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Introduction
Following on the success of the corporate model at a national level, many corporations have become
transnational or multinational corporations: growing beyond national boundaries to attain sometimes
remarkable positions of power and influence in the process of globalizing. In the spread of corporations
across multiple continents, the importance of private international laws has grown many folds. Conflict of
laws, or private international law, or international private law, in common law system, is that branch of
international law and interstate law that regulates all lawsuits involving a ―foreign‖ law element, where a
difference in result will occur depending on which laws are applied.
Indian Position
The law in India is essentially based on Common Law system and English precedents. The present Indian
legal system does not contain any specific provision on any cross –border relations, but is spread over
various legislations.
Origin of a corporation
The domicile of origin in the case of a company is the country where it is registered, i.e., the place or country
of its incorporation. Thus, a company formed under the English Companies Act has an English domicile if it
is registered in England. Similarly, a company incorporated under the Indian Companies Act will have an
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Compiled by Shuchi Pandey 5th Year B.A.,LLB. (Hons) University of Burdwan
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(also known as a quasi-foreign corporation)
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Cesena Sulphur Company v Nicholson (1876), I Ex D. 428
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Indian domicile. This has been recognized by the Indian Supreme Court in the case Technip SA v. SMS
Holding (Pvt.) Ltd. & Ors4, the court observed that:
―Questions as to the status of a corporation are to be decided according to the laws of its domicile or
incorporation subject to certain exceptions including the exception of domestic public policy. This is because
a corporation is a purely artificial body created by law. It can act only in accordance with the law of its
creation. Therefore, if it is a corporation, it can be so only by virtue of the law by which it was incorporated
and it is to this law alone that all questions concerning the creation and dissolution of the corporate status are
referred unless it is contrary to public policy.‖
In addition according to Indian Income Tax Act, a company registered outside India but having its
management and control in India, is considered an Indian Company for the purpose of corporate taxation.5
The domiciles of the shareholders have no influence in determining the domicile of the company.6
American Position
If a case involving a pseudo-foreign corporation comes before an American court, the court exercises its
jurisdiction after determining the domicile of the pseudo-foreign company. There are two conflicting opinion
on what would constitute the domicile of a pseudo-foreign corporation and they are as follows:
1. The domicile of a company would be the place where it was incorporated.
2. The domicile of a company would be the place of business or where it mostly transacts.
4
2005] RD-SC 331 (11 May 2005)
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Section 2(26) of the Income-tax Act, 1961
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Private international law recognises that the fact that majority of shareholders of a company are Indians
will not make it an Indian domicile company, even if it is incorporated elsewhere. Paras Diwan, Private
International Law (New Delhi: Deep & Deep Publications, 1993) at 382. In Re Travancore National etc.
Bank Ltd., (1939) Mad. 318, Rao, J., said that the domicile of a company is the place considered by the law
to be the centre of its affairs which in the case of (1) a trading company is its principal place of business,
i.e., the place where the administrative business of the corporation is carried, and (2) in the case of other
corporations, it is the place where its functions are discharged. In short, the test of domicile of a company is
the same under the Indian law as it is under the English law. It should be kept in mind that the domicile of
the company is entirely distinct and independent from the domicile of its members or shareholders.
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Atul M Setalvald, Conflict of Law, 1st edition pg. 547
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1906 (AC) 445, 5TC 198
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AIR 1951 SC 101
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RBI vs. BCCIL, (no.1) (1992) 78 CC 207 Bom
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Also known as the Internal Affairs Doctrine.
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authority to regulate a corporation‘s internal affairs. In addition, the doctrine generally requires that the law
of the sate of incorporation govern allegations of director or officer breaches of fiduciary duty owed to the
corporation and its shareholders.12 When the rights of third parties unaffiliated with the corporation are at
issue, however, the doctrine does not apply and ordinary choice of law principles govern.
Despite this difference of opinion, one thing is absolutely clear: ―The central question in choosing the
appropriate law to govern a corporation asks whether the particular issue involved is an internal one or one
that involves third parties.
Conclusion
The nature of the corporation continues to evolve through existing corporations pushing new ideas and
structures, courts responding, and governments regulating in response to new situations. A question of
long standing is that of diffused responsibility: for example, if the corporation is found liable for a death,
then how should the blame and punishment for this be allocated across the shareholders, directors,
management and staff of the corporation, and the corporation itself?
The present law differs among jurisdictions, and is in a state of flux. Some argue that the owners of the
business - the shareholders - should be ultimately responsible for such circumstances, forcing them to
consider issues other than profit when investing, but the modern corporation may have many millions of
small shareholders who know nothing about its business activities. In addition, traders — especially
hedge funds — may rapidly turn over their partial ownership of a corporation many times a day.
12
Walton v. Morgan Stanley & Co., 623 F.2d 796, 798 n.3 (2d Cir. 1980)
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Colt Studio, Inc. vs. Badpuppy Enter, 75F.Supp.2d1104, 1107. (Quoting International shoe Co. vs.
Washington, 326U.S.310, 316 (1945).
14
Perkins vs.Benguet Consol Mining Co., 342 U.S.437 (1952)
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Burger King Corp. v. Rudzewiez, 47 1 U.S. 462 (1985).
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