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Pachaiammal and anr. Vs. the Hindustan Co-operative Insurance Society Limited, an Incorporated Company and ors. - Court Judgment

LegalCrystal Citation
SubjectCivil
CourtChennai
Decided On
Reported in(1940)2MLJ688
AppellantPachaiammal and anr.
RespondentThe Hindustan Co-operative Insurance Society Limited, an Incorporated Company and ors.
Cases ReferredG. D. John v. Sambamurthi Aiyar
Excerpt:
- - according to the pleadings the policy was issued on the 6th august, 1925 and the assured died on 31st may, 1926. the company repudiated liability on the ground that the assured had failed to disclose that he was-suffering from certain diseases when he made the proposal. it will be sufficient to refer to the well-known case of grainger & son v. in the last mentioned case the company did not carry on business in england and consequently it was held that the service of a writ on its agents was not good service......branch offices in many places in india. in madras the company has a very large branch office. the madras office employs about 400 canvassing agents and its establishment charges amount to rs. 67,000 a year. the supervision of the canvassers employed in the madras presidency rests entirely with the. madras office. when a proposal is made in the madras presidency it is forwarded to the head office at calcutta through the madras office, which arranges for the medical examination of the person making the proposal. although premia may be paid to the head office they are usually paid to the madras office. the payments here made in respect of premia amount to over rs. 6,00,000 a year. the madras office, however, has no power to accept proposals for policies. that power is reserved entirely to.....
Judgment:

1. The question which falls for decision in this appeal is whether the respondent company, the Hindustan Co-operative Insurance Society, Limited, carries on business in Madras within the meaning of Clause 12 of the Letters Patent of this Court. The first appellant is the widow and the second appellant is the daughter of one C.T. Subramania Mudali, who died on the 31st May, 1926. The deceased lived at Little Conjeeva ram in the Chingleput District and therefore outside the limits of this Court's original jurisdiction. He insured his life with the company for. a sum of Rs. 5,000, payable at the age of sixty years. According to the pleadings the policy was issued on the 6th August, 1925 and the assured died on 31st May, 1926. The company repudiated liability on the ground that the assured had failed to disclose that he was-suffering from certain diseases when he made the proposal. The suit was filed on the Original Side of this Court by the appellants, who claimed that the Court had jurisdiction because the company was carrying on business in Madras. In its written statement the company raised the question of the Court's jurisdiction and its contention that the Court had no jurisdiction was upheld by Mockett, J., who accordingly dismissed the suit. The appeal is from that decision.

2. It is common ground that if the company cannot be deemed to be carrying on business in Madras the present suit cannot be maintained, because no part of the cause of action arose here. As a matter of fact the leave of the Court to file the suit was neither sought nor given. The head office of the company is in Calcutta and it has branch offices in many places in India. In Madras the company has a very large branch office. The Madras office employs about 400 canvassing agents and its establishment charges amount to Rs. 67,000 a year. The supervision of the canvassers employed in the Madras Presidency rests entirely with the. Madras office. When a proposal is made in the Madras Presidency it is forwarded to the head office at Calcutta through the Madras office, which arranges for the medical examination of the person making the proposal. Although premia may be paid to the head office they are usually paid to the Madras office. The payments here made in respect of premia amount to over Rs. 6,00,000 a year. The Madras office, however, has no power to accept proposals for policies. That power is reserved entirely to the head office and it alone has power to issue policies and to authorize payments in respect of policies. Therefore so far as the Madras Presidency is concerned the position is this. The Madras office does everything in connection with the company's business, except entering into formal contracts of insurance and authorizing payments in respect thereof. The appellants claim that in these circumstances it is contrary to common sense to say that the company is not carrying on business in the City of Madras. When considered without regard to authority this assertion does not appear to be unreasonable, but what is meant by carrying on business has been the subject of much judicial discussion and it must now be regarded as settled that a company only carries on business where it enters into contracts relating to its business, not at places' where it may have canvassers or agents for the purpose of obtaining offers of business and attending to matters ancillary to its business.

3. The question of what is meant by carrying on business has frequently been discussed in England in cases relating to liability to income-tax, but it is not necessary to refer to all the cases which have been cited in arguments in this connection. It will be sufficient to refer to the well-known case of Grainger & Son v. William Lane Gough (1896) A.C. 325 and to two later decisions. In Grainger & Son v. IVilliam Lane Gough (1896) A.C. 325, the House of Lords held that a wine merchant in France who merely canvassed through agents for orders for the sale of his wines to customers in the United Kingdom, did not carry on business in the United Kingdom, as all contracts for the sale of wines and all deliveries to customers were made in France. In the course of his judgment in this case Lord Herschell said:

If all that a merchant does in any particular country is to solicit orders, I do not think he can reasonably be said to exercise or carry on his trade in that country. What is done there is only ancillary to the exercise of his trada in the country where he buys or makes, stores, and sells his goods.

4. In De Beers Consolidated Mines, Limited v. Howe (1906) A.C. 455, Lord Loretmrn, L.C., observed that the true rule was that a company resided for purposes of income-tax where its real business was carried on, and the real business was carried on where the central management and control actually abided. In Smidth and Co. v. Greenwood (1921) 3 K.B. 583 , the Court of Appeal had to decide whether a Danish firm resident in Copenhagen which manufactured and dealt in cement-making machinery was liable to income-tax in the United Kingdom. The firm had an office in London which was in the charge of a qualified engineer, who was a whole time servant. He answered inquiries from prospective customers and advised them, but he had no power to enter into contracts. That power was reserved to the office in Copenhagen and it was from there that the goods were shipped to England. It 'was held that the firm exercised its trade in Denmark and was not resident in the United Kingdom. Atkin, L.J., put the case this way. The question was where did the operations take place from which the profits in substance arose, and relying on the observations of Lord Herschell and Lord Watson in Grainger & Son v. William Lane Gough (1896) A.C. 325, held the firm must be deemed to be carrying on business in Copenhagen. The branch office in Madras of the respondent company is very much in the. same position as the office of the Danish firm in London. Proposals are solicited, inquiries are answered and everything ancillary to the transaction of the business of the company is done here, but the contracts of insurance are not made here. They are made in Calcutta, and the entering into contracts of insurance is the real business of the company.

5. The learned Advocate-General has referred to certain decisions in England with regard to the jurisdiction of the Supreme Court. Residence in England gives the Court jurisdiction, and in De Beers Consolidated Mines, Ltd. v. Howe (1906) A.C. 455, Lord Loreburn, L.C., agreeing with the Master of the Rolls, observed that the residence of a company within the meaning of the Income-tax Acts was not necessarily the same thing as residence for the purpose of serving a writ. The learned Advocate-General has contended that the income-tax cases stand on a different footing from the cases relating to jurisdiction, but they show no divergence of opinion on the question of what is meant by 'carrying on business.' The learned Advocate-General has referred us to La Compagnie Generate Trans-Atlan-tique v. Thomas Law and Co (1899) A.C. 431, Leoneux Limon and Co. v. Hong Kong and Shanghai Banking Corporation (1886) 33 Ch. D. 446 , Dunlop Pneumatic Tyre Co., Ltd. v. Actien-Gesellchaft Fur Motor und Motorfahrseugbau Vorm. Cudell and Co. (1902) 1 K.B. 342, Saccharin Corporation, Ltd. v. Chemische Fabrik von Heyden Aktiengesells-chaft (1911) 2 K.B. 516, Actiesselskabet Dampskib 'Hercules' v. Grand Trunk Pacific Railway Co. (1912) 1 K.B. 222 and Okura and Co., Ltd. v. Forsbacka Jernverks Aktiebolag (1914) 1 K.B. 715. When the facts are examined it will be found that in all these cases, except the last, the companies-carried on business in England within the meaning 'of the income-tax cases. In the last mentioned case the company did not carry on business in England and consequently it was held that the service of a writ on its agents was not good service. It is not necessary to consider in what respect residence within the meaning of the English Income-tax Acts may differ from residence for the purpose of serying a writ, because all that the Court is concerned with in the present case is what is meant by 'carrying on business' and both the income-tax cases and the jurisdiction cases are in agreement here.

6. There are decisions of our own Court which are also directly opposed to the appellants' case. In the Municipal Council of Cocanada v. The ' Clan Line' Steamers, Ltd. (1918) 36 M.L.J. 226 : I.L.R. 42 Mad. 455, a Bench of this Court held that a Shipping Company which earned money by carrying goods by sea and called regularly at Cocanada for the purpose of loading and unloading cargo was not carrying on business in Cocanada, because there was only a, sub-agent there and all contracts with the shippers were entered into by the agent of the company in Madras. Therefore the company was not exercising any trade or carrying on business in Cocanada so as to be liable to be taxed under Section 53 of the Madras District Municipalities Act. Another Bench of this Court approved of and followed that decision in the Municipal Council, Dindigul v. The Bombay Co., Ltd., Madras (1928) 56 M.L.J. 525 : I.L.R. 52 Mad. 207. It was there held that the expression 'transacting business' is the same as 'carrying on business'. A case in which the facts were exactly similar to the facets in this case was G. D. John v. Sambamurthi Aiyar (1928) 56 M.L.J. 299, where Kumaraswami Sastri,. J., held that a life insurance company which had its head office in Bombay and a branch office in Madras with no power to enter into contracts, but merely to forward proposals and send moneys to the head office, was not carrying on business in Madras. This decision was followed by Lakshmana Rao, J., in C.S. No. 120 of 1937.

7. The English authorities are against the appellants and decisions of this Court are also against them. We agree with the learned Judge that the authorities are such that the Court is bound to hold that the respondent company is not carrying on business in Madras within the meaning of the Letters Patent. Consequently the appeal must be dismissed with costs. The appellants could have sued in the Subordinate Court if they had so chosen and it is regrettable that that course was not adopted, the authorities being so emphatically against them.


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