JURISTIC PERSON

FINAL DRAFT OF RESEARCH PROPOSAL FOR THE

PARTIAL FULFILLMENT OF JURISPRUDENCE II

Juristic Person

Submitted To – Dr. Manoranjan Kumar

Submitted By – Bhargavi Mishra

Roll no. – 1524

6th Semester, 3rd Year

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ACKNOWLEDGEMENT

I take this opportunity to express my profound gratitude and deep regards to my guide Dr.
Manorajan Kumar for his exemplary guidance, monitoring and constant encouragement
throughout the course of this project. The blessing, help and guidance given by his from time
to time shall carry me a long way in the journey of life on which I am about to embark.

I also take this opportunity to express a deep sense of gratitude to my seniors, the library staff
and my friends for their valuable information and guidance, which helped me in completing
this task through various stages.

I would also thank my Institution and my faculty members without whom this project would
have been a distant reality. I also extend my heartfelt thanks to my family and well wishers.

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AIMS AND OBJECTIVES

The objective of this research project is to –

1. Learn about the definition of persons and its kinds.

2. Know the difference between Natural Person and a Juristic Person.
3. Critically examine the rights and liabilities of Juristic Person.

HYPOTHESIS

Awarding Corporations a Juristic Personality causes more liability than gain to Judicial
system.

SCOPE AND LIMITATION

This Project is limited in its exhaustiveness due paucity of time and limited area available in
research.

RESEARCH METHODOLOGY

This study involves the use of doctrinal method of research. The information will be gleaned
from various books on the subject of Jurisprudence and Legal Rights, articles and published
research works.

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TABLE OF CONTENTS

CHAPTER 1: INTRODUCTION..................................................................................5

CHAPTER 2: DEFINITION OF PERSON...................................................................6

CHAPTER 3: KINDS OF PERSON..............................................................................9

NATURAL PERSONS..............................................................................................9

LEGAL PERSONS..................................................................................................11

CHAPTER 4: ORIGIN OF THE CONCEPT OF JURISTIC PERSON......................13

CHAPTER 5: KINDS OF JURISTIC PERSON..........................................................15

CHAPTER 5: THEORIES OF CORPORATE PERSONALITY................................21

CHAPTER 6: CONCLUSION AND SUGGESTION.................................................25

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CHAPTER 1: INTRODUCTION

The main object of law is to regulate the relationship between individuals in the society. The
validity of the acts and omissions of persons is determined on the basis of their
reasonableness. All these acts which do not adversely affect the interest of others are held to
be lawful whereas the acts which interfere with for the protection of interests of mankind.
Therefore rights and duties form the basis for judging legality of man’s acts. The law imposes
liability for unreasonable and unlawful acts, the enforcement of which is ensured through
legal sanctions. The law being concerned with regulating the human conduct, the concept of
Juristic personality constitutes an important subject matter of jurisprudence for there cannot
be rights and duties without a person.

The term juristic people, also used as persona ficta or personne morale are the terms most
generally employed to designate the organization through which corporate action is affected 1.
Those which exist for the purpose of administering governmental powers are known as public
corporations. Those which are conducted for the purpose of enriching private individuals are
known as private corporations. For the purposes of the present inquiry the distinction is not
important, our problem being to determine the nature of the person, being, or group, through
which the will of the collection of members of the corporation finds expression. Personality is
considered therefore, an attribute not only of men, but of groups of men, acting as a unit for
the attainment of a common end. This person, which is not a human being, is called
technically, a juristic person to distinguish it from the physical personality of mankind. The
collective will of a group of men so acting and holding property, when recognized as a
subject of law, or as having legal subjectivity, or more plainly, when recognized as capable of
holding definite legal rights, is no more a fiction than is the personality of any human being.
This juristic person, or collective will of the group is endowed with definite legal capacity. It
is capable of exercising rights, capable of committing wrongs; the former, it may vindicate;
the latter it must pay for. This most important feature of the juristic or corporate personality is
known in legal terms as the body corporate', and in the Indian Companies Act, 1956 we see
that this term has been defined in Section 2(7) where it has been specified what can be
included under the term, body corporation.

1
Greenough and Kittredge Words and their ways in English speech p 268, quoted by Ogden and
Richards The Meaning of Meaning p 129.

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CHAPTER 2: DEFINITION OF PERSON

The word "person" is derived form the Latin word “persona”. This term has a long history.
To begin with, it simply meant a mask. Later on, it was used to denote the part played by a
man in life. After that, it was used in the sense of the man who played the part. In later
Roman law, the term persona 2. Last of all the term is used in the sense of a being who is
capable of sustaining rights and duties.3

Many definitions of persons have been given by various jurists, they have defined “persons
” in different ways.

The German jurist LITELMANA considers “mil” as the essence of legal personality. To
quote him “personality is the legal capacity of will, the bodiliness of men for their
personality a wholly irrelevant attribute ”.

SALMOND defines a “person ” as, “any being to whom the law regards as capable of rights
or duties Any being that is so capable, is a person whether human being or not and nothing
that is no so capable is a person even though he be a man ”4.

According to PATON, a legal personality is a particular device by which law creates units to
which it ascribes certain powers. It is merely a convenient juristic device by which the
problem of organizing rights and duties is arised out. He also defines legal personality is a
medium through which some such units are created in whom rights can be vested.

According to GRAY, a person is “an entity to which rights and duties may be attributed”.

2
Duff Personality in Roman private Law ch. 1
3
Hart, ‘Definition and theory in Jurisprudence’ (1954) 70 LQR 37
4
SALMOND : Jurisprudence (12l1' Ed) P.229

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According to the German writers: “will is the essence of a personality. A legal person is one
who is capable of will”.

According to MEURER, ‘The jurists conception of the juristic person exhausts itself in the
will and the so called physical persons are for the law only juristsic persons with a physical
'super fluim .

According to KARLOWA, “the body is not merely the house in which the human
personality dwells, it is together with the soul which now for his life is inseparably bound
-with it, the personality. So, not only as a being which has the possibility of willing but as a
being which can have manifold bodily and spiritual needs and interests as a human center
of interests, is a man, a person”.

According to the English and American jurists, a person must have not only a “corpus” but
also “an animus ”. Mere “animus ” or will is not enough. A person is one who has rights
and duties. It is something which can own rights and is capable of doing acts which affect
the rights of others.

S A VIGNY has defined the term "person” as the “subject or bearer of a right" but, as
pointed out by HOLLAND5, this definition is not exhaustive. Rights avail against persons as
much as they are reposed in them.

A person is not necessarily a human being. There may be human beings who are not persons.
Slaves are not person sin the legal sense as they cannot have rights. In the same way, there
may be persons who are not human beings. This is particularly so in the case of corporations.

According to the Hindu law, idols are legal person. Although they have a personality in the
eye of law, they are not human beings. The term “personality ” has a wider significance than
humanity. Under the Indian penal code the word person includes any company or
association, or body of persons, whether incorporated or not. 6

In the philosophical sense, personality is the basis of human being. In the legal sense, it is the
capacity of being a “right and duly hearing unity”. Legal personality is a device by which
law creates units to which it attributes certain legal rights and duties. Legal personality is an
artificial custom of law.

5
Holland, Jurisprudence (9th Ed. 1900) 88
6
Pollock, A First Book of Jurisprudence (1923) 114.

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Thus “person” in juristic term are of two kinds namely natural and legal. The former are
human beings capable of rights and duties. Legal persons are beings who may be real
“natural” or imaginary “artificial” in whom law vests rights and duties and thus attributes
personality by way of fiction.

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CHAPTER 3: KINDS OF PERSON

There are two kinds of person.

NATURAL PERSONS
A natural person is a living human being. But all living human beings need not necessarily
be recognized as persons in law.

According to HOLLAND7, “ a natural" persons is “such a human being as is regarded by

the law as capable of rights and duties in the language of Roman law, as having a status

According to another writer, natural persons are “living human beings recognized as persons
by the state The first requisite of a moral human being is that he must be recognized as
possessing a sufficient status to enable him to possessing a sufficient status to enable him to
possess rights and duties8. A slave in Roman law did not possess a personality sufficient to
sustain legal rights and duties. Inspite of that, he existed in law because he could make
contracts which under certain circumstances were binding on his master. Certain natural
rights possessed by him could have legal consequences if he was manumitted. Likewise, in
Roman law, an exile or a captive imprisoned by the enemy forfeited his rights. However, if
he was pardoned or freed his personality returned to him. In the case of English law, if a
person became an outlaw he lost his personality and thereby became incapable of having
rights and duties.

The second requisite over, he must possess essentially human characteristics.

For example, before the abolition of slavery, the slaves were considered as ‘res’’ and were
devoid of any legal personality for they could have no rights and duties. Again lunatics and
infants have a restricted legal personality. They do not have civil rights such as right to vote,
etc.9

7
Supra Note 5
8
Austin, Lectures on Jurisprudence, 3rd ed, Campbell, London, 1869, pp. 357-358
9
Gray, The Nature And Sources Of The Law (2d Ed. 1921) 27

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In other words, a natural person is a human being. But all human beings are not legal
persons. In olden days tire slaves were not considered legal persons. Tire case of the slave is
well known that they were treated no more than the mere chattels. Similarly, a person who
takes a religious or holy order or enters a monastery has in certain system been treated as
civilly dead.

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In Hindu society, too, when a person becomes a “sanyasi" his proprietary rights
extinguish and his property goes to his heirs as if he were dead. At one time, human
beings who had been declared "outlaws " were not regarded as persons in the eyes of
the law and killing them was not homicide. Lunatics, new born babies and infants,
have, however, been said to have limited and restricted rights. They do not possess as
many civil rights as nor mal human beings do have. Though in modern times, it has
been the tendency to grant legal personality to all living within the territory of the state,
the most systems, however provide a rule that wheresoever legal personality is granted
it begins at birth and ends with death.

Important persons and outcastes are excluded from a share of the heritage; and so are
persons born blind and deaf; as well as mad men, idols, the dumb and those who have lost
a sense of a limb.

According to HOLLAND10, ‘natural person” is "such a human being as is regarded by

the law as capable of rights and duties - in the language of Roman law, as having a
status

According to another writer, natural persons are “living human beings recognized as
persons by the state”. The first requisite of a normal human being is that he must be
recognized as possessing a sufficient status to enable him to possess rights and duties.

A slave in Roman law did not possess a personality sufficient to sustain legal rights and
duties11. Inspite of that, he existed in law because he could make

10
Supra Note 5
11
Allen, Legal Duties, 28

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contracts which under certain circumstances were binding on his master. Certain natural
rights possessed by him could have legal consequences if he was manumitted. Likewise,
in Roman law, an exile or a captive imprisoned by the enemy forfeited his rights.
However, if he was pardoned or freed, his personality returned to him.

LEGAL PERSONS

Legal persons are real or imaginary beings to whom personality is attributed by law by way
of ‘'fiction ” whereas it does not exist in fact.

Juristic persons are also defined as these things, mass or property, group of human beings or
an institution upon whom the law has conferred a legal status and who are in the eye of law
capable of having rights and duties as natural persons.

Law attributes by legal fiction a personality o some real thing. A fictitious thing is that
which does not exist infact but which is deemed to exist in the eye of law.

There are two essentials of a legal person and these are :

i) The corpus. And

ii) The animus.

The corpus in the body into which the law infuses the animus, will or intention of a fictitious
personality.

The animus is the personality or the will of the person. There is a "double fiction ” in a
juristic person is created or made an entity. By the second fiction, it is claimed with the will
of a living being.

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Juristic persons come into existence when there is in existence a thing, a mass of property an
institution or a group of persons and the law attributes to them the character of person. This
may be done as a result of an act of the sovereign or by a general rule prescribed by the
government.

A legal person has a real existence but its personality is fictitious. Personification is
essential for all legal personality but personification does not create personality.
Personification is a mere metaphor. It is used merely because it simplifies thought and
expression.

A firm, a jury, a bench of judges or a public meeting is not recognized as having a legal
personality. The animus is lacking in their case.

According to SALMOND, a legal person is any subject mater other than a human being to
which the law attributes personality. This extension for good and sufficient reasons of the
concept of personality beyond the class of human .beings is one of the most noteworthy
feats of the legal imagination.

The law in creating legal persons, always does so by personifying some legal thing.
Personification, however, conduces go greatly to simplicity of thought and speech that its
aid is invariably accepted. The thing personified may be termed the corpus of the legal
person so created; it is the body into which the law infuses the animus of a fictitious
personality.

Therefore, SALMOND rightly remarked that although all legal personality involves
personification, the converse is not true. It simply mean that personality is a definite legal
devised for compnendour expression. It is for the law only to recognize an entity as a legal
person by devolving personality upon that entity. This devolving of personality is known as
personification but this does not mean that all types of personification mean legal
personality.

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CHAPTER 4: ORIGIN OF THE CONCEPT OF JURISTIC

PERSON

The word “person ” is derived from the Latin word "persona ” which meant a mask worn
by actors playing different roles in a drama. Until sixty century the word was used to denote
the part played by a man in life. Thereafter, it began to used in the sense of a living being
capable of having rights and duties.

Many writers have restricted the use of the term “personality ” to human beings alone
bcause it is only thy who can be subject-matter of rights and duties, and therefore of juristic
personality. But it must be stated that the term has a far wider connotation in law and
includes gods, angles, idols12, corporation, etc. though they are not human beings.
Conversely, there may be living persons such as slaves, who are not treated as “person” law
because they are not capable of having rights and duties. Likewise, in Hindu law an ascetic
"sanyasi ” who has renounced the world ceases to have any proprietary rights and his entire
estate is passed on his heirs and successors and his legal personality is completely lost.

All modem times relating to personality resemble one another in one way to the other
because they are derived form the same origin.

The term "personality” in English "personalite" in French, “personlichkeit”, in German are

all derived form the classic Latin word "persona” which originally meant the theatrical
mask put on by the Greek actors on stage while acting in a drama. But this concrete noun
says ALLPORT, got converted and transformed itself into one that is abstract and multiple
in meaning. This gave rise to as many as fifty interpretations of the term “personality”
which have been discussed in detail by G.W.ALLPORT.

The theologist used the term "personality" to designate “the members of the trinity” and
later on the trinity were designate as "personae

The philosophers made in equal to true essence of life laying more emphasis upon
nationality. Some of the philosophers twisted it to the side of ethics and maintained that
"personalty" may be regarded as an ethical rather than a metaphysical conception. There are
12
SALOMAN V. SALOMAN (1897) A1 22

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still thinkers who-consider personality as "the ideal and perfect attribute of 'being’ - never
fully attained by human kind",

To LOTZE personality was "the dieal ofperfection”. The conception of personality as an

ideal is exalted still further in Ramaticism.

GOETHE regarded personality as the "supreme value Jurists did not lag behind. They
interpreted it as "any individual enjoying legal status", And consequently individuals
material possessions with which the law like wise had concerned came to be known as his
“personality”.

The sociologists made it equal to the individual himself. For them “personality” is the
integration of all traits which and status of the person in society. Personality, therefore, was
interpreted as social effectiveness. The psychologists put it equal to the assemblage of
personal qualities.

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CHAPTER 5: KINDS OF JURISTIC PERSON

In England, there are two types of juristic persons:

1) Corporation sole, and

2) Corporation aggregate.

The origin and the course of evolution of the two are quite different, therefore, it
necessitates their discussion separately.

Corporation Sole

It consists of series of successive persons, one member at a time, e.g. sovereign, post master
general, secretary of state for war, etc. It is a natural person performing the duties of a
mythical person, who never dies or retires. The living official is only an agent or
representative through whom the legal person of corporation sole performs his duties. In
another words, corporation sole is an incorporated series of successive persons. It consists
of a single person who is personified and regarded by law as a legal person. - A single
person, who in exercise of some office or function, deals in the legal capacity and has rights
and duties. A corporation sole is perpetual. The examples of corporation sole are:-

a) Sovereign - crowd, king, emperor

b) The post master general
c) The solicitor to the treasury
d) The secretary of the state of war
e) The minister of education
f) Public trustee
g) Comptroller & auditor general of India
h) Archbishop
i) Minister of health, etc.

A corporation sole is distinguished form “a mere succession of officers or persons

exercising the same rights".

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A Prof. GRAY pointed out, "if a corporation sole exists, an occupant of an office can
generally acquire property of the benefit of this successors as well as himself he can
generally recover for injury inflicted on property pertaining to the office while such
property was in the hands of his predecessor and he can sometimes enter into a contract
which will bind or endure to the advantage of his successors’’.

A corporation sole does not require a seal but a corporation aggregate can act or express its
will only by a deed under the common seal. The existence of common seal is the evidence of
incorporation and the non existence of a common will is an evidence against in corporation.
A corporation can change its seal at will.

According to DIAS and HUGHES, the main purpose of the corporation sole is ro ensure
continuity. It avoids any obeyance "in siesisn” moreover, the occupant of the office can
acquire property for the benefit of his successors. He may contract to bind or benefit them.
He can sue for injuries to the property while it is in the hands of the predecessor.

Generally, corporation sole are the holders of a public office which are recognized by law as
corporation. The chief characteristic of a corporation is its "continuous entity endowed with
a capacity for endless duration ”.

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A corporation sole is an illustration of "double capacity”. For instance, the King of

England exercises the function of the crown and in his capacity as the constitutional head,
he can confer rights and duties upon himself as an individual. The natural person may thus
owe a duty to himself as a legal person. Same is the position of the President of India. As
regards the British crown it is generally said, "the king is dead, long live the king". This
proverb indicates the double capacity of the crown as a natural person, i.e individual, while
the latter part expresses his position as a legal personality. In simple word, it means that
even after the death of the king; his legal as a crown remains in existence as a corporation
sole.13

According to DIAS and HUGHES, “a question that is also asked is whether a corporation
can survive the last of its members. Prof. GOVER mentions a case in which all the
members of the company were killed by a bomb while at a general meeting, but the
company was deemed to survive

The object of corporation sole is similar to that of corporation aggregate. In it a single

person holding a public office holds the office in a series of succession, meaning thereby
that with his death, his property, rights and liabilities, etc. do not extinguish but they are
vested in the person who succeeds him. Thus, on the death of a corporation sole, his natural
personality is destroyed but legal personality continues to be represented by the successive
person. In consequence, the death of a corporation sole does not adversely affect the
interests of the public in general.

Corporation aggregate

A corporation aggregate is an incorporated group of co-existing persons. It has several

members at a time. It is a artificial or fictitious persons constituted by the personification of
a group of individuals. The individuals forming the corpus of the corporation are called its
members.A corporation aggregate is an "association of human beings united for the
purpose of forwarding their certain interest14s Limited companies are the best example of a
corporation aggregate. Such a company is formed by a number of persons who as
shareholders of the company contribute or promise to contribute to the capital of the
company for furtherance of a common object. Their liability is limited to the extent of their

13
SJ Stoljar Groups and Entities: An Inquiry into Corporate Theory (ANU Press, Canberra, 1973) 183
14
Gunter Teubner "Enterprise Corporatism: New Industrial Policy and the 'Essence' of the Legal
Person" in Sally Wheeler (ed) A Reader on the Law of the Business Enterprise (Oxford University
Press, Oxford 1994) 51

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share-holding in the company. A limited company is thus formed by the personification of

the shareholders. The property of the company is not that of the shareholders but its own
property and tis assets and liabilities are different from that of its members. The
shareholders have a right to receive dividends for the profits of the company but not the
property of the company15. For certain purposes, company has an independent existence
from those of its members16. It is for this reason that the company may become insolvent
but its members may still be rich and wealthy. Conversely, the insolvency of the members
does not adversely affect the company and it may continue to have a flourishing business.
The death of members does not finish the existence of the company. 17

GROWER elites a unique example of this and writes that in the general meeting of a
company all the members died due to bomb explosion but it did not affect the existence of
the company and it continued functioning as before

It must, however, be noted that a partnership firm is not a company in the eyes of law. It
represents only aggregate of the individual members. The existing partners own the property
and the debts. There cannot be one-man firm but there can be a one-man company as held in
the historic Saloman case18. This judgment established the principle of corporate personality.

The facts of the case are that one Saloman was carrying the business of boot and shoe
manufacture. He incorporated a company named “Saloman & Co Ltd. ” With seven
subscribers consisting of himself, his wife, four sons and one daughter. The company took
over the personal business assets of Saloman for $38,782 and in turn, Saloman took 20,000
share of $ 1 each, debentures worth $ 10,000/- of the company’s assets and the balance in
cash. His wife, four sons and a daughter took $1 share each. Subsequently, the company
went into liquidation due to general trade depression. There were various unsecured
creditors, who contended that Saloman could not be treated as a secured creditor of the
company in respect of the debenture held by him, as he was the managing director of one-
man company, which was not different from Saloman and the clock of the company was a
mere shame and fraud, Lord MAC NAUGHTEN observed:

“When the memorandum is duly signed and registered, though there be only seven shares,
taken, the subscribers are a body corporate exercising all the functions of an incorporated

15
Saloman V. Saloman & Co. (1887)
16
' Colonial Bank V. Whilley, (1885) 30 Ch. D.261
17
GOWER : Modern Company Law, P.72

18
Salomon v Salomon, 1897, AC 22

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company... the company is at law a different person altogether from subscribers to the
memorandum, and though, it may be that after incorporation the business is precisely the
same as it was before and the same persons are managers, and the same hands receive the
profits; the company is not in law the agent of the subscribers or trustees of them. Nor are
the subscribers, as members liable, in any share or form except to the extent and in the
manner provided by the companies act19.

Thus, it was decided in this case that a corporate body has its own existence or personality
separate and distinct from its members and, therefore, a shareholder cannot be held liable for
the acts of the company even though he hold virtually the entire share capital. Tire case also
recognized the principle of limited liability of a company. Thus, where a shareholder has
already paid the full amount on the shares and is the holder of full-paid shares, he cannot be
required to pay anything more to help to meet the obligation of the company.

The legal statues and position of company has been aptly described by the supreme court of
India in Tata Engineering & Locomotive Company Ltd., V State of Bihar 20. The court
observed, ‘the corporation in law is equal to a natural person and. has a legal entity of its
own”. The entity of the corporation is entirely separate from that of its shareholders and its
assets are separate from those of its shareholders.

According to HALSBURY’s laws of England a corporation aggregate is a collection of

individuals united into one body under a special domination having perpetual succession
under an artificial form and vested by the policy of the law with the capacity of acting in
several respects of an individual, liberty of taking and granting property, of contracting
obligations and of suing and be sued, of enjoying privileges and immunities in common dnd
expressing a variety of political rights more or less extensive, according to the decision of its
institution or the powers conferred upon it either at the time of its creation or at any
subsequent period of its existence21.

19
Meridian Global Funds Asia Ltd v Securities Commission [1995] 2 AC 500. See JH Farrar
Corporate Governance: Theories, Principles and Practice (2 ed, Oxford University Press, Melbourne,
2004) ch 5.

20
Tata Engineering & Locomotive Company Ltd., V State of Bihar
21
Adolf A. Berle, Jr, The Theory of Enterprise Entity, Columbia Law Review, Vol. 47, No. 3 (Apr.,
1947), pp. 343-358

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There are following ingredients of a corporation aggregate :-

a) It is an artificial or fictitious or a legal person existing in the eye of

law.
b) It has legal entity quite distinct and separate from its members.
c) It has perpetual succession.
d) It is the owner of its property.
e) It has common seal.
f) It can enter into contracts and can incur obligations.
g) It an sue and be sued.

SALMOND says that corporation aggregate are by far the more and numerous and important
examples of such types of corporations are as under:-

a) Joint stock companies constituted under the companies act.

b) Corporations constituted under special acts of parliament, for
example:-
i) State Bank of India,
ii) Life Insurance Corporation of India,
iii) State Trading Corporation of India
iv) Reserve Bank of India
c) A municipal corporation “in England".
d) Companies or corporations created by Royal Charter e.g. East India
Company established in 1600.

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CHAPTER 5: THEORIES OF CORPORATE PERSONALITY

In Jurisprudence, discussion on the nature of corporate personality has always become one of
the major focuses. Even though there are many theories which attempt to explain the nature
of corporate personality, none of them is said to be dominant. It is contented that while each
theory contains elements of truth, none can by itself sufficiently interpret the phenomenon of
a juristic person.
The acceptance of the corporate personality of a company basically means that another non-
human entity is recognized to assume a legal entity. Although this theory has been accepted
as a well-established principle it is actually essentially a metaphorical usage of language,
clothing the formal group with a single separate legal entity by analogy with a natural
person.22
Majority of the principal jurisprudence theories on corporate personality contented that the
legal entity of the corporation is artificial. The separate legal personality of corporation is
based upon theories which are concentrated upon the philosophical explanation of the
existence of personality in beings other than human individuals 23. There are various theories
of corporate personality which have attempted to theorize the nature and authority of it. This
might make one to gather that theoretically all the legal problems regarding persons have
been fully explored but this is not true. There is a great divergence between theory and
practice. Any one theory alone is not capable of solving the problems fully.
Therefore, the courts have not followed any one theory consistently. The reason of gap
between theory and practice is that the theorists have kept themselves more occupied with
either a philosophical explaination of legal personality, or in making it to fit in some political
ideology than with the practical problems. Even though there are many theories which
attempted to explain the nature of corporate personality none of them is said to be dominant.
It is claimed that each theory contains elements of truth; none can by itself sufficiently
interpret the phenomenon of juristic person. The following are the principal theories of
corporate personality:
1. Fiction Theory
2. Realist Theory
3. Concession Theory
22
Maitland F.W, Introduction to Gierke‟s Political Theories of the Middle Age; F. Hallis Corporate
Personality, 1stEd. 1913 page 137; 146
23

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4. Bracket Theory or Symbolist Theory

5. Purpose Theory

PURPOSE THEORY

This theory, that of Brinz primarily, and developed in England by Barker24, is based
on the assumption that ‘person’ is applicable only to human beings; they alone can
be the subjects of jural relations. The so-called ‘juristic’ persons are not persons at
all. Since they are treated as distinct from their human sub-stratum, if any, and since
jural relations can only vet in human beings, they should be regarded simply as
‘subjection properties’ designed for certain purposes. It should be noted that this
theory assumes that other people may owe duties towards these ‘subjection
properties’ without there being correlative claims, which is not impossible, although
critics have attacked the theory on this ground. As applied to ownership, the idea of
the theory was designed mainly to explain the foundation, the Stiftung of German
law. And it would also explain the vacant inheritance, the hereditas jacens, of
Roman law. It is not applicable to English law. Judges have repeatedly asserted that
corporations, for instance are ‘persons’, and it is in this use of the word that need
explaining. If they say that these are persons, then to challenge this usage would
amount simply to using the word differently from Judges.

To Duguit ‘purpose’ assumed a different meaning. To him the endeavour of law in

its widest sense is the achievement of social solidarity. The question is always
whether a given group is pursuing a purpose which conforms with social solidarity.
If it does, then all activities falling within that purpose deserve protection. He
rejected the idea of collective will as unproven; but there can be, he said, a collective
purpose.25

24
Brinz Lehrbuch der Pandekten 1. Pp 196-238; III, pp 453-586; Barker in his translation of Gierke
Natural Law and the Thoery of Society Ixxiii-Ixxxvii.
25
Duguit The progress of continental law in the 19th century. Pp 87-100

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THEORY OF ENTERPRISE ENTITY

Related, though somewhat removed from the above discussed theory, is the theory of
the enterprise entity. The corporate entity, it is said, is based on the reality of the
underlying enterprise26. Approval by law of the corporate from establishes a prima
facie case that the assets, activities and responsibilities of the corporation are part of
the enterprise. Where there is no formal approval by law, the existence, and extent of
responsibility and so forth of the unit are determined by the underlying enterprise.
This way of looking at it does explain the attitude of the law towards unincorporated
associations and also leaves room for the miscellaneous situations in which corporate
unity is ignored. The theory is a utilitarian one.

SYMBOLIST OR BRACKET THEORY

According to Ihering the members of a corporation and the beneficiaries of a

foundation are the only persons. ‘Juristic person’ is but a symbol to help in
effectuating the purpose of the group, it amounts to putting a bracket round the
members in order to treat them as a unit. This theory, too, assumes that the word
person is confined to human beings. It does not explain the foundations for the
benefit of mankind generally or for animals. Also- and this is not so much as an
objection as a comment- this theory does not purport to do more than to say what the
facts are that underlie propositions such as, ‘X and Co.’ owe Y certain amount of
money. It takes no account of the policy of the Courts in the varying ways in which
they use the phrase. ‘X and Co.’; whether they will, for instance, lift the mask, i.e.
remove the bracket, or not. Closely related to this theory is that of Hohfeld, which
may be considered next. .

26
Berle ‘The theory of enterprise entity’(1947) 47 Columbia Law Review 343; Lord Wilberforce in
British Railway Board v Herrington [1972] AC 877 at 911, 922 [1972]1 All ER 749 at 769, 779;
DHN Food Distributers ltd. v Tower Hamlets London Borough Council [1976] 3 All ER 462, [1976] 1
WLR 852.

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HOHFELD’S THEORY

Hohfeld27 drew a distinction between human beings and ‘juristic persons’. The latter,
he said, are the creation of arbitrary rules of procedure. Only human beings have
claims, duties, powers and liabilities; transactions are conducted by them and it is
they who ultimately become entitled and responsible. There are, however, arbitrary
rules which limit the extent of their responsibility in various ways, e.g. to the amount
of the shares. The ‘Corporate person’ is merely a procedural form, which is used to
work out in a convenient way for immediate purposes a mass of jural relations of a
large number of individuals., and to postpone the detailed working out of these
relations among the individuals inter se for a later a more appropriate occasion.

This theory is purely analytical and like the preceding one, analyses a corporation out
of existence. Although it is reminiscent of a person who fails to see a wood and sees
onlu a collection of trees, it would be unfair to suggest that Hohfeld was advocating
that corporations should be viewed in this way. He was only seeking to reduce the
corporate concept to ultimate realities. What he said was that the use of the group
terminology is the means of taking account of mass individual relationships. It is to
be noted. However, that he left unexplained the inconsistencies of the law; his theory
was not concerned with that aspect of it. Finally, to say that corporate personality is a
procedural form may seem to be rather a misleading use of the word ‘procedural’.
What seems to be meant is that the unity of a corporation is a convenient way of
deciding cases in court.

KELSEN’S THEORY

Kelsen28 began by rejecting, for purposes of law, any contrast between human beings
as 'natural persons' and 'juristic persons'. The law is concerned with human beings
only in so far as their conduct is the subject of rules, duties and claims. the concept
27
Hohfeld Fundamental Legal Conceptions chs 6 and 7.
28
Kelsen General theory of law and State pp 93-109; Pure Theory of Law pp 168-192

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 JURISTIC PERSON

of 'person' is always a matter of law; the biological character of human beings is

outside its province. Kelsen also rejected the definition of person as an 'entity' which
'has' claims and duties. The totality of claims and duties is the person in law; there
is no entity distinct from them. Turning to corporations, he pointed out that it is the
conduct of human beings that is the subject matter of claims and duties. A
corporation is distinct from one of its members when his conduct is governed not
only by claims and duties, but also by a special set of rules which regulates his
actions in relation to the other members of the corporation. It is this set of rules that
constitutes the corporation. For example, whether the contract of an individual
affects only him or the company of which he is a member will depend on whether or
not the contract falls within the special set of rules regulating his actions in relation
to his fellow members.

This theory is also purely analytical and accurate as far as it goes. It omits the policy
factors that bring about variations in the attitude of the courts, and it does not explain
why the special set of rules, of which Kelsen spoke, is invoked in the case of
corporations, but not in partnerships. In fairness to Kelsen it must be pointed out that
he expressly disclaimed any desire to bring in the policy aspects of the law. All he
was concerned to do was to present a formal picture of the law, and to that extent he
did what he set out to do.

FICTION THEORY

Its principal supporters are Savigny and Salmond.29 Juristic persons are only treated
as if they are persons, ie human beings. It is thought that Sinibald Fieschi, who
became Pope Innocent IV in 1243, was the first to employ the idea of persona ficta;
'cum collegium in causa universitatis fingatur una persona30'. It is clear that the
theory presupposes that only human beings are 'properly' called 'persons'. Every
single man and only the single man is capable of rights', declared Savigny 31; and
29
Salmond Jurisprudence 7th edition s 114
30
Gierke Das deutsche Genossenschaftsrecht III, 279 n 102
31
Savigny System des heutiden romischen Rechts II, 2-3

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 JURISTIC PERSON

again, ‘The original concept of personality must coincide with the idea of man’ 32.
The theory appears to have originated during the Holy Roman Empire and at the
height of Papal authority. Pope Innocent's statement may have been offered as the
reason why ecclesiastical bodies could not be excommunicated or be capitally
punished. All that the fiction theory asserts is that some groups and institutions are
regarded as if they are persons and does not find it necessary to answer why. This
gives it flexibility to enable it to accommodate the cases in English law where the
mask is lifted and those where it is not, cases where groups are treated as persons for
some purposes but not for others. The popularity of this theory among English
writers is explained partly by this very flexibility, partly by its avoidance of
metaphysical notions of ‘mind’ and 'will,' and partly by its nonpolitical character.

CONCESSION THEORY

This is allied to the fiction theory and, in fact, supporters of the one tend also to
support the other. Its main feature is that it regards the dignity of being a 'juristic
person' as having to be conceded by the state, i.e. the law. The identification of 'law'
with 'state' is necessary for this theory, but not for the fiction theory. It is a product
of the era of the power of the national state, which superseded the Holy Roman
Empire and in which the supremacy of the state was emphasised. It follows,
therefore, that the concession theory has been used for political purposes to
strengthen the state and to suppress autonomous bodies within it. No such body has
any claim to recognition as a 'person.' It is a matter of discretion for the state. This
is consistent with the deprivation of legal personality from outlaws; but on the other
hand it is possible to argue that the common law corporations of English law
discredit it somewhat though, even with these, there is a possibility of arguing that
they are persons by virtue of a lost royal grant.

32
Savigny II, 60.

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 JURISTIC PERSON

REALIST AND ORGANISM THEORY

The 'realist' theory, of which Gierke is the principal exponent and Maitland a
sympathizer33, asserts that 'juristic persons' enjoy a real existence as a group. A
group tends to become a unit and to function as such. The theory is of German
origin. Until the time of Bismarck, Germany consisted of a large number of separate
states. Unification was their ideal, and the movement towards it assumed almost the
character of a crusade. The very idea of unity and of collective working has never
ceased to be something of a marvel, which may be one reason for the aura of
mysticism and emotion which is seldom far from this theory. The ‘realist’ theory
opposes the concession theory. Human beings are persons without any concession
from the state and, so the argument runs, so far as groups are 'real,' they too are
automatically persons.

The 'organism' theory, with which the 'realist' theory is closely associated, asserts
that groups are persons because they are 'organisms' and correspond biologically to
human beings. This is based on a special use of the term 'organism' and the
implications of such biological comparison can lead to absurdity 34. It is said that
they have a 'real life'. Professor Wolff points out that if this were true, a contract
between two companies whereby one is to go into voluntary liquidation would be
void as an agreement to commit suicide 35. It is also said that they have a 'group will'
which is independent of the wills of its component members. Professor Wolff has

33
Frederic William Maitland, The Collected Papers of Frederic William Maitland, ed. H.A.L. Fisher
(Cambridge University Press, 1911). 3 Vols. Vol. 3. Chapter: THE CORPORATION SOLE 1
Accessed from <http://oll.libertyfund.org/title/873/70325> on 20-02-2012
34
Discussed by Wollf pp 498-499. See, however, Denning LJ in HL Bolton (Engineering) co. Ltd. v
TJ Graham and Sons Ltd. [1957] I QB 159 at 172, [1956] 3 All ER 624 at 630. A ‘realist’
interpretation can be given to certain aspects of English Law, eg when a corporation is said to act,
‘personally’ through its supreme directorate. Also Riverston Meat Co. Pty Ltd. v Lancashire Shipping
Co. Ltd. [1961] AC 807 at 861, [1961] I All ER 495 at 516.
35
M. Wolff, “On the Nature of Legal Persons”, (1938) 54 Law Quarterly Review 494.

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 JURISTIC PERSON

pointed out that the 'group will' is only the result of mutually influenced wills 36,
which indeed every fictionist would admit. To say, on the other hand, that it is a
single will is as much a fiction as ever the fictionists asserted. As Gray, quoting
Windscheid, said, 'To get rid of the fiction of an attributed will, by saying that a
corporation has a real general will, is to drive out one fiction by another37.

It has also been stated that group entities are 'real' in a different sense from human
beings. The 'reality' is physical, namely the unity of spirit, purpose, interests, and
organisation. Even so, it fails to explain the inconsistencies of the law with regard to
corporations. Connected with the realist theory is the 'Institutional' theory which
marks a shift in emphasis from an individualist to a collectivist outlook. The
individual is integrated into the institution and becomes part of it. The 'pluralist' form
of this theory allowed the independent existence of many institutions within the
supreme institution of the state. The 'fascist' form of it, however, gave it a twist so as
to make the state the only institution, which integrated all others and allowed none to
survive in an autonomous condition.

36
ibid.
37
Gray pp 54-55.

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CHAPTER 6: CONCLUSION AND SUGGESTION

The law finds it difficult to deal with collective ownership and collective actions with
collective group of persons as a single legal entity. There were practical difficulties in
making numerous individuals as parties to a suit against the group. This problem has been
mitigated by the incorporation of the collective group as a corporate entity which an sue or
be sued without making each of its members party to the suit. There are numerous other
advantages too, Incorporation greatly simplifies legal procedure, enabling persons to sue a
single incorporated body rather than numerous individuals. The corporation, on its part, can
also sue as a single legal person, The death or withdrawal of member or members does not
disturb the existence of an incorporated body. The members may come and go but the
corporation continues perpetually for ever, The financial liability of shareholders is limited
only to the extent of their shareholding and not beyond it, An incorporated body being a
legal entity, can freely dispose off its property in its own name. Its property is clearly
distinguished from that of the shareholder’s property and Incorporation helps the growth of
commerce and industries. Even small investors have an opportunity to invest their income in
the capital of the corporate body. In this incorporation enables the petty investors to
contribute to the development of national economy.

It may be reiterated that a corporation is not a natural person, therefore it neither has a body
nor brain or soul of its own. It has to act through its agents, employees and other personnel.
It therefore follows that a corporation neither has its own will nor an interest of it own. The
interest of a company is in fact the interest of its shareholders which is represented by the
board of directors. Despite this reality, the law confers a fictitious legal personality or
corporations which vests rights, duties and property in them. Consequently, a corporation
can sue or can be sued and owes both civil and criminal liability for the acts done by it. the
whole law of corporation is based on the theory of corporate entity but the separate
personality of the company and its statutory privileges should be used for legitimate business
purposes only. Where the legal entity of the company is being used for fraudulent and
dishonest purpose, the individuals concerned will not be allowed to take the shelter behind
the corporate personality. The court, in such cases, shall break through the corporate and

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apply the principle of what is known as “lifting or piercing the corporate veil38” The
corporate veil of a company may be lifted to ascertain the true character and economic
realities behind the legal personality of the company. The company’s separate personality
may be disregard in the following cases. It refers to the situation where a shareholder is
held liable for its corporation’s debts despite the rule of limited liability and/of
separate personality. The veil doctrine is invoked when shareholders blur the
distinction between the corporation and the shareholders. A company or corporation
can only act through human agents that compose it. As a result, there are two main
ways through which a company becomes liable in company or corporate law: firstly
through direct liability (for direct infringement) and secondly through secondary
liability (for acts of its human agents acting in the course of their employment).

There are two existing theories for the lifting of the corporate veil. The first is the
“alter-ego” or other self theory, and the other is the “instrumentality” theory. The
alter-ego theory considers if there is in distinctive nature of the boundaries between
the corporation and its shareholders. The instrumentality theory on the other hand
examines the use of a corporation by its owners in ways that benefit the owner rather
than the corporation. It is up to the court to decide on which theory to apply or make
a combination of the two doctrines. Besides the statutory provisions for lifting the
corporate veil, courts also do lift the corporate veil to see the real state of affairs.
However, even though the legislature and the courts have in many cases now
allowed the corporate veil to be lifted, it should be noted that the principle of veil of
incorporation is still the rule and the instances of lifting or piercing the veil are the
exceptions to this rule.

38
Sections 45, 147, 212, 247 and 542 of the companies act, 1956 contain provisions relating to lifting
the corporate veil to reach the real forces of action behind the company’s legal facade.

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BIBLIOGRAPHY

Books

1. Suri Ratnapala, Jurisprudence, Cambridge Publications, 2009.

2. Vijay Ghormade, Jurisprudence and Legal Theory, Hind Law House, 2008.
3. Salmond, “Jurisprudence”, 4th Edn. Butterworth’s Publications, New Delhi.
4. V.D. Mahajan, “Legal Theory and Justice”, Orient Longman Pub., New Delhi (1991).
5. Holland, “Jurisprudence”, 4th Edn. Sweet & Maxwell Publishers (London).
6. HLA Hart, Essays in jurisprudence and philosophy, Clarendon Press, (Reprint, 1983).
7. John Austin, Lectures on Jurisprudence, Campbell, London, (3rd ed, 1999) pp. 357-358.
8. John William Salmond and Patrick John Fitzgerald, Salmond on Jurisprudence, Sweet &
Maxwell, 1966 (12th Ed. 1966) pp. 231.
9. RWM Dias, Jurisprudence, Aditya Books Butterworths New Delhi (5th ed. 1994) pp. 250
– 270.

Articles

1. Adolf A. Berle, Jr, “The Theory of Enterprise Entity”, Columbia Law Review, Vol. 47,
No. 3 (Apr., 1947), pp. 343-358
2. Bryant Smith, Legal Personality, The Yale Law Journal, Vol. 37, No. 3 (Jan., 1928), pp.
283-299 
3. JH Farrar, “Corporate Governance: Theories, Principles and Practice” (2 ed, Oxford
University Press, Melbourne, 2004)
4. M. Wolff, “On the Nature of Legal Persons”, (1938) 54 Law Quarterly Review 494.
5. SJ Stoljar, “Groups and Entities: An Inquiry into Corporate Theory” (ANU Press,
Canberra, 1973) 183

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