bug#10307: 23.3; Shell fails to run when current-working-directory is not existant

[Ashok Gautham]

* Steps to reproduce bug
1. C-x C-f ~/nonExistant/foo.txt 

   not do this because I want to use the shell to run a command that
   (Message: Type M-x make-directory RET RET to create directory) I do
   would create this for me.

2. M-x shell
   (Message: No such file or directory) Shell does not open

* Expected Behaviour
1. Open shell with nearest parent directory that is alive
   (or)
2. Prompt for the working-directory for shell
   (or in the worst case)
3. Die with an Error: Shell cannot work without an existing current
   directory