Case: The Rajah Of Vizianagaram Vs. Official Receiver, Vizianagaram

up the forensic rules which govern the conduct of its own liquidation. This makes it clear that the liquidation of the company in countries other than where the company is incorporated and has its principal office, is just ancillary to the simultaneous liquidation of that company in the country of its domicil or any winding. up of the company in future. That is to say, the winding up of the company in those countries is just complementary to the winding up of the company in the country of its domicil. The rights and liabilities of the creditors and contributories respectively when a company is would up in the country of its domicil will be limited to their original rights and liabilities after taking into consideration how much of those rights and liabilities have been already satisfied during the winding up proceedings of its offices in other countries. 21. In Russian and English Bank v. Baring Brothers and Co. (No. 3), 1986-1 All ER 505, the facts were that the Bank incorporated in Russia under Russian law, with its head office at Petrograd, was dissolved sometime in January 1918. This Bank had a branch in England. The London branch of the Bank had two large sums of money with Baring Brothers. On March 23,1921, the Bank brought an action against the Baring Brothers in the Chancery Division of the High Court of Justice for the recovery of those sums. The Baring Brothers prayed that all further proceedings in the action be stayed on the found that the action had been commence or, at all events, was being continued in the name of a plaintiff who was non-existent. In considering this matter, Lord Atkin said at page 518 : The legislature has provided that a dissolved foreign corporation may be wound up in accordance with the provisions of the Companies Act. The provisions of the Companies Act as to winding up are only applicable to corporations which are in existence. Are we to say that the legislative enactment 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 an 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 re-creating or reconstituting a new corporation; it is for particular and limited purposes refusing to recognise the dissolution of the old. It is clear from these observations that the winding up of the dissolved company incorporated in Russia was deemed to be the winding up of that very company and not of any fictitious company composed of the branch of that company in England. The main question before us however was deliberately left open for consideration later. The observations however go against the appellants contention that the so called unregistered company which is being wound up should be deemed to be a separate entity from the original company incorporated in England. 22. In Re Azoff-Don Commercial Bank, 1954-1 All ER 947, proceedings for the winding up of a Russian company which had been carrying on business in England was taken in England. This company had been dissolved prior to the proceedings under the laws of the Union of Soviet Socialist Republics. The petitioners for the winding up of this company were certain Norwegian Banks who were creditors of the company. The petition was opposed by the Crown and another person who was held to have no locus stand to object, of the grounds on which the Crown objected to the petition, one was that the Court should not make a winding up order at the suit of foreign creditors in respect of debts payable in Norwegian kroner, but that it should leave the Crown to get in the English assets with a view to the Crown being in a position to make ex-gratia payments among English creditors in respect of rouble debts. In considering this objection it was said at page 956: The object of a winding-up order is to ensure distribution of the assets among the whole body of creditors. No other basis of distribution would be fair. 23. In 1958-1 Ch 76, a creditor applied for the winding up of a company incorporated in the Republic of Ireland and having a place of business and assets in the United Kingdom. A request was made that the winding up order should include the expression that the Liquidator shall not act in pursuance of the order except for the purpose of getting in the English assets and settling the list of the English creditors without applying to the Court for directions. It was held that the provisions of the Companies Act, 1948, do not provide for making such exceptions in the winding up order. 24.We are therefore of opinion that both on account of the specific provisions of the Act and of the general principles, the view taken by the Court below that foreign creditors can prove their claims in the winding up of the unregistered company is correct.

Decision (1 = appeal accepted, 0 = rejected): 0

Explanation:
0[ds]15. The Courts of a country dealing with the winding up of a company can ordinarily, deal with the assets within their jurisdiction and not with the assets of the company outside their jurisdiction. It is therefore necessary that if a company carries on business in countries other than the country in which it is incorporated, the Courts of those countries too should be able to conduct winding-up proceedings of its business, in their respective countries. Such winding up of the business in a country other than the country in which the company was incorporated is really an ancillary winding up of the train company whose winding up may have already been taken up in that country or may be taken up at the proper time16. It appears that so long as the company as such is able to carry on business profitably and be in a position to meet its liabilities, neither the company nor its creditor nor its contributory would think of the winding up proceedings even if the company ceases to carry on business in any particular country. The persons interested in the company will be getting their proper return on the amount lent or contributed. Ordinarily, the winding up of the company will be proceeding simultaneously in the various countries where it carried 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 liabilities17. It is the company incorporated outside India which is really wound up as an un-registered company in this country. In fact, there is no separate un-registered 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 S. 271 itself says that the company incorporated outside India may be wound up as an un-registered company when it ceases to carry on business in India. Further, there are no separate creditors or contributories of the so called un-registered 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 proceedings18. There has been case law with respect to the nature of winding of proceedings in the various countries and the procedure followed in such winding upIt is clear from these observations that the winding up of the dissolved company incorporated in Russia was deemed to be the winding up of that very company and not of any fictitious company composed of the branch of that company in England. The main question before us however was deliberately left open for consideration later. The observations however go against the appellants contention that the so called unregistered company which is being wound up should be deemed to be a separate entity from the original company incorporated in England23. In 1958-1 Ch 76, a creditor applied for the winding up of a company incorporated in the Republic of Ireland and having a place of business and assets in the United Kingdom. A request was made that the winding up order should include the expression that the Liquidator shall not act in pursuance of the order except for the purpose of getting in the English assets and settling the list of the English creditors without applying to the Court for directions. It was held that the provisions of the Companies Act, 1948, do not provide for making such exceptions in the winding up order24.We are therefore of opinion that both on account of the specific provisions of the Act and of the general principles, the view taken by the Court below that foreign creditors can prove their claims in the winding up of the unregistered company is correct.