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

2. The facts leading to the appeal are that the Vizianagaram Mining Co. Ltd., hereinafter called the company, was incorporated in England, under the English Companies Act then in force, on December 8, 1894, the object of the company being to mine manganese ore and some other minerals in India. Its principal place of business in India was at Kodur, Vizagapatam District3. The company took certain land on lease from the Rajah of Vizianagaram, the appellant. Its business did not prove profitable and it was not in a position to pay the rent to the lessor or to pay its creditors. On the application on behalf of the Rajah of Vizianagaram, orders for the winding up of the company were, passed by the High Court on March 6, 1946. The Official Receiver of Vizagapatam was appointed Official Liquidator of the company. Thereafter, the liquidation proceedings were transferred to the District Court of Vizagapatam. The Official Liquidator realised about two lakhs of rupees from the assets of the company in India. Certain foreign creditors of the company filed proofs of their claims before the Official Liquidator. The appellant objected to their claims being entertained on the ground that these liquidation proceedings were only for the benefit of the Indian creditors and that foreign creditors were not entitled to prove their debts in these proceedings. The Official Liquidator rejected these objections and allowed the foreign creditors to prove their claims4. The appellant then filed an application under S. 183 of the Indian Companies Act, 1913 (Act VII of 19l3), hereinafter called the Act, for the expunging of the proofs of all foreign creditors and for deleting their names from the certificate of the Official Liquidator filed under R. 90 of the rules framed under the Act, in the Court of the District Judge, Vizagapatam. The application was dismissed by the District Judge. Against this order the appellant filed an appeal, C. M. A. 249 of 1949, in the High Court. The High Court dismissed the appeal holding that the foreign creditors could prove their claims in the proceedings. Thereafter, the appellant applied for a certificate under Art. 133 of the Constitution. The High Court granted the certificate and hence this appeal.

Court's reasoning:
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.