Kerala High Court
P.J. Johnson And Sons. vs Astrofiel Armadorn S.A. Of Panama, ... on 28 October, 1988
Equivalent citations: AIR1989KER53, [1990]69COMPCAS619(KER), AIR 1989 KERALA 53, (1989) ILR(KER) 1 KER 579, ILR (1989) 1 KER 579, (1988) 2 KER LT 947, (1990) 69 COMCAS 619, (1990) 1 LJR 179
Bench: T. Kochu Thommen, K.T. Thomas
JUDGMENT Kochu Thommen, J.
1. This appeal is by the plaintiff in a suit for recovery of money for goods and services supplied to a ship stated to be owned by the first defendant. The third defendant is stated to be the agent of the first defendant. The contract, under which money is claimed by the plaintiff, is stated to have been entered into with him by the third defendant, which is a corporation registered in England, for and on behalf of its principal, the first defendant, which is a corporation registered in the Republic of Panama. The court below found that the Contract, as evidenced by Ext. A10 dated 22-4-1974, having been made by the third defendants agent of the first defendant, the latter alone was liable under it. However the suit was dismissed for the reason that it was barred by limitation.
2. The vessel "Agiaparaskevi" arrived at the port of Cochin on 3-5-1974 and left on 3-6-1974. It was during that period that goods and services were supplied by the plaintiff to the vessel, as acknowledged by its master by Ext. A8, the translation of which in English is Ext. A9. Exts. A9 and A10 show that the plaintiff had carried out its obligations under the contract. For the purpose of this appeal, the only question that is relevant is as regards the plea of limitation.
3. The suit was filed in 1979 while the cause of action admittedly arose during the period between 3-5-1974 and 3-6-1974. Prima facie the suit was hopelessly time-barred, unless saved by Section 15(5) of the Limitation Act, 1963.
4. Hearing of the arrival of the vessel at the port of Cochin, the plaintiff instituted the suit on 1-8-1979 and moved an application for attachment of the vessel under Order 38, Rule 5 of the C.P. C. T he court below made an order of conditional attachment of the vessel The first defendant entered appearance by the master of the vessel, the second defendant, under protest, specifically pleading the bar of limitation, furnished security by way of bank guarantee for a sum of Rs. 1,25,000/-and secured release of the vessel.
5. Defendants 1 and 2 filed written statements denying the plaint allegations and pleading the bar of limitation. The third defendant has remained ex parte throughout.
6. It is the case of the plaintiff that the contract was made with the third defendant as agent of the first defendant, both of which are companies incorporated outside India. The plaintiff has no case that the master of the vessel has made any contract with the plaintiff either in his personal capacity or as an agent.
7. The court rejecting the contention of the plaintiff that the suit was not barred by limitation by reason of Section 15(5.) of the Limitation Act, 1963, held that neither the first defendant nor its agent, the third defendant, both being corporations incorporated outside India, ever carried on business in India so much so that neither was "absent" from India in order to attract the sub-section.
8. Section 15(5) reads :
"In computing the period of limitation for any suit the time during which the defendant has been absent from India and from the territories outside India under the administration of the Central Government shall be excluded."
9. The only question, therefore, for the purposes of this appeal is whether or not defendants 1 and 3, being foreign corporations, were ever present in India so as to be absent at any time from India. If they were not present in India, they naturally could not be absent from India, and in that event Sub-section (5) of Section 15 has no application. The answer to this fundamental question depends upon whether either of them carried on business in India.
10. In T. M. and Co. v. H. I. Trust Ltd, AIR 1972 SC 1311, the Supreme Court had occasion to consider this question. Referring to Section 15(5) the court stated :
"32. It was urged on behalf of Turner Morrison that Hungerford is a non-resident company. Therefore it cannot be said that at any time it was present in India. Hence the suit is not barred. If this argument is correct then there can be no period of limitation for filing a suit against a non-resident company a proposition which is prima facie startling. Can we hold that Section 15(5) applies to a suit of the type with which we are concerned? That provision contemplates the case of a defendant who has been absent from India. That article presupposes that defendant was at one time present in India and later he has been absent from India. A person who was never in India cannot be considered as having been absent from India. Factually a company cannot either be present in India or absent from India But it may have a domicile or residence in India. Sometimes questions have arisen as to what is the place of residence of an incorporated company....."
The court then cited with approval the views expressed by Dicey in Conflict of Laws, 4th Edn., p. 152 as to the difference between a natural person and a corporation as regards domicile, residence and jurisdiction, See the decision of the Bombay High Court in Sayaji Rao Gaekwar of Baroda v. Madhaorao Raghunatharao, AIR 1929 Bom 14 and concluded :
"36. Section 15(5) of the Limitation Act, 1963 can be viewed in one of the two ways, i.e., that that provision does not apply to incorporated companies at all or alternatively. that the incorporated companies must be held to reside in places where they carry on their activities and thus being present in all these places. Hungerford is an Investment company. It had invested large sums of monies in Turner Morrison. Its Board of Directors used to meet in India now and then. It was (through its representatives) attending the general meeting of the shareholders of Turner Morrison. Under these circumstances, it must be held to have been residing in this country and consequently was not absent from this country. Hence Section 15(5) cannot afford any assistance to Turner Morrison to save the bar of limitation."
By the nature of its business and the magnitude of its investment, the company was at all material times resident in India and was, therefore, never absent from India. Section 15(5), the court held, had no application.
11. Dicey and Morris in Conflict of Laws, 10th Edn., Vol. II. page 728 (Rule 138) says "A corporation is resident in the country where its central management and control is exercised. If the exercise of central management and control is divided between two or more countries then the corporation is resident in each of these countries."
12. A corporation has of course no physical residence. Nevertheless it resides in the place where it carries on its "real business". Its "real business is carried on where the central management and control actually abides", De Beers Consolidated Minec Ltd. v. Howe. (1906) AC 455, 458, i.e., where the seat and directing power of the corporation are located. While the corporation is domiciled where it is incorporated, it is resident at the place of its real business. These two places, therefore, may not necessarily be the same. See Rule 137, Dicey and Morris, ibid; and, Cheshire and North, Private International Law, 10th Edn. But the former is one of the relevant factors to be taken into account in identifying the latter. A corporation is sometimes said to be domiciled or resident in two places in the sense that it keeps house and does business in more than one place and its actual management and control is thus divided. So stated Lord St. Leenards in Carron Iron Co. v. Maclaren, (1855) 5 HLC 416, 459, Quoted in Saccharin Corporation Ltd. v. Chemische Fabrik Von Heyden Aktiengesellachaft, (1911) 2 KB 516, 521 ;
"If the service upon the agent is right, it is because, in respect of their house of business in England, they have a domicile in England; and in respect of their manufactory in Scotland, they have a domicile there. There may be two domiciles and two jurisdictions; and in this case there are, as I conceive, two domiciles and a double sort of jurisdiction, one in Scotland and one in England; and for the purpose of carrying on their business, one is just as much the domicile of the corporation as the other."
The emphasis here, of course, is on the business carried on by the corporation in more than one place and its management and control being thus divided. Channell, J. stated in Goerz and Co. v. Bell, (1904) 2 KB 136, 146 :
"..... it is possible -- though I do not decide the question one way or the other -- that the company may have two residences ..... That is clear in the case of a person, and I think the condition of things might be the same with regard to a company."
That was a case where the company was registered in a foreign country, but having its head office and central management in London. It was accordingly held that it was resident in England. Developing this principle, Viscount. Cave L.C. held in Swedish Central Ry Co. v. Thompson. (1925) AC 495, 501 :
"..... An individual may clearly have more Cadwalader, (1904) 5 Tax Cas 101; and on principle there appears to be no reason why a company should not be in the same position. The central management and control of a company may be divided, and it may 'keep house and do business' in more than one place; and if so, it may have more than one residence."
13. In exceptional cases the central management and control "may be divided or even, at any rate in theory, peripatetic" Unit Construction Co. Ltd. v. Bullock, (1960) AC 351, 366. Such dual residence occurs and the corporation is said to reside in each country where "some portion of controlling power and authority can be identified" : Per Lord Radcliffe, ibid, 367. The ascertainment of a limited company's residence has to be determined by reference to various circumstances such as the country in incorporation, the site of general meetings, the site of meetings of the directors' board, etc. A company "is resident where its central control and management abide" words which, according to the decision of the House of Lords that finally propounded that test (De Beers Consolidated Mines Ltd. v. Howe, (1906) AC 455) are equivalent to saying that a company's residence is where its "real business" is carried on Per Lord Radcliff, ibid, 365.
14. Lord Loreburn, L. C. in De Beers Consolidated Mines Ltd. v. Howe. (1906) AC 455. 458 stated :
"..... Now, it is easy to ascertain where an individual resides, but when the inquiry relates to a company, which in a natural sense does not reside anywhere, some artificial test must be applied .... In applying the conception of residence to a company, we ought, I think, to proceed as nearly as we can upon the analogy of an individual. A company cannot eat or sleep, but it can keep house and do business. We ought, therefore, to see where it really keeps house and does business. An individual may be of foreign nationality, and yet reside in the United Kingdom. So may a company..... I regard that..... the real business is carried on where the central management and control actually abides."
15. Referring to the principle in Carron Iron Co. v. Maclaren, (1855) 5 HLC 416, Collins, L.J. in La Bourgogne, (1899) P. 1, 16, Stated that, in the case of a foreign corporation, it was necessary to get at the question of its residence by reference to the mode and the place in which it carried on its business. The place of its business was the place of its residence for the purpose of jurisdiction. He stated :
"..... if a foreign corporation is found to be actually carrying on business in this country at a fixed place, you are then able to apply to it -- not the machinery for serving process out of the jurisdiction, but -- machinery for serving process within the jurisdiction."
The claim of the plaintiff in that case was against a foreign shipping company operating vessels which traded with various countries, including England, and having an office of its own at a fixed place in England. Collins, L. J. posing the question whether such a foreign corporation was for the purpose of service of writ resident in England stated :
"Now, is this corporation carrying on business, not merely in the waters of England, but carrying on business at a fixed place, so as to entitle the plaintiff to say, 'This is a corporation resident in England, and I can, therefore, adopt the process of serving persons within the jurisdiction'? That involves a nice question of fact."
The learned Judge then considered whether the business of the corporation was carried on in England at a fixed and definite place in such a way as either to make it the business of the corporation, or to make it merely the business of its agent. On the facts found, he concluded that the business was that of the corporation and not merely that of the agent. Various factors were taken into account in coming to that conclusion, and one of the fundamental circumstances was that the foreign corporation had a fixed place of business in England. It was not merely trading with England by its ships visiting English ports from time to time for short periods, but it was trading in England by setting up an office at a fixed and definite place and for a substantial length of time. In the same case A. L. Smith, LJ. stated :
"..... I do not think, as was contended by counsel for the plaintiffs, that if the defendant company had done nothing more than run a line of steamers from Havre to Newhaven and back, employing a broker here to arrange for the loading and unloading of the ships, and paying him a commission for so doing, that would constitute carrying on business by the French company in this country so as to constitute residence within the jurisdiction."
He then said :
"But there is a more important factor, which in my judgment is the governing fact in this case, which is that the defendant company has come to this country and taken a lease of premises in Leadenhall Street, and thereby has brought itself under contractual obligations with the landlord to carry out all covenants in the lease whatever they may be, and the payment of rent is undoubtedly one of them..... To my mind, the answer is clear that these premises were taken in order that the French company might carry on its business there....."
Referring to this principle, Vaughan Williams, L.J. stated in Saccharin Corporation Ltd. (1911) 2 KB 516, 522 :
"..... It is not enough that the foreign corporation should carry on business in England. It is well settled that it must also have such a definite place of business as, in the words of Lord St. Leonards, gives it a domicile in this country."
The question in that case was whether the foreign corporation could properly be served with a writ in England. That was possible only if it was domiciled or resident in England The test of residence was satisfied if the corporation carried on its business in England for sufficiently long period at a fixed place where it had a right to be there; if its servants occupied that place for the purpose of its business; if its agent had the power to enter into contracts of sale on its behalf without having to obtain its sanction in each case all this would be clear evidence that the foreign corporation was operating its business in England. Fletcher Moulton, LJ. in the same case referred in this context to the position of the agent :
"..... He carries on business at a fixed place in London as sole agent for the defendants in the United Kingdom, though it is true that he is also agent for another firm. He has power to enter into contracts of sale for the defendants; ..... Contracts made by him in this country on behalf of the defendants are signed by him, or by his clerk for him, as their agent; and so far as I can see every trade operation is done by him for the defendants at this fixed address..... I agree that it is of primary importance that a foreign corporation should carry on its business in this country at a fixed and definite place, ...." : ibid, pp. 524, 525.
16. In Dunlop Pneumatic Tyre Company Ltd. v. Actien-Gesellschaft Fur Motor Und Motorfahrzeuqbau Vorm. Cudell and Co., (1902) 1 KB 342, 349, Mathew LJ. pointed out that a corporation resided at the place where it carried on its business. In the same case Romer, LJ. said :
"If for a substantial period of time business is carried on by a foreign corporation at a fixed place of business in this country, through some person, who there carries on the corporation's business as their representative and not merely his own independent business, then for that period the company must be considered as resident within the jurisdiction for the purpose of service of a writ." : ibid, p. 349.
17. Buckley, L.J. in Okura & Co. Ltd. v. Forsbacka Jernverks Aktiabolag, (1914) 1 KB 715, 718, examined the question whether a writ could be served upon a foreign corporation. He said :
"The answer to that question depends on whether the defendants can be found 'here' for the purpose of being served. In one sense, of course, the corporation cannot be 'here'. The question really is whether this corporation can be said to be 'here' by a person who represents it in a sense relevant to the question which we have to decide. The point to be considered is, do the facts show that this corporation is carrying on its business in this country? In determining that question, three matters have to be considered First, the acts carrying on business in this country must have continued for a sufficiently substantial period of time. That is the case here. Next, it is essential that these acts should have been done at some fixed place of business. If the acts relied on in this case amount to a carrying on of a business, there is no doubt that those acts were done at a fixed place of business. The third essential, and one which it is always more difficult to satisfy, is that the corporation must be 'here' by a person who carries on business for the corporation in this country."
So stating Buckley, L.J. considered the question whether a person who represented the corporation was its alter-ego doing business of the corporation so as to treat the corporation as resident in England. On the facts of that case, the court held that the foreign corporation was not carrying on its business at the agent's office in London so as to be resident at a place within the jurisdiction. Buckley, LJ. stated :
"..... In my opinion that defendants are not 'here' by an alter-ego who does business for them here, or who is competent to bind them in any way. They are not doing business here by a person but through a person....."
18. In The Holetain, (1936) 2 All ER 1660, 1664, it was stated :
"The whole question is whether the foreign corporation is trading with this country or is trading within this country. In the former case it is not, in the latter case it is, amenable to taxation in this country; and speaking for myself, I cannot see that there is any real distinction between the line of reasoning which would lead to the conclusion that the company was carrying on business in this country for the one purpose or for the other purpose."
Lord Evershed, M.R. pointed out in Union Corporation Ltd. v. Inland Revenue Commissioners, (1952) 1 TLR 651, 663 quoted by Lord Cohen in Unit Construction Co. Ltd. v. Bullock, (1960) AC 351, 373 :
"The company may be properly found to reside in a country where it 'really does business', that is to say where the controlling power and authority which, according to the ordinary constitution of a limited liability and the exercise of that power and authority, are to some substantial degree to be found."
19. The cases discussed above arose with reference to the question whether a foreign corporation could be subjected to the taxing statutes or whether summons could be served upon them. The question thus in all these cases was whether or not the foreign corporation was resident within the country so as to be subject to the local jurisdiction.2. As regards service of process, the decisions cited may have become academic in view of the provisions of Section 592(1)(d) of the Companies Act (1 of 1956) which says :
"592. Documents, etc, to be delivered to Registrar by foreign companies carrying on business in India.-
(1) Foreign companies which after the commencement of this Act, establish a place of business within India shall,
1. See also Cheshire and North, Private International Law, 10th edn., pp. 188 et. seq.; J.H.C. Morris, Conflict of Laws, 3rd edn., pp. 66 et. seq.; and, Dicey and Morris, Conflict of Laws, 10th edn., Vol. 1, pp. 186 et. seq. and Vol. II. pp. 727 et. seq.
2. See also Walter Nutter and Co. v.
Messageries Maritimes De France, (1885) 54 LJQB 527; Haggin v. Comptoir D'Escompte De Paris; Mason and Barry v.
The Sama, (1889) 23 QB 519; Grant v.
Anderson & Co., (1892) 1 QB 108; The Princesse Clementine, (1897) p. 18; La Compagnie Generale Transatlantique v.
Thomas Law & Co., (1899) A.C. 431; Goerz & Co. v. Bell, (1904) 2 KB 136;
Actiesselskabet Dampskib "Hercules" v.
Grand Trunk Pacific Railway Company, (1912) 1 KB 222; Mitchellv. Egyptian Hotels Ltd., (1915) AC 1022; Swedish Central Railway Co. Ltd. v. Thompson, (1925) AC 495; Sabatier v. The Trading Company, (1927) 1 Ch. 495; Employees' Liability Assurance Corporation Ltd. v. Sedgwick, Collins and Company Ltd, (1927) AC 95;
Egyptian Delta Land and Investment Company Ltd. v. Todd, (1929) AC 1; In re Naqmlooge Vennootschap Handelmaatschappij Woker, (1946) 1 Ch.
98; P. S. 'Anant Narayan v. Massey Ferguson Ltd., (Canada), (1965) 1 Com LJ 269 (Mad.); and, The World Harmony, (1965) WLR 1275 within thirty days of the establishment of the place of business, deliver to the Registrar for registration -
(a)-(c) .....
(d) the name and address or the names and addresses of some one or more persons resident in India, authorised to accept on behalf of the company service of process and any notices or other documents required to be served on the company; and
(e)....."
(See also Section 407(1)(c) of the Companies Act, 1948 (United Kingdom)). But these decisions are still of great relevance and practical importance in determining whether a foreign corporation is carrying on business in the country.
20. To sum up: The decisions discussed above evidence what is now generally accepted as a rule of Private International Law See Dicey & Morris, on. cit.; and Cheshire & North, eg. cit., and what may be regarded as part of Indian Law, namely, that a foreign corporation is resident in India only if it carries on business in India. A foreign corporation carrying on business in India is amenable to the jurisdiction of the local courts and is for all practical purposes present in India This test is satisfied only if its business is carried on at a fixed and definite place which is, to a reasonable extent, a permanent place within India. The mere presence of a representative of the foreign corporation is not sufficient if his only authority is to elicit orders from custo'mers, but not to make contracts on behalf of the corporation. The question really is, as stated by Lord Loraborn, does the corporation really keep house and does business in India? Its real business is carried on where the "central management and control actually abides". De Beers ConsoUdated Mines Ltd. v. Howe, (1906) AC 455, 458 (see above). While a company is domiciled where it is incorporated, it is resident where its controlling power and authority is vested. Although dual residence is conceivable where there is division of management and control, it is nevertheless imperative that in some degree, in some measure, to some extent it can be said that the foreign corporation is centrally managed and controlled in India. This test can by no means be satisfied unless the corporation has a fixed place of business in India for sufficiently and reasonably long period of time. Although in Dunlop Pneumatic Tyre Co. Ltd. v. Actien-Gesellschaft Fur Motor Und Motor-fahrzeunbau Vorm. Cudell & Co., (1902) 1 KB 342, a very short period of residence at a fixed place was considered to be sufficient on the special and peculiar facts of that case, it was nevertheless recognised in that case by Romer, L.J. that, in principle, to satisfy the concept of residence the business should be carried on for a "substantial period of time" (p. 349). These are the essential tests which must be satisfied if a foreign corporation has to be treated as present in India.
21. The question then for the present purpose is whether or not defendants 1 and 3, being foreign corporations, had residence in India so as to be subsequently absent to attract Section 15(5) of the Limitation Act. The answer would depend upon the further question whether these corporations or either of them had carried on business in India and not merely carried on business with India The mere fact that a ship belonging to a foreign corporation traded with India by transporting goods or persons to and from this country did not mean that the foreign corporation owning the ship was resident in India in the sense that the corporation was carrying on business in India; see La Bourgogne, (1889) P. 1. We see no merit in the contentions to the contrary. A ship has no fixed place of residence anywhere except at the place of its registration. Although the master of a ship is for certain purposes an agent of the carrier and the ship is the property of the carrier by which the carrier trades in the. carriage of goods or passengers, the master is not the owners' alter-ego and his authority is limited, especially where he can communicate with the owners without difficulty See Carver, Carriage by Sea, 13th Edn., Vol. I. pp. 39 et. seq,, as is invariably the position in modern times. The foreign corporation owning the ship does not reside in the place visited by the ship unless the test of residence is satisfied, namely, that the corporation has an office at a fixed place where it carries on through its agents or servants its own business for a substantial period of time. The plaintiff has no Such case and there is no such evidence. Neither corporation has had at any time an office of its own in India where it carried on its own business.
22. At no time was either of the two foreign corporations a resident here. These corporations were never present here and were, therefore, never absent from this country. The suit was therefore barred by limitation. The learned Judge rightly held so. Applying the test adopted by the Supreme Court in T.M. & Co. v. H.I. Trust Ltd, AIR 1972 SC 1311, Section 15(5) of the Limitation Act has, in our view, no application to the facts of the case. The appeal is accordingly dismissed. We make no order as to costs.