1983 (5) TMI 197 - HC - Companies Law

Foreign company denied registration under Companies Act, 1956. Court rules on eligibility criteria.

The court upheld the Registrar's decision to reject the foreign company's request for registration under Part IX of the Companies Act, 1956. It ruled that ... Registration under Part IX of the Companies Act, 1956 - interpretation of section 565(1)(b) of the Companies Act, 1956 - qualification of 'in force in India' on Acts of Parliament and letters patent - status and treatment of foreign companies under the Companies Act - application of Chapter VI to companies incorporated outside IndiaInterpretation of section 565(1)(b) of the Companies Act, 1956 - qualification of 'in force in India' on Acts of Parliament and letters patent - registration under Part IX of the Companies Act, 1956 - status and treatment of foreign companies under the Companies Act - application of Chapter VI to companies incorporated outside India - Whether a company incorporated outside India (a foreign company) can obtain registration under section 565(1)(b) of the Companies Act, 1956. - HELD THAT: - The Court examined clause (b) of section 565(1) in the context of the Act's scheme, the definition of 'company' in section 3 and the separate treatment of foreign companies in Chapter VI. The phrase 'any Act of Parliament of the United Kingdom or letters patent in force in India' is a single clause set off by commas and, read naturally, the words 'in force in India' qualify both 'any Act of Parliament of the United Kingdom' and 'letters patent'. A literal reading that the phrase qualified only 'letters patent' would be strained and lead to incongruity. More importantly, the statutory structure indicates two broad classes-companies formed and registered under the Act or existing companies recognised by the Act, and companies incorporated outside India which are governed by Chapter VI. Registration under section 565 does not transform a foreign company into a 'company' as defined by the Act, nor does the Act provide that Chapter VI ceases to apply upon such registration. The Court therefore concluded that the legislative scheme does not contemplate elevating a foreign company incorporated outside India to the status of a company under the Act by registration under section 565(1)(b). Consequently, a foreign company incorporated outside India is not entitled to registration under Part IX.The petitioner's request for registration under Part IX is not permissible; the refusal to register was correct and the petition is dismissed.Final Conclusion: The High Court holds that section 565(1)(b) does not permit a company incorporated outside India to be registered under Part IX of the Companies Act, 1956; the Registrar's decision to refuse registration is upheld and the petition is dismissed. Issues Involved:1. Interpretation of Section 565(1)(b) of the Companies Act, 1956.2. Eligibility of a foreign company for registration under Part IX of the Companies Act, 1956.3. Application of the Foreign Exchange Regulation Act, 1973, to foreign companies.4. Legislative intent and statutory construction of relevant provisions.Issue-wise Detailed Analysis:1. Interpretation of Section 565(1)(b) of the Companies Act, 1956:The petitioner, a company incorporated in the United Kingdom, sought registration as a private limited company under Part IX of the Companies Act, 1956. The Registrar of Companies rejected this request based on the interpretation of Section 565(1)(b), which states that a company formed under an Act of Parliament of the United Kingdom, not in force in India, cannot be registered. The petitioner argued that the phrase 'in force in India' qualifies only 'letters patent' and not 'any Act of Parliament of the United Kingdom.' The court, however, held that the phrase 'in force in India' qualifies both 'any Act of Parliament of the United Kingdom' and 'letters patent,' thereby supporting the Registrar's interpretation.2. Eligibility of a Foreign Company for Registration under Part IX of the Companies Act, 1956:The court examined whether a foreign company could be registered under the Indian Companies Act. The petitioner contended that it met all other qualifications and should be eligible for registration. However, the court noted that the Companies Act distinguishes between companies incorporated in India and those incorporated outside India. The definition of a 'company' under Section 3 of the Act does not include foreign companies. Consequently, a foreign company, even if registered under Section 565(1)(b), would not be considered a 'company' as defined in the Act.3. Application of the Foreign Exchange Regulation Act, 1973, to Foreign Companies:The petitioner had sought permission from the Reserve Bank of India under Section 29(2)(a) of the Foreign Exchange Regulation Act, 1973, to continue its business in India. The Reserve Bank granted permission with the condition that the petitioner should convert its Indian branch into an Indian company with non-resident interest not exceeding 40%. The petitioner argued that the Registrar should not have refused registration, especially given the Reserve Bank's directive. However, the court maintained that the Registrar's decision was based on a correct interpretation of the Companies Act, irrespective of the Reserve Bank's conditions.4. Legislative Intent and Statutory Construction of Relevant Provisions:The court considered the legislative intent behind Section 565(1)(b) and the overall scheme of the Companies Act. It noted that the Act envisages two types of companies: those incorporated in India and those incorporated outside India. The provisions applicable to foreign companies do not cease to apply even if they seek registration under the Act. The court also referred to the Sachar Committee Report, which recommended compulsory registration of existing companies under the new law but did not address foreign companies. The court concluded that the law does not envisage the registration of a foreign company as an Indian company under the Act.Conclusion:The court upheld the Registrar's decision to reject the petitioner's request for registration as a private limited company under Part IX of the Companies Act, 1956. It ruled that the petitioner, being a foreign company, is not entitled to the reliefs sought. The petition was dismissed, and the rule issued was discharged.