Hindusthan Heavy Chemicals Ltd. vs Krebs and Cie S.A., Paris

R.M. Datta, J.—This application has been made by the Hindus-than Heavy Chemicals Limited for stay of the winding up proceedings initiated against it by Krebs & Cie S.A., Paris (hereinafter called the Respondent).

The facts are as follows: By a written agreement dated May 20, 1959, the Respondent was entrusted with, the installation of Caustic Soda Chlorine plant at Khardah. A sum of Rs. 2,12,774-40 P. became due and owing to the Respondent on account of delegation fees. Under a scheme of arrangement sanctioned by an order of this Court in respect of the said Hindusthan Heavy Chemicals (hereinafter called the said company) the said company, inter alia, agreed to pay up the Respondent''s claim in terms thereof. The said scheme was sanctioned by this Court on January 17, 1966. The company applied to the Reserve Bank of India for sanction for payment to the Respondent. By its order No. Pass/A7/81/1330-68 dated November 12, 1968, the Reserve Bank of India gave its sanction for payment to the Respondent in non-transferable rupee account from and out of the company''s account.

It appears that under the said scheme the dues of the unsecured creditors were to be paid off by three annual equal instalments. The first of such instalments was payable within three weeks from the date of the sanction of the scheme. In spite of the said sanction being given by the Reserve Bank of India the company did not pay any amount to the Respondent. By its letter dated January 14, 1969, a notice u/s 434(1) of the Companies Act, 1956, was served on the company by the Respondent under the signature of its President one E. C. Krebs. The Respondent has been described in the letterhead as:

Krebs 61 Rule Pouchet

75 Paris 17

The opening words of the said notice are as follows:

Take Notice That We Messrs. Krebs & Cie Paris, a company duly registered under Law of 24.7.1966 and decree of 23.3.1967 relative to commercial companies, entered into Commercial Register of PARIS under No. 56 B 3524....

By its reply dated February 21, 1969, M/s. Khaitan & Co. denied their client''s liability to pay any sum to M/s. Krebs & Cie Paris on the ground that their client had dealings and transactions with some other company long prior to the aforesaid dates mentioned in the letter under reply. They wrote:

Our clients do not know under what law of 24th July 1966 and decree of 23rd March 1967 relative to such commercial companies Messrs. Krebs & Cie, Paris have been registered.

They asked for a copy of the registration and the decree. By their letter dated March 10, 1969, M/s. G. C. Chunder & Co. acting on behalf, of the Respondent replied stating that a new company law has come into force in France by virtue of which the existing companies were required to bring them in line and in conformity with the new regulation that were passed in the manner as provided therein. They also informed that the Respondent had only complied with the necessary changes under the new law and the decree and were continuing in the same status as before since 1929 when they were incorporated for the first time. Further, that there had been no change in the constitution or composition of the company ever since, so as to justify the contention that Krebs & Cie, Paris as registered under the new decree was a different company. They also offered inspection of the records. M/s. Khaitan & Co. by their reply dated March 14, 1969, insisted that this was a new company and expressed all ignorance about the provisions of the new company law which came into force in France.

In the application for stay it has been stated that there are serious disputes as between the identity of the concern with whom the Applicant company had dealings and transactions and the concern which is the Respondent herein. Their main grievance is that the new concern had not been described as ''Societe Anonyme'' the abbreviation whereof is ''S.A.'' The dictionary meaning of Societe Anonyme is joint stock company. In other words, the substance of the objection is that the word ''S.A.'' or ''Limited'', as is understood in the Indian Company Jurisprudence had not been affixed to the name of the Respondent. The Applicant company has gone so far as to suggest in the said affidavit that the Respondent suppressed its real identity and was guilty of impersonation and had wrongfully represented that it was the same concern as that of the supplier company. It was also suggested that the Respondent had been guilty of making misrepresentation to the Reserve Bank of India which did not know the real facts that had now been discovered by the Applicant company. The aforesaid allegations have been made as true to the knowledge of Mohanlal Golecha affirmed on May 17, 1969.

The question before me is whether the dispute as sought to be raised and as indicated above as regards the claim is bona fide. If the winding up Court is satisfied about such bona fides in respect of the above dispute, then whether the defence will ultimately succeed or not would not be considered at this stage and the parties would be left to seek their remedy elsewhere in appropriate proceedings. Once this bona fides would be established the winding up Court would immediately stay its hands. In such event, the notice u/s 434 of the Companies Act, 1956, would not be construed as meaning neglect to pay within the meaning of the said provision.

Mr. Ghose appearing on behalf of the company contended that the question of what the foreign law was would be a question of fact and the same would have to be decided by calling competent witness who would be expert in foreign law. It was also contended that what the new French company law was would have to be ascertained through such expert witness. Without the help of such expert witness who would be conversant with such foreign law the Court would not be justified in looking into the provisions of the new company law that had come into force in France.

In support of his contention Mr. Ghose had relied on the case of Emilie Christien v. Pierre Joseph Delanney 3 C.W.N. 614 and the case of Kumar Jagadish Chandra Sinha Vs. Commissioner of Income Tax, West Bengal, .

Mr. Ghose also contended that only an abstract of the hew French law had been set out in the annexure in the affidavit of the French Trade Commissioner who is employed in the French Embassy" in India. Relying on the aforesaid case (2) Mr. Ghose contended that the Court must know what the whole of the foreign law in a foreign country was and not the extract thereof. Moreover, the evidence of a Trade Commissioner could not be sufficient to ascertain what the French company law was. Mr. Ghose also referred to the case of Ramanlal and Anr. v. Ram Gopal AIR 1054 Raj. 135 (137). It was also contended that the affidavit filed by N. N. Nundy on behalf of the Respondent would be of no use inasmuch as the said affidavit was based entirely on hearsay evidence as would appear from para. 5 thereof.

The extract of the Trade Register maintained in French with its English translation has been tendered by consent. It is contended that in Clause (9) thereof the concern has been described both as partners and also as directors suggesting that it is hybrid concern which might both be described as a firm as also as a limited company. The concept of such hybrid company is unknown to the Indian Companies Act.

It is contended that if the concern is a firm then this application by a foreign firm would not be maintainable because the foreign firm must sue through its individual partners and not through the firm name.

It is lastly contended that the claim is inflated.. Reliance has been placed on several correspondences. The letter dated November-15, 1967, would show that a sum of Rs. 2,49,000 was claimed as the amount due.. Both in the notice u/s 434 of the Companies Act as also in the petition for winding up a sum of Rs. 2,12,000 was claimed as the amount due. Prior to devaluation which came into effect on June 6, 1966, the company owed a sum of Rs. 1,58,000. Under the scheme of arrangement which Was sanctioned on January 1,7, 1966, the first instalment which became payable to the company became due on February 8, 1966. Accordingly, the claim has been disputed to the extent of about Rs. 54,000 and this being a substantial amount the company Court ought to hold that it is a bona fide dispute relating to the claim following the various reported decisions on this point.

On the aforesaid state of affairs it is necessary here to determine in the first place as to whether the dispute raised in the stay application is a bona fide dispute or not. It appears from the cover page of the contract itself that the concern was described as ''Krebs & Cie''. At p. 3 of the contract the concern was described only as ''Krebs''. By their letter dated May 27, 1966, the said Applicant company through its secretary described the concern as ''Krebs and Cie Paris''. By letter dated June 2, 1966, Respondent''s resident Engineer at Calcutta replied to the above letter and forwarded a copy thereof to the concern describing it as ''Krebs & Cie Paris'' and also as ''Krebs-- Paris''.

It will appear from the above correspondence that the parties knew well about all these names which were differently described by both the parties to the contract to relate to the one and the same concern, viz. ''Krebs & Cie S.A., Paris''. It is also significant that in the application for permission to transfer rupee to a non-resident account made with the Reserve Bank of India on April 18, 1968, the concern was described as ''Krebs & Cie, Paris''. The Applicant, viz. -Hindustan Heavy Chemicals Ltd. desired that the amount of Rs. 2,12,774-70 P. be transferred to the non-resident account of M/s. ''Krebs & Cie Paris'', who were described as the transferee. The Reserve Bank of India gave its sanction in that name and the Respondent is confident that they would be in a position to satisfy the Reserve Bank about their identity and to get the money transferred in their account. In fact, the Reserve Bank of India has not disputed the payment so far. The letter dated-April 11, 1968, written by Nandi to Rathi would also show that the amount was due as outstanding delegation fees to ''Krebs & Cie Paris.'' The letter of April 17, 1968, also described the concern as ''Krebs & Cie Paris'' and also as ''Krebs--Paris''. The said letter dated April 11, 1968, was replied to by the Chief Accountant of Hindusthan Heavy Chemicals Ltd. being the very same Mohanlal Golecha who is now raising this dispute and in the said reply the concern was described by him as ''Krebs 8c Cie Paris''. Again by their letter dated September 4, 1968, the said Chief Accountant of Hindusthan Heavy Chemicals Ltd. described the concern as ''Krebs & Cie Paris''. From the sanction dated November 12, 1968, made by the Deputy Controller of the Reserve Bank of India it also appears that the sanction was given in favour of Krebs & Cie Paris.

From the above correspondence and documents it is obvious that the parties including the said M. L- Golecha well knew even from the date of the contract and at all material time thereafter that the same company, viz. ''Krebs & Cie S.A., Paris'' was being described all throughout either as ''Krebs & Cie Paris'' or as ''Krebs--Paris'' or as ''Krebs'' and so on. The point now sought to be raised for the first time by the letter of M/s. Khaitan and Co. that it is a different concern under the new French law cannot, in my opinion, amount to a bona fide dispute at all. It seems that in order to avoid the payment the said company has now taken recourse to this flimsy pretext and adamant attitude and is not in a mood to admit that it was the same concern even under the new law solely with the mala fide intent to delay payment.

If the company had the bona fide intention to pay the amount due from the company to the proper party, the company''s attitude would surely have been somewhat different. They would not have been adamant in their attitude to insist that it was different concern which had come into existence on the basis of the registration under the new law. They are not in a position to contradict the company''s version by any positive evidence on their side. It is absolutely clear that their whole object is to gain some more time to make the payment. Now, that the Reserve Bank of India has given its sanction to transfer the amount they cannot stop payment any further and, accordingly, they are now bent upon trying to delay payment by whatever means possible. It appears from para. 11 of the affidavit of the French Trade Commissioner that the correct position was fully explained to the effect that the company was registered on January 30, 1929, in Paris and the registration number was 56vB 3524 and that the company after effecting the amendments in its statute as required by the law of July 24, 1966, continued in the same status, character and composition and with the same registration number. The relevant portion of the law of July 24, 1966, has been translated and the English version of Articles 499 508 and 509 thereof have been annexed to the said affidavit. In the affidavit-in-reply which has been filed on behalf of7 the said company the relevant allegations have either been denied or not admitted.

On behalf of the Respondent the ''Journal Official DeLa Republique Francaise'' which contained the entire law of July 24, 1966, has been relied on as the official journal of the Republic of J France. The relevancy of the said journal to establish the identity of the Respondent has been disputed on behalf of the company. I have already stated that save and except that there is a bare denial of practically everything in respect of the'' identity of the Respondent there is no positive averment or assertion on the part of the company to show that there is any substance in such bare denial on the part of the company. If the official journal of the Republic of France containing the whole law of July 24, 1966, is available to the said company then there could not have been any difficulty on their part to acquaint themselves and to show therefrom that after the coming into force of the law of July 24, 1966, the Respondent became a different entity distinct from Krebs & Cie S.A., Paris.

To consider the question of the bona fides of the dispute sought to be raised the French law as set out in annex. ''A'' to the affidavit of the Trade Commissioner is set out:

TRANSLATION

EXTRACTS FROM THE

OFFICIAL GAZETTE OF THE FRENCH REPUBLIC

LAWS AND DECREES

No. 171---Monday 25th and Tuesday 26th July 1966

LAWS

Law No. 66. 537 of the 24th July 1966 relating to

Commercial Companies.

The National Assembly and the Senate have adopted. The President of the French Republic promulgated the law, the content of which is the following:

Article 499--This law applies to companies which will be formed on the territory of the French Republic, dating from its coming into force. However, the formalities of formation previously performed will not have to be renewed.

The formerly constituted companies have to harmonize the statutes with the provisions of this law and decrees referred to in Article 508 within a period of eighteen months from their coming into force.

Article 508--The various decrees provided for by this law shall be enacted in the Council of State.

Article 509--This law shall come into force on the first day of the seventh month following its publication in the Official Gazette.

All that Article 499 of the above Statute provides is that the previously constituted company will not have to go through the formalities of formation over again. With regard to the previously constituted companies the new Statute requires that if their Statutes (meaning thereby the memorandum and articles of association) were in any way contrary to or different from the provisions of the new Statute then they would have to amend their constitution so as to bring it in conformity with the new statute fixed for doing the same. Besides the above articles if any other article in the said law of July 24, 1966, was thought relevant the same could have been brought to the notice of the Court on behalf of the company. The suggestion that by the coming into force of the new law of July 24, 1966, the identity or character or status of the company has changed, appears to be wholly unsound and without any basis whatsoever. Had there been any substance in their point there could not have been any difficulty to satisfy the Court even prima facie about the same from the said official journal.

On behalf of the company reliance has been placed on the certified copy of the abstract of the trade register (legal entities) concerning Krebs ET. Cie which have been entered in the records under No. 56. B 3524 to show that new registration number has been given to this company as No. 238, 024 B. The copy of the said document has been filed in this proceeding and formal proof by consent has been dispensed with. The said document has been marked as Ex. ''A''. The original certified copy in French language has also been exhibited and marked as Ex. ''4'' and formal proof thereof by consent has been dispensed with. A separate English translation of the certified copy was made out in Paris on July 8,1969, by a sworn translator and the same has also been exhibited and marked as Ex. ''5'' in this proceeding and formal proof thereof has been by consent dispensed with. It has also been pointed out from the said document on behalf of the Respondent that against the column described as legal form'' has been stated the words ''joint stock company'' to suggest that the company is not a hybrid company nor a partnership firm but a joint stock company. Against the column under the heading ''date of the beginning of the main operation'' the date has been stated as January 30,1929. By examining the said document it is not possible to get any impression that a new company has been formed under the law of July 24, 1966, or that the company is not a joint stock company but a hybrid company or a partnership concern. It appears from the said document that the company commenced its business on October 15,1929, and was registered on March 4,1956, under the registration number 56. B. 3524. The printed and typewritten cover page of the certified copy written in French language would clearly show that the registration number still is the same, viz, 56. B. 3524.

In my opinion, the company failed to raise any dispute of any substance The sum and substance of the company''s contention amounts to this that it does not know, and, it will appear, that the company will not care to know what the law of July 24,1966, is until it is decided in a suit after taking the evidence of the skilled witnesses. No reason whatsoever is given and no particulars are mentioned in the affidavit in support of the stay application as to why the Respondent is not the same concern or entity with whom the contract was entered into. It is a vague attempt (to impress upon the Court that the identity or status or the character of the Respondent was different from the company which was the real claimant and for that all that was done was to rely on the abstract of the (trade register disclosed on behalf of the Respondent and to try to make out therefrom a case to the effect that the Respondent was a different entity from the one with whom the contract was entered into by misreading the same.

Mr; Ghose has cited English authorities to show that under the English Common Law to enable the Courts to take judicial cognizance of the foreign and the colonial laws the same must be'' proved by calling expert witness conversant with such laws, Section 38 of the Indian Evidence Act is a departure from the above English Rule. The said section provides:

When the Court has to form, an opinion as to a law of any country, any statement of such law contained in a book purporting to the printed or published under the, authority of the Government of such country and to contain any such law, and any report of a ruling of the Courts of such country contained in book purporting to be a report of such ruling, is relevant.

Under the above provision, the statement in the reports and in the books of law are relevant and are admissible in evidence and the Court can look into them and form its opinion on them. The condition is that such books or publications or reports must be printed or published under the authority of. the Government of the country concerned. If the above conditions are satisfied then the Courts can consider from the said books or reports or publications and form its opinion about what the foreign law is of course, if the Court so thinks, the Court may also ask the parties to adduce oral evidence and to prove the same by expert opinions" and by witness skilled in such foreign law.

Section 45 of the Evidence Act provides:

When the Court has to form an opinion upon a point of foreign law, or of science or art, or as to identity of handwriting or finger impressions, the opinion upon that point of persons specially skilled in such foreign law, science or art, or in questions as to identity handwriting or finger impressions are relevant facts.

Such persons are called experts.

Under this provision the evidence of the opinion of the expert is adduced and the Court forms its opinion upon such expert opinion evidence. It has been contended on behalf of the company that if the Court has to consider the question of the whole law in respect of any foreign law, the Court should not form an opinion without hearing the evidence of the persons who are skilled in such law. In my opinion, the Court is not called upon to decide such question in the facts and circumstances of this case because no such controversy has been raised bona fide or otherwise on behalf of the company even after looking into the official journal of the Republic of France. The Court has to be prima facie satisfied that it is necessary to consider the whole law by giving reasons therefore and it is not sufficient merely to state that the whole law has to be looked into.

Section 84 of the Evidence Act provides:

The Court shall presume the genuineness of every book purporting to be printed or published under the authority of the Government of any country and to contain any of the laws of that country, and of every book purporting to contain reports of decisions of the Courts of such country.

Under this provision, the genuineness of the said official journal of the Republic of France is proved. No other provision in the said journal has been relied on by and on behalf of the company and; accordingly, from the said articles, English translation whereof has been set out in the annexure to the affidavit of the said French Trade Commissioner, the Court can form its opinion as to the French law of July 24, 1966, relating to the character, formation and identity of the joint stock companies which were constituted prior to the coming into force of the said law of July 24, 1966. The said articles only have been exhibited in this case from the said official journal and formal proof in respect thereof has been dispensed with by consent.

In the light of the above sections of the Evidence Act (I of 1872) the cases cited by Mr. Ghose have to be considered.

Mr. Ghose relied on the Sussex Peerage case (1844) 11 CI. & Fin. 85: 8 Jur. 793 where the House of Lords observed to the effect that the foreign law must be taken from the evidence of the professional or official witness. Lord Brougham in his speech at p. 115 observed:

The witness may refer to the sources of his knowledge; but it is perfectly clear that the proper mode of proving a foreign law is not by showing to the House the book of the law; for the House ''has not organs to know and to deal with the text of that law, and therefore requires the assistance of a lawyer who knows how to interpret it. If the Code Napolean was before a French Court, that Court would know how to deal with, and construe its provisions, but in England we have no such knowledge, and the English Judges must therefore have the assistance of foreign lawyers.

As stated above,, the Indian law is somewhat different by reason of the provisions embodied in the Evidence Act of 1872- Accordingly, this case is distinguishable. It appears that the restriction in England is not applicable to India because of the provisions of the Evidence Act of 1872. The Indian law makes a conscious departure from the common law of England in this respect.

Reliance was also placed on the case of Emilie Christien v. Pierre Joseph Delanney (Supra). In that case a passage in an unauthorised translation of the Code Napoleon was referred to, to establish that the person concerned was a Frenchman. In my opinion, this-case is also distinguishable for similar reasons in the sens''e that it.did not satisfy the requirements of the provisions of the Evidence Act I of 1872.

In the case of Ramanlal and Anr. v. Ramgopal (Supra) a certified copy of Burma Gazette was placed before the Court with the seal of the Court in Burma. The same was not accepted in proof of the Act being published in the Official Gazette. This case is also distinguishable from the case before me inasmuch as the original official gazette itself was not available before the Court. In that case the certified copy could not satisfy the requirement of the provision of the Evidence Act (I of 1872). The Court, accordingly, did not take any notice of the said attested copy of the gazette and, as such, the relevant Act was not proved before the Court.

In the case before me M/s. G. C. Chunder & Co. by then letter dated April 16, 1969, offered inspection of the said official gazette which contained the entire French law. As stated before, the portion containing the said Articles translation whereof have been made annexures to the affidavit of the said French Trade Commissioner, was tendered and by "consent formal proof was dispensed with in respect thereto. It follows that the entire law was brought before the Court and the'' company had the opportunity to examine the whole law and to find out any such provision which would go to show that the Respondent acquired a different identity or entity by virtue of the said new law. It is obvious that the company did not find anything from the contents of the said official journal which could be of any advantage to it. In effect, the company has intentionally kept its eyes shut and has turned a deaf ear to the Respondent in respect of its identity and calls upon the Court also not to make use of those faculties until an expert would come and give his opinion about it.

Mr. Ghose strongly relied on the case of Kumar Jagadish Chandra Sinha v. Commissioner of income tax (Supra) where Chakra-vartti C.J. observed that the only effect of Sections 84 and 38 of the Evidence Act was that the Court might take judicial notice of a publication containing a foreign law, if it was issued under the authority of the foreign G6vernment concerned and might accept the law as set out in such publication as a law in force in the particular foreign country at the relevant time. But such publication could not be evidence that what was contained in that was the whole law. It was observed:

What the whole law of a foreign country at a particular point of time is cannot, therefore, be proved except by calling in expert as provided for in Section 45, Evidence Act.--Page 51

In my opinion, the point raised by Mr. Ghose in this application that the whole French company law is not before this Court because of want of proper witnesses, need not be gone into in this application or decided because the dispute sought to be raised herein itself is not bona fide.

Accordingly, the contention of Mr. Ghose that there is a bona fide dispute as to what the French company law is and also as to what the whole French company law is cannot be accepted and I reject the same.

On the question of devaluation and on the question of there being a dispute as to the amount of the claim, Mr. Chatterjee referred to the book on The Conflict of Laws by Dicey & Morris (8th ed., p. 890) where it is provided:

For the purpose of litigation in England:

(a) a debt expressed in a foreign currency must be converted into sterling with reference to the rate of exchange prevailing on the day when the debt was payable.

The learned authors have; referred to various decided cases on the point.

On the basis of the aforesaid Mr. Chatterjee, contended that the parties agreed that the payment would be made in rupee currency in April 1968. The relevant letter showing the agreement has been annexed to the affidavit-in-opposition. Moreover, the sum as mentioned in the notice u/s 434 of the Companies Act, 1956, and as claimed in the petition for winding up was also applied for by the company itself for sanction of the Reserve Bank of India so that the said amount could be paid to the petitioning creditor under the said contract. In my opinion, this particular dispute also like the other one cannot be said to be,a bona fide dispute relating to the claim of the petitioning creditor.

In the case of In re Tweeds Garages Ltd. L.R. (1962) 1 Ch. 406 the company disputed the amount of the debt as alleged in the petition although the company admitted the existences of the debt. It was held in that case that a dispute as to the precise sum owed was not a sufficient answer to the petition.

Under those circumstances, I reject the contention of Mr. Ghose also on the question of devaluation.

At the end of his argument Mr. Sankar Ghose on behalf of the company submitted that his client was prepared to furnish security for the entire amount claimed by the petitioning creditor to the satisfaction of the Registrar of this Court. Mr. Ghose expressed his client''s inability to furnish cash security or bank guarantee and offered to furnish security of immovable properties. In my opinion, once the winding up Court comes to the finding that the claim of the petitioning creditor has not been bona fide disputed by the company the Court should not, except under very special circumstances, order security to be furnished by the company and to order conditional stay. In such a case, as soon as the security is ordered to be furnished, the winding up Court, in considering the merit, cannot be said to be sure about the question of bona fides or the mala fides and has got to conclude that there is some iota of doubt in its mind in coming to such finding. In my opinion, the winding up Court has got to arrive at a definite finding on the question of the claim being disputed bona fide or not. Once it comes to the finding that the dispute raised in respect of the claim is mala fide it has to dismiss the application for stay. Under those circumstances, in my opinion, the Court would not be justified in making an order for security and a conditional order for stay after coming to the finding that the claim of the Respondent has not been bona fide disputed.

The application accordingly is bound to fail and is dismissed with costs. Certified for two counsel.