Bishadendu Gupta vs H. Langham Reed and Others

Wort Ag., C.J.—This is an application u/s 235, Companies Act, and relates to payments made by the directors who are persons named in this application on 24th June 1930, that date is rather more than a month after a petition for winding up had been presented. That petition was dated 5th May of the same year. There were difficulties arising in the case but ultimately this Court made an order compulsorily winding up the company on 11th May 1931. It will be seen therefore that the payment was made after winding up, the date of the winding up dating back to the presentation of the petition under the provisions of the Companies Act. Now u/s 235 this application is made and it is said that there has been a misapplication of the assets of the company in these circumstances. The Peninsular Company which had not been carrying on business for some time entered into negotiations with a firm who were the debenture-holders of the Calmoni Engineering Co., Ltd.

It is unnecessary to load the case with a great many facts. It is sufficient to state that as a result of those negotiations the Peninsular Company were to pay some thing approaching �10,000 sterling for the purchase to the Calmoni Company and under the agreement they were to pay �4,000 either as earnest money or to give them the right of option to purchase the assets of the Calmoni Engineering; Co, It matters not whether under the contract, which is not before me, it was payment of �4,000 entitling the purchasing company to exercise the option of whether it was the earnest money or part payment; the fact remains that the directors paid over this sum of money and it is in these circumstances that an application is made u/s 235. It is a most unfortunate matter that every one of these directors is out, of the jurisdiction of this Court, namely Mr. Langham Reed, Sir George Cunningham Buchanan, Mr. Charles Thomson Gordon and Mr. Manu Subedar. All of them are actually outside the jurisdiction of this Court. The first three are living in England and with regard to them I have not the slightest hesitation as to what my order should be. It is impossible for me to hold that I can either issue an order of service of the summons or any other proceeding on persons beyond the jurisdiction of this Court or beyond the jurisdiction of the Courts in British India.

It is a principle of international'' law that a Court shall not serve its processes on persons outside its own jurisdiction and upon persons against whom, if an order was made, the order cannot be enforced. It is expressed in these words: "extra territorium jus decenti non paretur legis extra terrorum non obligant." To say that under certain circumstances I am to enforce orders against persons out of the jurisdiction of this Court has nothing to do with the matter. But if the matter is entirely within the jurisdiction, then under certain conventions that judgment or order may be enforced in a country other than the country in which it is made but that is an entirely different subject. As to the question of jurisdiction, the CPC is quite clear. Section 16 provides "subject to the pecuniary or other limitations prescribed by any law" (and then it describes suits of various kinds for the recovery of Immovable property, for partition etc.) "shall be instituted in the Court within the local limits of whose jurisdiction the property is situate." The section applies exclusively to Immovable property. We have nothing to do with that. Section 19 provides:

Where a suit is for compensation for wrong done to the person or to moveable property, if the wrong was done within the local limits of the jurisdiction of one Court and the defendant resides or carries on business or personally works for gain within the local limits of the jurisdiction of another Court, the suit may be instituted at the option of the plaintiff in either of the said Courts.

Section 20 provides:

Subject to the limitations aforesaid, every suit shall he instituted in a Court within the local limits of whose jurisdiction the defendant resides, etc.

I do not propose to read the whole of Section 20 as it is not suggested for one moment that this case is governed by that section. Section 28 provides for the method of service out of the jurisdiction but it naturally assumes that it is one of those cases which the Court has jurisdiction by reason of the subject matter of the suit, over persons outside the jurisdiction. Certain authorities were relied upon; they are the English cases. The first one is In re British Imperial Corporation, (1877) 5 Ch D 749 in which an application was made to serve two officials of the company, resident in Scotland. The Vice-Chancellor, without stating any reasons, gave leave to serve the summons at Glasgow or elsewhere in Scotland. Lord Wrenbury in his book on the English Company Acts mentioned this case without any comment but having stated that before the year 1909 the Court had no jurisdiction to give leave to serve notices of orders and other proceedings in the winding up on persons out of the jurisdiction, he points out that this applied only to orders and proceedings which if was desired to enforce and notice of an appointment to settle the list of contributories could be served out of the jurisdiction. The other cases relied upon are in In re Busfield. Whaley v. Busfield (1886) 32 Ch D 123. In that case the question was whether an originating summons could be served out of the jurisdiction. Cotton, L.J. in confirming the judgment of Chitty, J. made this statement:

Service out of the jurisdiction is an interference with the ordinary course of the law, for generally Courts exercise jurisdiction only over persons who are within the territorial limits of their jurisdiction. If an Act of Parliament gives them jurisdiction, etc., etc. such jurisdiction is valid, but apart from statute a Court has no power to exercise jurisdiction over anyone beyond its limits.

I should add that Fry, L.J. in agreeing with Cotton, L.J. made this statement:

I think that the general orders of 1883 contain a complete Code governing service out of jurisdiction.

The position was this: that apart from statutory rules made under the Judicature Act in England there was no power to serve out of the jurisdiction excepting in so far as the Acts relating to a Chancery procedure and the Common law procedure Acts gave that power. To put it in a sentence and to repeat the words of Cotton, L.J. the power to serve out of the jurisdiction is entirely a question of statute without which there was no such power. The point that the Court of Appeal was discussing was whether an originating summons came within the terms or the Orders of 1883, and they decided that they did not. That matter was cured eventually by the enactment of Rule 8-A of Order 11 of the Rules of the Supreme Court in England. Cotton, L.J. in that case referred to the decision in Credits Gerundeuse v. Van Weede (1884) 12 QBD 171 and pointed out that that was a case of interpleader, and the decision of Pollock, J. might be supported on the ground that the object of service was not to give jurisdiction over the party served, but only to give him notice of a proceeding affecting his rights. As I say I have no possible doubt as regards the directors in this case who reside outside British India. The question arises as to Manu Subedar who resides in Bombay. This is a very unfortunate position in which the Company finds itself. u/s 3, Companies Act, undoubtedly jurisdiction is given to the Courts in Bihar over this Company as the Company was registered in this province, or to put it more accurately its registered office is situate in this province. That being so, although I am not deciding that question, it might be argued that that would exclude the jurisdiction of the Bombay Court. The Company, therefore, is on the horns of a dilemma. The Director Mr. Subedar is not within the jurisdiction of this Court and the Bombay Court, in the view that one might take of Section 3, has no jurisdiction over any matter relating to the Company.

Now accepting the contention of the Seamed advocate who appears for the official liquidator that this is merely an inquiry into the conduct of the Director and, is in the same line of cases as the one to Which I have just made reference and to Which Cotton, L.J. referred and whose remarks I have repeated, Section 235, expressly State''s that the Court may on the application of the liquidator, or of any creditor or contributory, examine into the conduct of ''the director and compel him to repay the money or restore the property, and whilst being quite clear as to my jurisdiction or want of jurisdiction to make an order against the three directors now (residing in England, I find it difficult to come to the conclusion that I have no jurisdiction over persons resident in British India regarding matters connected with assets of the Company and a Company over which I have admittedly jurisdiction. In those circumstances I propose to allow the application against Mr. Subedar and make an order in this form: That this Court directs that an enquiry be made what payments out of the assets of the Company were made by the Directors or any of them subsequent to 5th May 1930 and whether any such payments were properly allowed having regard to Section 227 and Section 235, Companies Act. Whether any such payments are void u/s 227, Companies Act, and whether if void such sums could be repaid by the said Mr. Subedar.