by the communal disturbances which preceded and followed the partition of the country, the head office and all the branch and pay offices of the bank, with the exception of Dehra Dun office, had to be closed and that for some time before it suspended payment in January 1948, the entire business of the bank was centralised at and was being controlled from Dehra Dun. In connection with its business, the bank could sue and be sued in Dehra Dun. When the bank established its "residence" at Dehra Dun and made it the principal place of business, it submitted to the jurisdiction of the Courts in these provinces.
28. In Re: Travancore National and Quilon Bank Ltd. A.I.R. (26) 1939 Mad. 318, the Travancore National and Quilon Bank Ltd., was incorporated in the Travancore State. The registered office of that bank was within the jurisdiction of the said State; and it was there even at the time when the application under Section 153, Companies Act, was made and the said bank had established its central office in Madras, after having complied with the requirements of Section 277 of the Act. In that case also the question arose whether the High Court of Madras had jurisdiction to entertain the application under Section 153 of the Act and it was held that the High Court had jurisdiction to entertain the application. There it was pointed out:
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 Bought to give the company a wide signification, it must also have meant to give the 'Court' a wide signification. The expression 'Court'...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.
29. In the Bombay case A. I. R. (24) 1937 Bom. 16 cited above, the question arose whether the High Court of Bombay had jurisdiction to make an order for the winding up of a company which was registered in England but which had its branches within the jurisdiction of that Court. In that case within the jurisdiction of the High Court certain secured creditors whose claims ran into several lacs of rupees and who were in possession of a very large part of the goods and assets of the company as secured creditors were residing; the relevant documents had been executed and the transactions had taken place in Bombay; the company had assets in several parts of the country and in the native states; and the claims of the unsecured creditors were also to be disposed of by that Court.
30. After the migration of 95% of the creditors of the bank from Pakistan and the principal place of business of the bank being at Dehra Dun, this Court had the jurisdiction to entertain the application and make an order |under Section 153, Companies Act; and we find accordingly.
31. In the next place, it has been argued by the learned Counsel for the appellants that the Proposed scheme is neither practicable, fair or reasonable nor has it been approved by a majority of the creditors and share-holders of the bank. We may dispose of the latter part of the objection first. It is baaed on the allegation that the creditors' meeting held on 18th and 19th July, last was not a representative one and was not properly conducted. In this connection it hag been pointed out that most of the creditors resided in Pakistan and their views were not represented at the meeting. In view of the fact that 95 per cent. or at least the majority of the creditors have migrated to India and the notices were issued individually to such of the creditors whose addresses were known to the bank and were also published in several newspapers this objection has no force. The creditors meeting was notified to be held an 18th July 1948. It was held on that date and as the creditors were unable to reach any decision the meeting was adjourned to the following day. Under the ordinary rules of procedure governing such meetings, the meeting could be adjourned to the next day. The fact that a sub-committee was constituted on 18th July to examine the details of the scheme cannot be considered an irregularity. The recommendations of the subcommittee were put before the meeting of the creditors, which approved those recommendations. We are, therefore, not prepared to hold that the meetings were not conducted properly, or that any irregular procedure was adopted therein.
32. The main objection to the proposed scheme put forward before us was that the sum of Rs. 2,50,000 was insufficient for the restarting of the bank. In this connection we have to, bear in mind that when the bank was originally started the working capital was only Rs. 1,00,000 and in course of time it was doing flourishing business. In the circumstances in which the bank finds itself at the present moment, it is necessary that the management should proceed cautiously and take as little risk as possible. If the bank flourishes in future it may be possible for the bank to make further calls on the share-holders. Therefore, we see no force in this objection.
33. Another objection raised in this connection was that the creditors were being deprived of 171/2% of their dues and no interest would be payable to them after 26th January 1948. Under the proposed scheme the creditors will be paid 75% of their deposits in the manner provided therein and in lieu of 71/2% they would get fully paid up shares in the bank. Therefore, if the bank starts functioning again and is able to earn profits the creditors will be able to share in the profits earned by the bank. Therefore, this objection is also without any force.
34. The last objection in this connection was that if the amount available is distributed , to-day the creditors would get about 60 or 75% of the amount due to them. This would be possible if the bank goes into liquidation and if that course be adopted the creditors will have to wait for a number of years. If, on the other hand, the bank is allowed to function the creditors would be able to get back 821/2% of their dues and in future to share the profits and thereby make up their loss. This objection also must, therefore, be overruled.
35. Lastly, it had been urged by the appellants' learned Counsel that the present directors of the bank are both incompetent and dishonest and whatever may be the merits of the scheme it is bound not to succeed under the bank's present management. In this connection it was alleged that, the managing director had advanced a sum of over Rs. 4,00,000 to his brother-in-law, Chunnilal Khanna, on inadequate security. It, however appears that the board of directors had sanctioned advance to this gentleman to the extent of Rs. 4,00,000 against the security of stock-in trade. It has not been suggested or proved that the stock-in-trade was not sufficient to cover the advance. It is, therefore, not possible to say that the managing director had acted dishonestly in making the advance in question.
36. It was further alleged that, according to the report of the auditors, the managing director failed to cash promptly two cheques for Rs. 50,000 which had been issued in favour of the bank by Messrs. Jhandumal and Sons of Dehradun and failed to make entry in the account books of the bank about jewellery worth more than Rs. 50,000, which he had obtained from the said firm. The payment of the cheques was refused by the bank on which they were drawn and the managing director had no opportunity to explain the circumstances in which the cheques could not be cashed or about the jewellery obtained by him. As the jewellery is said to have been obtained after the bank had suspended payment it could not have been shown in the account books. In any case, the bank does not stand to lose anything because the liability, if any, of Messrs. Jhandumal and Sons stands. It was also alleged that the managing director had committed certain irregularity in connection with the deposits in the name of Bannu Wholesale Cloth Association, Dehradun. It appears from the auditors' report that the amount at the credit of the Association at Bannu was transferred from time to time to Dehradun and the last instalment so transferred was on 26th January 1948, and that the total amount at the credit of the association was Rs. 3,90,001-5-0. What happened on 26th January 1948, was that the said amount was transferrer to the credit of 30 individuals, who formed the association. This was done in pursuance of resolution passed by the Association and a copy of which must have been received by the bank The directors of the bank had sanctioned the all the members of the association may be give 10,000 each as an overdraft in anticipation the remittance of Rs. 90,000 and some of the members of the Association at Dehradun had availed themselves of this facility. We find nothing irregular in this.
37. We, therefore, find no reason to hold that the present management cannot be trusted with the future management of the bank. It may be noted here that when the trouble arose the bank under the same management was carrying on flourishing business.
38. The finding of the learned Judge that the proposed scheme was fair and reasonable is, therefore, correct and must be upheld. The safeguards incorporated in the scheme at the instance of the Court and with the consent of the bank do not in any manner affect the scheme placed before the Court.
39. We, therefore, find no force in the appeal and dismiss it with costs. The bank filed cross-objections in regard to cost but they have not been pressed before us and was find no force in them. They are also dismissed but we make no order as to costs.