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  • The Advocate-General (Sir A. Krishnaswami Ayyar) and K.S Rajagopala Ayyangar for appellants.—The meaning of “carries on business” has been considered in England in two classes of cases, viz., service of writ or jurisdiction cases and income-tax cases. The jurisdiction cases arise under Order IX, rule 8, of the Rules of the Supreme Court, England. At first, no writs were permitted to be issued against foreign corporations; but, by a process of liberal interpretation, foreign corporations also were made subject to the jurisdiction of the English Courts, provided they carried on business within the jurisdiction. The original test of “residence” or “domicile” gave place to the principle of “carrying on business” and gradually, the words “carry on business” were given a liberal interpretation and wide significance. Some of the important jurisdiction cases are: Lhoneux, Limon & Co. v. Hong Kong and Shanghai Banking Corporation(2), La Bourgogne(3), Compagnie Generate Transatlantique v. Thomas Law & Co.(4), Dunlop Pneumatic Tyre Company v. Actien-Gesellschaft fur Motor und Motorfahrzeugbau vorm Cudell & Co.(5), Saccharin Corporation, Limited v. Chemische Fabrik von Heyden Aktiengesellschaft(6), Actiesselskabet Dampskib “Hercules” v. Grand Trunk Pacific Railway(7) and Okura & Co., Limited v. Forsbacka Jernverks Aktiebolag(8). In some of these cases it has been held that the fact of the existence of an agent at a place was not sufficient to determine that the corporation was carrying on business at the place. Mere employment of an agent may not amount to carrying on business. It depended upon the extent of the business done by him on behalf of his principal. But there is no hard and fast rule that a business is carried on only at the place where contracts are made. The completion of contracts is not the only test. Business is no doubt carried on at the place where contracts are concluded; see Municipal Council, Adoni v. Babu Naidu. But whether business is carried on in any place can be ascertained from facts other than the making of contracts, such as delivery of goods and payment of price at that place. Maintenance of a branch office at a place and doing a portion of the business there would amount to carrying on business at the place; see Hoggin v. Comptoir D'Escompte de Paris. Mason and Barry v. The Same Actiesselskabet Dampskib “Hercules” v. Grand Trunk Pacific Railway. Further, it depends also on the nature of the business. What may be material for carrying on the business of sale of goods may not be material for carrying on other classes of business, for instance, insurance. Having a branch office, with a banking account and an establishment for controlling canvassing operations and securing policies, may be sufficient to indicate the carrying on of the business of insurance. Even in income-tax cases it has been held that the test of the making of contracts is not conclusive; see W.H Muller & Co. (London), Ltd. v. Lethem. This decision was affirmed on appeal in W.H Muller & Co. (London) v. Lethem; see also Maclaine & Co. v. Eccott. The decision in Grainger & Son v. Gough proceeded on the special facts of the case. A more liberal test was applied in the jurisdiction cases than in the tax cases; see De Beers Consolidated Mines, Limited v. Howe.
  • K.S Rajagopala Ayyangar followed.—The question whether a corporation carried on business at a place has arisen for consideration in the Madras High Court under the Madras District Municipalities Act; see Municipal Council of Cocanada v. The ‘Clan’ Line Steamers, Ltd. and Municipal Council, Dindigul v. Bombay Co., Ltd.. In those cases there were only agents and no branch offices and the agents were not authorised to make contracts on behalf of the principals. The existence of a branch office is a very important fact which distinguishes the present case and the branch office does every portion of the business excepting the acceptance of the proposals and the authorisation of payments on matured policies. The decisions of Kumaraswami Sastri, J. in G.D John v. Sambamurthy Aiyar and of Lakshmana Rao, J. in Civil Suit No. 120 of 1937 are also distinguishable. It was held in those cases that the branch offices acted merely as post offices for transmission of proposals. The test is not where the contracts are made but where the profits of the business in substance arise; see the observations of Atkin L.J in Smidth & Co. v. Greenwood.
  • T.R Venkatarama Sastri and A.V Seshayya for first respondent.—“Carrying on business” does not mean merely doing something in furtherance of the business. The words have acquired a legal significance by reason of judicial interpretation, and the question is whether business is carried on here in that legal sense. Neither the existence of an agent nor of a branch office is sufficient. The agent and the branch office may be here for the purpose of doing the ancillary operations for securing business. The essential part of an insurance business is the issue of policies and payment of the amount insured and these cannot be done without the approval of the head office at Calcutta. Both in the Indian Life Assurance Companies Act (VI of 1912) and in the Indian. Insurance Act (IV of 1938), life insurance business is defined as meaning issue of policies or effecting contracts of insurance. A contract of insurance is effected at the replace where the proposal is accepted; see The National Insurance Co., Ltd., Calcutta v. Seethammal. It has been held in the case of insurance companies that they are not resident in a place even though they have a branch office there; see Jones v. Scottish Accident Insurance Co., Watkins v. Scottish Imperial Insurance Co., New York Life Insurance Co. v. Public Trustee. The decisions in Sulley v. The Attorney General and Badcock v. Cumberland Gap Park Company also are to the same effect. Under section 20 of the Civil Procedure Code, it has been expressly provided that the place where a branch office of a company is situate should be deemed to be the place where the company carries on business in respect of the causes of action arising there. But clause 12 of the Letters Patent is different and the question here is whether the company carries on business within the jurisdiction or not. Even the decisions cited on behalf of the appellants show, when they are read with the facts of those cases, that the governing test is, where are the contracts relating to the business made? There is no difference in this respect between jurisdiction cases and tax cases. Both classes of cases are referred to without distinction in discussing the meaning of “carrying on business”; see Swedish Central By. Co. v. Thompson. See also the observations of Coutts Trotter, J. in Clan Line Steamers, Limited v. Municipal Council of Cocanada. The decision in Grainger & Son v. Gough is still the leading decision on the point. The decision in Smidth & Co. v. Greenwood(9) does not really take the matter further if regard he had to the facts of the case. The decision was affirmed by the House of Lords in Greenwood v. F.L Smidth & Co.(10), but the observations of Atkin L.J, on which the appellants rely, are not referred to there. To hold that this Court has no jurisdiction to entertain suits like the present one will not be much of a hardship, as suits can be filed in the Courts within whose jurisdiction the death of the assured takes place.
  • S. Ramachandra Ayyar for second respondent.
Judges
  • Sir Lionel Leach, C.J
  • Horwill, J.
Acts
  • section 53 of the Madras District Municipalities Act.
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  • The Advocate-General (Sir A. Krishnaswami Ayyar) and K.S Rajagopala Ayyangar for appellants.—The meaning of “carries on business” has been considered in England in two classes of cases, viz., service of writ or jurisdiction cases and income-tax cases. The jurisdiction cases arise under Order IX, rule 8, of the Rules of the Supreme Court, England. At first, no writs were permitted to be issued against foreign corporations; but, by a process of liberal interpretation, foreign corporations also were made subject to the jurisdiction of the English Courts, provided they carried on business within the jurisdiction. The original test of “residence” or “domicile” gave place to the principle of “carrying on business” and gradually, the words “carry on business” were given a liberal interpretation and wide significance. Some of the important jurisdiction cases are: Lhoneux, Limon & Co. v. Hong Kong and Shanghai Banking Corporation(2), La Bourgogne(3), Compagnie Generate Transatlantique v. Thomas Law & Co.(4), Dunlop Pneumatic Tyre Company v. Actien-Gesellschaft fur Motor und Motorfahrzeugbau vorm Cudell & Co.(5), Saccharin Corporation, Limited v. Chemische Fabrik von Heyden Aktiengesellschaft(6), Actiesselskabet Dampskib “Hercules” v. Grand Trunk Pacific Railway(7) and Okura & Co., Limited v. Forsbacka Jernverks Aktiebolag(8). In some of these cases it has been held that the fact of the existence of an agent at a place was not sufficient to determine that the corporation was carrying on business at the place. Mere employment of an agent may not amount to carrying on business. It depended upon the extent of the business done by him on behalf of his principal. But there is no hard and fast rule that a business is carried on only at the place where contracts are made. The completion of contracts is not the only test. Business is no doubt carried on at the place where contracts are concluded; see Municipal Council, Adoni v. Babu Naidu. But whether business is carried on in any place can be ascertained from facts other than the making of contracts, such as delivery of goods and payment of price at that place. Maintenance of a branch office at a place and doing a portion of the business there would amount to carrying on business at the place; see Hoggin v. Comptoir D'Escompte de Paris. Mason and Barry v. The Same Actiesselskabet Dampskib “Hercules” v. Grand Trunk Pacific Railway. Further, it depends also on the nature of the business. What may be material for carrying on the business of sale of goods may not be material for carrying on other classes of business, for instance, insurance. Having a branch office, with a banking account and an establishment for controlling canvassing operations and securing policies, may be sufficient to indicate the carrying on of the business of insurance. Even in income-tax cases it has been held that the test of the making of contracts is not conclusive; see W.H Muller & Co. (London), Ltd. v. Lethem. This decision was affirmed on appeal in W.H Muller & Co. (London) v. Lethem; see also Maclaine & Co. v. Eccott. The decision in Grainger & Son v. Gough proceeded on the special facts of the case. A more liberal test was applied in the jurisdiction cases than in the tax cases; see De Beers Consolidated Mines, Limited v. Howe.
  • K.S Rajagopala Ayyangar followed.—The question whether a corporation carried on business at a place has arisen for consideration in the Madras High Court under the Madras District Municipalities Act; see Municipal Council of Cocanada v. The ‘Clan’ Line Steamers, Ltd. and Municipal Council, Dindigul v. Bombay Co., Ltd.. In those cases there were only agents and no branch offices and the agents were not authorised to make contracts on behalf of the principals. The existence of a branch office is a very important fact which distinguishes the present case and the branch office does every portion of the business excepting the acceptance of the proposals and the authorisation of payments on matured policies. The decisions of Kumaraswami Sastri, J. in G.D John v. Sambamurthy Aiyar and of Lakshmana Rao, J. in Civil Suit No. 120 of 1937 are also distinguishable. It was held in those cases that the branch offices acted merely as post offices for transmission of proposals. The test is not where the contracts are made but where the profits of the business in substance arise; see the observations of Atkin L.J in Smidth & Co. v. Greenwood.
  • T.R Venkatarama Sastri and A.V Seshayya for first respondent.—“Carrying on business” does not mean merely doing something in furtherance of the business. The words have acquired a legal significance by reason of judicial interpretation, and the question is whether business is carried on here in that legal sense. Neither the existence of an agent nor of a branch office is sufficient. The agent and the branch office may be here for the purpose of doing the ancillary operations for securing business. The essential part of an insurance business is the issue of policies and payment of the amount insured and these cannot be done without the approval of the head office at Calcutta. Both in the Indian Life Assurance Companies Act (VI of 1912) and in the Indian. Insurance Act (IV of 1938), life insurance business is defined as meaning issue of policies or effecting contracts of insurance. A contract of insurance is effected at the replace where the proposal is accepted; see The National Insurance Co., Ltd., Calcutta v. Seethammal. It has been held in the case of insurance companies that they are not resident in a place even though they have a branch office there; see Jones v. Scottish Accident Insurance Co., Watkins v. Scottish Imperial Insurance Co., New York Life Insurance Co. v. Public Trustee. The decisions in Sulley v. The Attorney General and Badcock v. Cumberland Gap Park Company also are to the same effect. Under section 20 of the Civil Procedure Code, it has been expressly provided that the place where a branch office of a company is situate should be deemed to be the place where the company carries on business in respect of the causes of action arising there. But clause 12 of the Letters Patent is different and the question here is whether the company carries on business within the jurisdiction or not. Even the decisions cited on behalf of the appellants show, when they are read with the facts of those cases, that the governing test is, where are the contracts relating to the business made? There is no difference in this respect between jurisdiction cases and tax cases. Both classes of cases are referred to without distinction in discussing the meaning of “carrying on business”; see Swedish Central By. Co. v. Thompson. See also the observations of Coutts Trotter, J. in Clan Line Steamers, Limited v. Municipal Council of Cocanada. The decision in Grainger & Son v. Gough is still the leading decision on the point. The decision in Smidth & Co. v. Greenwood(9) does not really take the matter further if regard he had to the facts of the case. The decision was affirmed by the House of Lords in Greenwood v. F.L Smidth & Co.(10), but the observations of Atkin L.J, on which the appellants rely, are not referred to there. To hold that this Court has no jurisdiction to entertain suits like the present one will not be much of a hardship, as suits can be filed in the Courts within whose jurisdiction the death of the assured takes place.
  • S. Ramachandra Ayyar for second respondent.
Judges
  • Sir Lionel Leach, C.J
  • Horwill, J.
Acts
  • section 53 of the Madras District Municipalities Act.
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Smart Summary

Judgment Summary — Sir Lionel Leach, C.J.

Factual and Procedural Background

The dispute concerns whether The Hindusthan Co-operative Insurance Society, Limited (the respondent company) "carries on business in Madras" within the meaning of clause 12 of the Letters Patent of the Court. The appellants are the widow and daughter of C.T. Subramania Mudali, who died on 31 May 1926. The deceased resided at Little Conjeeveram in the Chingleput District (outside the Court's original jurisdiction) and had insured his life with the respondent for Rs. 5,000, the policy having been issued on 6 August 1925. The company repudiated liability on the ground that the assured failed to disclose certain diseases when he proposed for insurance.

The appellants filed suit on the original side of this Court asserting jurisdiction on the ground that the company carried on business in Madras. The respondent, by written statement, challenged the Court's jurisdiction. Mockett, J. upheld the company's contention and dismissed the suit. The present appeal is from that dismissal.

It is recorded in the opinion that leave of the Court to file the suit on the original side was neither sought nor granted.

Legal Issues Presented

  1. Whether the respondent company "carries on business in Madras" within the meaning of clause 12 of the Letters Patent of this Court, such that the Court has original jurisdiction over the suit.
  2. As a corollary, whether the presence of a substantial branch office (engaging in canvassing, arranging medical examinations, receiving premia, and supervising agents) is sufficient to constitute "carrying on business" where the head office alone has power to accept proposals, issue policies and authorize payments.

Arguments of the Parties

Appellants' Arguments

  • The appellants contended that the respondent was carrying on business in the city of Madras because the Madras branch performed nearly all activities connected with the company's business in the Presidency — employing about 400 canvassing agents, supervising them locally, arranging medical examinations, receiving most premia (over Rs. 6,00,000 a year were paid in Madras), and incurring establishment charges of about Rs. 67,000 per year.
  • They argued that, given the extent of local operations and payments, it was contrary to common sense to hold that the company was not carrying on business in Madras.

Respondent Company's Contentions

  • The company contended that the Court lacked jurisdiction because it did not "carry on business in Madras" within the meaning of the Letters Patent: the head office in Calcutta alone had the power to accept proposals, to issue policies, and to authorize payments in respect of policies.
  • The Madras office, although performing extensive ancillary functions, had no authority to enter into the formal contracts of insurance which the company reserved to its head office.

Advocate-General's Submissions (as reported)

  • The learned Advocate-General referred to a number of English authorities on "residence" and jurisdiction and submitted that income-tax cases might stand on a different footing from jurisdiction cases, but that they showed no divergence on the meaning of "carrying on business."
  • He cited a series of English cases (listed in the opinion) and the court examined those authorities in relation to the facts before it.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
Grainger & Son v. Gough Held that solicitation of orders by agents in a country does not amount to carrying on business there where all contracts and deliveries are made elsewhere; Lord Herschell's observation that mere solicitation is ancillary to the trade carried on where the goods are bought, made, stored and sold. Used as a primary authority for the proposition that a company carries on business where it enters into contracts relating to its business, not merely where it solicits offers or performs ancillary functions.
De Beers Consolidated Mines, Limited v. Howe (Lord Loreburn L.C.) Stated the rule that a company "resides" for income-tax purposes where its real business is carried on; the real business is where central management and control abides. Relied upon to show that the location of the central management and the place where the real business is conducted determine where business is carried on.
Smidth & Co. v. Greenwood Where a foreign firm has a local office that answers inquiries but has no power to enter contracts, the firm's trade is exercised where the contracts are made and operations from which profits arise (not at the local inquiry office). The Madras branch was held analogous to the London office of the Danish firm: extensive ancillary activities in Madras did not equate to carrying on the real business where contracts were entered into in Calcutta.
Compagnie Generale Transatlantique v. Thomas Law & Co.; Lhoneux, Limon & Co. v. Hong Kong & Shanghai Banking Corporation; Dunlop Pneumatic Tyre Company v. Actien-Gesellschaft fur Motor und Motorfahrzeugbau vorm. Cudell & Co.; Saccharin Corporation, Ltd. v. Chemische Fabrik von Heyden Aktiengesellschaft; Actiesselskabet Dampskib "Hercules" v. Grand Trunk Pacific Railway Referenced collectively by the Advocate-General in discussing English authorities on residence/jurisdiction and carrying on business. The Court observed that, on examination of the facts, in these cases (except the one noted below) the companies had been held to carry on business in England for income-tax purposes; the Court used the group to show consistency between income-tax and jurisdictional analyses on the meaning of "carrying on business."
Okura & Co., Limited v. Forsbacka Jernverks Aktiebolag Held that the company did not carry on business in England and that service of a writ on its agents was not good service. Highlighted as an example where the English authorities found no carrying on of business in the forum and therefore no valid local service — used to show alignment between income-tax and jurisdiction concepts in the Court's view.
Municipal Council of Cocanada v. The "Clan" Line Steamers, Ltd. Held that a shipping company which regularly called at Cocanada for loading/unloading, but where only a sub-agent was present and contracts with shippers were entered elsewhere, was not carrying on business in Cocanada for taxation under section 53 of the Madras District Municipalities Act. Relied on as a domestic precedent directly adverse to the appellants' case; used to support the conclusion that local presence of agents and operations ancillary to contracts does not constitute carrying on business.
Municipal Council v. Bombay Company, Ltd. Approved and followed the reasoning in the Cocanada case; held "transacting business" to be the same as "carrying on business." Reinforced the local authority that ancillary local activities do not amount to carrying on the company's business in that place.
G.D. John v. K.P. Sambamurthy Aiyar Decided that a life insurance company with head office in Bombay and a branch in Madras, where the branch had no power to enter into contracts but merely forwarded proposals and remitted moneys to head office, was not carrying on business in Madras. Described as a case with facts exactly similar to the present case and relied on by the Court as directly opposed to the appellants' contention.
Civil Suit No. 120 of 1937 (decision of Lakshmana Rao, J.) Followed the decision in G.D. John (as reported in the opinion). Noted as having followed the G.D. John decision, reinforcing the domestic line of authority applied in the present case.

Court's Reasoning and Analysis

The Court began by identifying the common-ground legal principle relevant to jurisdiction: if the company is not carrying on business in Madras, the suit cannot be maintained in the original jurisdiction of the Court since no part of the cause of action arose there. The Court emphasized that the words "carrying on business" have been subjected to extended judicial consideration and that the settled meaning is that a company carries on business where it enters into contracts relating to that business — not merely where it solicits offers or performs ancillary activities through agents or canvassers.

Applying that principle to the facts, the Court examined the nature and limits of the Madras branch's authority: although the Madras office employed a large body of canvassers, supervised them locally, arranged medical examinations, and received most premia paid in the Presidency (amounting to over Rs. 6,00,000 per year), it had no power to accept proposals for policies, to issue policies, or to authorize payments — powers that were reserved exclusively to the head office in Calcutta.

The Court surveyed authorities from England and from this Court. It relied on Grainger & Son v. Gough (Lord Herschell's formulation that mere solicitation is ancillary to the exercise of trade elsewhere), De Beers (central management and control determine where the real business is carried on), and Smidth & Co. v. Greenwood (the forum of the substantive operation that gives rise to profits is determinative). The Madras branch was equated to the London office in Smidth: it carried out ancillary functions but not the essential function of entering into contracts.

The Court also addressed the Advocate-General's list of English authorities and observed that, except for one named case (Okura), the cited English decisions, on their facts, supported the proposition that companies carried on business in England only where the real operational and contractual activities were located. The Court found no meaningful divergence between income-tax authorities and jurisdictional cases on the definition of "carrying on business."

Finally, the Court placed weight on domestic precedents (Municipal Council of Cocanada; Municipal Council v. Bombay Company; G.D. John v. K.P. Sambamurthy Aiyar and its subsequent follow-up) which directly supported the conclusion that a branch office which merely solicits proposals, forwards proposals to the head office and remits monies is not itself carrying on the company's business in that locality.

On that basis of precedent and analogy, the Court concluded that the Madras branch's activities, extensive though they were, did not amount to carrying on business in Madras within the meaning of the Letters Patent because the essential acts of entering into insurance contracts and authorizing payments were performed only at the head office in Calcutta.

Holding and Implications

Holding: The appeal is dismissed with costs. The Court holds that the respondent company is not carrying on business in Madras within the meaning of the Letters Patent; accordingly the original-jurisdiction suit could not be maintained in this Court.

Implications

  • Direct effect on the parties: The appellants' suit in the original jurisdiction is dismissed for want of jurisdiction; the appellants could have pursued their claim in a subordinate court (a course the opinion notes they did not take).
  • Broader implications: The Court's reasoning relies on established English and local authorities to apply a settled meaning of "carrying on business" — the decision applies those authorities to the facts but the opinion does not purport to announce a novel principle beyond the existing line of cases. The opinion does not discuss any expansion of precedent beyond its application to the present facts.

Source: Opinion delivered by Sir Lionel Leach, C.J., as excerpted in the provided text.

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    Pachaimmal v. Hindusthan Co-Operative Insurance Society, Limited

    Sir Lionel Leach, C.J:— The question which falls for decision in this appeal is whether the respondent company. The Hindusthan 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 31st May 1926. The deceased lived at Little Conjeeveram 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 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.

    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 elating 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.

    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 bases which have been cited in arguments in this connection. It will be sufficient to refer to the well-known case of Grainger & Son v. Gough and to two later decisions. In Grainger & Son v. Gough 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 trade in the country where he buys or makes, stores, and sells his, goods.”

    In De Beers Consolidated Mines, Limited v. Howe Lord Loreburn 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 & Co. v. Greenwood 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 operation take place from which the profits in substance arose, and, relying on the observations of Lord Herschell and Lord Watson in Grainger & Son v. Gough, 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.

    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, Limited v. Howe 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 Compagnie Generale Transatlantique v. Thomas Law & Co., Lhoneux, Limon & Co. v. Hong Kong and Shanghai Banking-Corporation, Dunlop Pneumatic Tyre Company v. Actien-Gesellschaft fur Motor und Motorfahrzeugbau vorm, Cudell & Co., Saccharin Corporation, Limited v. Chemische Fabrik von Heyden Aktiengesellschaft Actiesselskabet Dampskib “Hercules” v. Grand Trunk Pacific Railway and Okura & Co., Limited v. Forsbacka Jernverks Aktiebolag. 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 serving 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.

    There are decisions of our own Court which are also directly opposed to the appellants' case. In Municipal Council of Cocanada v. The “Clan” Line Steamers, Lid. 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 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 Municipal Council v. Bombay Company, Ltd., Ltd.. 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 facts in this case was G.D. John v. K.P. Sambamurthy Aiyar, 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 sent moneys to the head office, was not carrying on business in Madras. This decision was followed by Lakshmana Rao, J. in Civil Suit No. 120 of 1937.

    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 course was not adopted, the authorities being so emphatically against them.

    N.S

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