M/S Dabur (Nepal) Pvt. Limited vs M/S Woodworth Trade Links Pvt. ...
2012 Latest Caselaw 5400 Del

$~5
*     IN THE HIGH COURT OF DELHI AT NEW DELHI

%                         Date of Judgment:   11th September, 2012


+                       Co.Pet. 212/2006

M/S DABUR (NEPAL) PVT. LIMITED                .... Petitioner
                   Through: Mr.Sudhir Makkar and
                             Ms.Meenakshi Singh, Advocates


                        versus


M/S WOODWORTH TRADE LINKS PVT. LIMITED .....Respondent
                Through: Mr.S.Ganesh, Sr.Advocate with
                         Mr.Anurag Dubey,Mr. Meenesh
                         Dubey and Mr.D.P.Pande,
                         Advocates.

       CORAM:
       HON'BLE MS. JUSTICE INDERMEET KAUR


INDERMEET KAUR, J. (Oral)

C.A. No.1109/2008 & Co.Pet. 212/2006

1. The respondent M/s Woodworth Trade Links Pvt. Ltd. has filed

the present application seeking rejection of the petition i.e.

C.P.No.212/2006; submission being that in terms of Section 591 (1)(b)

of Companies Act a foreign company which is incorporated outside

India and has an established place of business within India is bound to

comply with provision contained under Sections 592 to 594

incorporated in part XI of the Companies Act of the said Act; the

petitioner is a foreign company; it has been incorporated outside India; it

has an established place of business within India; however the

provisions of Sections 592 to 594 have not been complied with.

Attention has been drawn to Section 599 of the Companies Act which

specifically prohibits such a company to institute any legal proceedings

until it has complied with the provisions of this part.

2. The petitioner has disputed this position.

3. Record shows that the petitioner company M/s Dabur (Nepal) Pvt.

Ltd. is a foreign company. There is no dispute to this fact. Part XI of

the Companies Act deals with the companies which are incorporated

outside India i.e. foreign company. This Chapter imposes certain

obligations upon these foreign companies which are doing business in

India and have established a place of business within India; they have to

comply with the provisions of Section 592 to 594 of the said Act failing

which the hurdle of Section 599 prevents such a foreign company from

initiating any legal proceedings in India.

4. Section 591 1(b) inter alia reads as under:-

"591 (1)(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 established place of business within India at the commencement of this Act."

5. Section 592, 593 and 594 contain the formalities which have to be

complied with by such a company i.e. a foreign company who has

established its place of business in India. Submission of the respondent

being reiterated that the petitioner has an established place of business in

India. The rigors of Section 599 prevent such a company to institute

legal proceedings.

6. Record shows that C.A.No.993/2007 has been filed by the

Respondent seeking a recall of an order of this Court dated 06.11.2007.

The reply filed by the petitioner to the said application and submission

contained therein is relevant. In para 11 the petitioner company has

stated:-

"It is however submitted that the Petitioner Company is a subsidiary of Dabur India Limited and as such the affairs of the said company pertaining to Delhi region are handled and looked after through the Delhi office of Dabur India Ltd."

7. This is an admission by the petitioner company that it is a

subsidiary of Dabur India Limited and affairs of the petitioner company

pertaining to the Delhi region are being handled and looked after by the

Delhi office of its parent company i.e Dabur India Limited. The

correspondences exchanged between the respondent and the parent

company of the petitioner are also relevant Annexure A-4(page 258) is a

letter dated 11.05.2001 send by Dabur India Limited to the respondent

wherein the reconciliation of accounts between the parent company and

its subsidiary on a regular basis has been sought to be insured. So also

are the other correspondences, which find mention at page 259, 260 and

261 of the paper book. Annexure A-8 (page 263) is a letter addressed by

the respondent to the petitioner wherein it is stated that the materials of

the petitioner will be stored at his godown at Tumariya Tola, which is

admittedly a place in India. There is also no dispute that the petitioner

company has godowns and warehouses at Raxaul (page 266).

8. In 92 (2001) DLT 572 Tumlare Software Services Pvt. Ltd. India

& Anr. v. Magic Software Services while considering the provisions of

Section 591 of the Companies Act in the context as to whether a foreign

company has an established place of business in India, the following

extract would be relevant:-

"As is apparent, the crux of the above provisions of Companies Act is that unless a Company has a specified or identifiable place at which it carries on business it cannot be said to have an established place of business that include office, storehouse, godown or any other kind of such activity that has direct relation with the business and place."

9. Admittedly in the present case the company has its warehouses/

storehouses in India where the goods of the company are being stored.

The correspondences exchanged between the parent company (of the

petitioner) and the respondent also show that all reconciliation of

accounts on behalf of the petitioner are being undertaken by its parent

company in India.

10. In a judgment reported as 1990 BCLC 546 (QBD) (Commercial

Court) Cleveland Museum of Art v. Capricorn Art International SA the

test laid down by the English Courts to determine whether a foreign

company had an established place of business in the place where the

legal proceedings had been initiated, the Court had held as follows:-

"In order to find that an overseas company had an established place of business in England it was necessary to show that it had some more or less permanent location associated with the company and from which habitually, or with some degree of regularity, business was conducted. On the facts

of the case in which this observation occurs, it was clear that the company used the London premises for storing works of art and also for the viewing of works of art stored there and that these were carried out to such an extent that the company had clearly established a place of business on the premises."

11. In Deverall v. Grant Advertising Inc. (1954) (3) All ER 389, a

Court of England in this context had noted as follows:-

"A company will be establishing a place of business in India, if it has a specified or identifiable place at which it carries on business, such as an office, store house, godown or other premises having some concrete connection between the locality and its business. The word „establish‟ indicates more than occasional connection."

12. In another case reported in (1944) 2 All ER 556 Tovarishetvo

Manufactur Liudvig Rabenek , the Court had gone to the length of

holding that where the representatives of a foreign company were often

coming and staying in a hotel in England for purchasing machinery,

cotton etc., the foreign company had a place of business in England.

13. The application filed by the respondent has to be viewed and

tested in this background.

14. The petitioner has himself in his reply to C.A. No. 993/2007

admitted that it is a subsidiary of its wholly owned company i.e. Dabur

India Limited. The correspondences exchanged between the respondent

and Dabur India Limited show that all business transactions of the

petitioner company were being reconciled on its behalf by its parent

company. The petitioner company also admittedly has its warehouses

and godowns at Tumariya Tola and Raxaul in India. This evidence

amply establishes that the petitioner company has an established place

of business in India. Admittedly, the provisions of Section 592 to 594

have not been complied with. Section 599 creates a hurdle for such a

foreign company to institute any legal proceedings.

15. The prayer made in the present application is allowed. The

present petition is not maintainable.

16. At this stage, learned counsel for the petitioner submits that the

provisions of Section 599 are not mandatory; they are directory; on the

payment of the requisite fee this irregularity can be cured. Circular No.

12/2002 dated 14.05.2002 has been revised and the fee payable by a

foreign company under Section 601 and the additional fee payable in

respect of their application relating to condonation of delay under

Section 637 B is contained therein. This submission is undisputed.

17. This petition not being maintainable is accordingly disposed of

with liberty granted to the petitioner to file a fresh petition after curing

the aforenoted defects. Pending applications also stand disposed of.

Period spent in pursuing this litigation be excluded for the purposes of

limitation.

INDERMEET KAUR, J SEPTEMBER 11, 2012 mr