JYOTI MAURYA

ROLL NO. 866

NATIONAL UNIVERSITY OF STUDY AND RESEARCH IN LAW, RANCHI

IN THE NATIONAL COMPANY LAW TRIBUNAL AT PRINCIPAL BENCH .

Petition No. _______/2021

(Under Section 245(1)(a) read with Section 4(1)(c) of the Companies Act, 2013)

SHAREHOLDERS OF SPICY CHILLY LTD. …….…………. Petitioner

versus

SPICY CHILLY LTD. .……………. Defendant

As Submitted to the Judicial and Technical Members of the National Company Law Tribunal,
Principal Bench.

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TABLE OF CONTENTS

TABLE OF CONTENT…………………………………………………………………………1
ABBREVIATION……………………………………………………………………………...2
INDEX OF AUTHORITIES…………………………………...…………………………...….....3
A. ACTS & STATUTES……………………………………….......……………………...3
B. BOOKS & COMMENTARIES.……………………..…………………………………...3
C. ARTICLES & JOURNALS..…………………………………………....……………….3
D. COMMITTEE REPORTS……………………………………………………………….3
E. LIST OF INDIAN CASES….…………………………………………............................3
F. LIST OF FOREIGN CASES……………………………………………………………..4
STATEMENT OF JURISDICTION ………………………………………………………………5
STATEMENT OF FACTS ……………………………………………………………………... 6
ISSUES RAISED…………………………….………………...………………………………7
SUMMARY OF ARGUMENTS………...……….…………………………………………….....8
ARGUMENTS ADVANCE ………………………………………………………………….9-15
I. THAT SPICY CHILLY LTD. IS AUTHORIZED TO FUND SUPER CHEF………………….9
I.I. THE ORGANIZATION OF THE SUPER CHEF COMPETITION IS REASONABLY INCIDENTAL
AND NECESSARY FOR THE ATTAINMENT OF THE MAIN OBJECTS…………………...9

I.II. THAT THE FUNDING OF SUPER CHEF IS A BONA FIDE EXERCISE OF POWER HENCE IS
INTRA VIRES…………………………………………………………………….12

II. THAT SPICY CHILLY LTD. CAN ENTER A JOINT VENTURE WITH THE OTHER TWO
COMPANIES……………………………………………………………………………13
II.I. THE JOINT VENTURE AGREEMENT, AUTHORIZED BY THE COMPANY’S CONSTITUTION,
IS INTRA VIRES………………………………………………………………...13

II.II. THE ONLY REQUIREMENT IN THE MOA FOR A JOINT VENTURE AGREEMENT IS TO
COVER PROPOSED ACTIVITY…………………………………………………...14

PRAYER.….…………………………………………………………………………….…..16

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ABBREVIATION

AIR All India Report

AoA Article of Association
Co. Et cetera
Etc. Compony
HC High Court
Hon’ble Honorable
i.e. Therefore
Ltd. Limited
MoA Memorandum of Association
SC Supreme Court
SCC Supreme Court Cases
Sec. Section
v. Versus

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INDEX OF AUTHORITIES

A. ACTS & STATUTES

THE COMPANIES ACT, 2013, § 2(6), Act No. 18, Acts of Parliament, 2013 (India).

B. BOOKS & COMMENTARIES.

1 JUDY ALLEN, MARKETING YOUR EVENT PLANNING BUSINESS: A CREATIVE APPROACH TO
GAINING THE COMPETITIVE EDGE, (Wiley 2013)……………………………………………10
18 RODERICK I ‘ANSON BANKS, LINDLEY & BANKS ON PARTNERSHIP (Sweet & Maxwell
2002)………………………………………………………………………………………...13
AVTAR SINGH, COMPANY LAW (17th ed. 2018)………………………………………….......11
BLACK’S LAW DICTIONARY (4th ed. 1951)…………………………………………………...14
FRANCIS PALMER & R DUNLOP, PALMER'S COMPANY PRECEDENT’S PART I (17th Ed. 1956).

C. ARTICLES AND JOURNALS

DIMITRA PAPADIMITRIOU ET. AL., Event Sponsorship as a Value Creating Strategy for Brands,
17 J. PROD. BRAND. MANAG. 212, (2008)…………………………………………………….10
NISHITH DESAI ASSOCIATES, Joint Venture in India, 6 (2014). Accessed from:
http://www.nishithdesai.com/fileadmin/user_upload/pdfs/Research%20Papers/Joint_Ventures
_in_India.pdf............................................................................................................................14

D. REPORTS
INDIA, MINISTRY OF CORPORATE AFFAIRS, Report of Expert Committee, Classification and
Registration of Companies, Available from:
http://www.mca.gov.in/Ministry/reportonexpertcommitte/chapter3.html.......................11, 15

E. LIST OF INDIAN CASES

Gajadhar Prasad Choudhary And Ors. v. State of Bihar And Ors., AIR 1984 Pat 105……...12
Ganga Metal Refining Co. Pr. Ltd. v. Commissioner of Income Tax, AIR 1967 Cal 429….13
VB Rangaraj v. VB Gopalkrishnan and Ors 73 Comp Cas 201 (SC) (1992)………………..14

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F. LIST OF FOREIGN CASES

Attorney-General v. Great Eastern Railway Co., (1880) LR 5 AC 473 (HL)……………….9
Bell Houses Ltd v. City Wall Properties Ltd., (1966) 2 QB 656 : (1966) 2 WLR 1323
(CA)……………………………………………………………………………………….12
Cotman v. Brougham, 1918 AC 514, 522………………………………………………9, 11
Deuchar v. Gas Light & Coke Co., (1924) 1 Ch 422, 435…………………………………12
Egyptian Salt and Soda Co. v. Port Said Salt Association, [1931] UKPC 47……………….9
Evans v. Brunner, Mond & Co., (1921) 1 Ch 359…………………………………………10
Forest v. London Chatham & Dover Railway Co., (1895) 1 QB 711 (CA)……………….10
Oakbank Oil Co. v. Crum, (1882) 8 App Cas 65……………………………………………9
Re: European Society Arbitration Acts--ex parte Liquidators of the British Nation Life
Assurance Association (1878) 8 Ch D 679………………………………………………..13

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STATEMENT OF JURISDICTION

“The Hon’ble National Company Law Tribunal has been vested with power to restrain the
company from committing an act which is ultra vires the articles or memorandum of the
company or pass such an order as it thinks fit, if it is of the opinion that the action of the
company has been or is about to be undertaken outside the authority of the company, by virtue
of section 245(1)(a)1 read with section 4(1)(c)2 of the Companies Act, 2013.”

The defendant most humbly and respectfully submits to the jurisdiction of the Honorable
National Company Law Tribunal.

1
245. Class action.— (1) Such number of member or members, depositor or depositors or any class of them, as
the case may be, as are indicated in sub-section (2) may, if they are of the opinion that the management or conduct
of the affairs of the company are being conducted in a manner prejudicial to the interests of the company or its
members or depositors, file an application before the Tribunal on behalf of the members or depositors for seeking
all or any of the following orders, namely:— (a) to restrain the company from committing an act which is ultra
vires the articles or memorandum of the company;
2
4. Memorandum.— (1) The memorandum of a company shall state—
(c) the objects for which the company is proposed to be incorporated and any matter considered necessary in
furtherance thereof;

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SUMMARY OF THE FACTS

BACKGROUND
Spicy Chilly Ltd. is a company into chain of restaurants and running its restaurants, cafes, bars,
and bistros all over India. Spicy Chilly Ltd. announced a Super Chef competition to be held in
January 2012.
JOINT VENTURE AGREEMENT

Spicy Chilly Ltd. has entered into an agreement with Daily Dairy India Pvt. Ltd. who
manufactures, processes, packages, and re-packages dairy products as sponsoring partner for
Super Chef. For the accommodation of participants of Super Chef, it enters into agreement
with Sand Spa Ltd. which carry on the business of management and marketing of hotels,
Chateaus, Castles, Inns, Lodgings, Motels, Guest Houses etc.

MAIN OBJECT OF THE SPICY CHILLY LTD.

The main objective of the Spicy Chilly Ltd. is to carry on the business of restaurant, bar, cafe,
night club, brewers, distillers, bakers, confectioners, butchers, fishmongers, grocers, ice –
cream manufacturers and to carry on any other business which may seem to the company
capable of being conveniently carried on in connection with the above or calculated directly to
enhance the value of the company’s properties and rights.

RELIEF SOUGHT/ ADJUDICATION

Aggrieved by the decision of the company to organise Super Chef in collaboration with other
two companies, shareholders of Spicy Chilly Ltd. have approached the NCLT stating that the
company is acting ultra vires.

The NCLT, Principal Bench is hearing this matter on the petition of ultra vires act.

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ISSUES RAISED

THE DEFENDANT VERY RESPECTFULLY PUT FORTH IN THE HON’BLE NCLT THE FOLLOWING
ISSUES:

1. WHETHER SPICY CHILLY LTD. IS AUTHORIZED TO FUND SUPER CHEF?

2. WHETHER SPICY CHILLY LTD. CAN ENTER INTO A JOINT VENTURE WITH THE OTHER TWO
COMPANIES?

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SUMMARY OF ARGUMENTS

I. WHETHER SPICY CHILLY LTD. IS AUTHORIZED TO FUND SUPER CHEF?

It is humbly addressed to the Hon'ble Tribunal that the financing of Super Chef by the Spicy
Chilly Ltd is not in violation of the Memorandum of Association. The counsel relies on the
following sub-issues to prove this submission. Time and again both the House of Lords and
Indian courts held that the doctrine of ultra vires is not to be applied in the strictest sense so as
to prohibit anything that is not expressly written in the memorandum. The organisation of the
Super Chef Competition is reasonably incidental and necessary for the attainment of the main
objects. Further, the funding of Super Chef is a bona fide exercise of power hence is intra vires,
in Bell Houses Ltd v. City Wall Properties Ltd., court held that a company can carry on any
other trade or business whatsoever which can, in the bona fide opinion of the board of directors,
be advantageously carried on by the company.

II. WHETHER SPICY CHILLY LTD. CAN ENTER INTO A JOINT VENTURE WITH THE OTHER
TWO COMPANIES?

A Joint venture is defined as any arrangement whereby two or more parties co-operate in order
to run a business or to achieve a commercial objective. It is humbly submitted before the
hon’ble National Law Tribunal that Spicy Chilly Ltd. can enter a joint venture with the Sand
Spa Ltd. and Daily Dairy India Pvt. Ltd because the joint venture agreement, authorised by the
company’s constitution, is intra vires, there is no general principle of law which prevents a
corporation from being a partner with another corporation or with ordinary individuals, except
the principle that a corporation cannot lawfully employ its funds for purposes not authorised
by its constitution. The only requirement in the MoA for joint venture agreement is to cover
proposed activity. In S. Shivashanmugam And Ors v. Butterfly Marketing Pvt Ltd., The hon’ble
court observed that it is not necessary for them to decide the question pertaining to the provision
contained in the companies MoA since they are sufficiently wide enough to enable the
company to enter the partnership with the defendant in the suit.

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ARGUMENTS ADVANCED

I. THAT SPICY CHILLY LTD. IS AUTHORIZED TO FUND SUPER CHEF.

1. It is humbly addressed to the Hon'ble Tribunal that the financing of Super Chef by the
Spicy Chilly Ltd is not in violation of the Memorandum of Association. The counsel relies
on the following sub-issues to prove this submission. Firstly, the organisation of the Super
Chef Competition is reasonably incidental and necessary for the attainment of the main
objects, and secondly, the funding of Super Chef is a bona fide exercise of power hence is
intra vires.

I.I. THE ORGANISATION OF THE SUPER CHEF COMPETITION IS REASONABLY INCIDENTAL

AND NECESSARY FOR THE ATTAINMENT OF THE MAIN OBJECTS

2. The aim of the Memorandum of Association's object clause is to delimit and define the
subjects in such a clear and unambiguous way that the reader may identify the area of
business within which the corporate operations are contained, and any activity beyond the
MoA is ultra vires the corporation.3 However, it is argued that the law of ultra vires should
be interpreted and applied in a rational and not unreasonable manner. Except specifically
banned, any conduct that is reasonably regarded as incidental to the items approved should
not be considered ultra vires.4

3. In Oakbank Oil Co. v. Crum5, the House of Lords observed that a corporation may perform
an act that is (a) essential for, or (b) inevitable to, achieving its objectives, or (c) otherwise
permitted by the Act.

4. The underlying principle upheld in Egyptian Salt and Soda Co. v. Port Said Salt
Association6 that an organisation formed for a specific purpose must be able to pursue
items that are essential to or subsequent to the purpose

5. It is submitted that the organising Super Chef is not only necessary but also incidental to
the objects of the company. With the increasing popularity of the food business,

3
Cotman v. Brougham, 1918 AC 514, 522.
4
Attorney-General v. Great Eastern Railway Co., (1880) LR 5 AC 473 (HL).
5
(1882) 8 App Cas 65.
6
[1931] UKPC 47.

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conducting special events such as cooking competitions and sponsoring such events give
financial and in-kind support to the business.7 It is one of the market strategies which not
only build consumer attitude and company’s brand name but also enhances business and
consumer relationships.8

I.I.I. Principle of Reasonable Construction

6. It is submitted that the Companies Act permits any act deemed appropriate for the
pursuance of the specified objects identified in the memorandum9, nevertheless, even
though they are not so specified, they are permissible under principle of reasonable
construction.10 The court in Forest v. London Chatham & Dover Railway Co.11, while
upholding that a railway company whose railroad is carried over arches may convert the
arches into shops, observed that “if this is not the case then it might as reasonably be
contended that a railway company is not entitled to sell the hay which grows on their banks
so as to make something out of it.”

7. Similarly, in Evans v. Brunner, Mond & Co.12, A chemical manufacturer was permitted to
allocate 1,000,000 pound to colleges and research centres for the advancement of scientific
education and study as long as it was beneficial to the corporation's continuing growth as
a chemical manufacturer.

8. Main object as well as relevant object of the company define object of the company as:
“To carry on the business of restaurant, bar, cafe, night club, brewers,
distillers, bakers, confectioners, butchers, fishmongers, grocers, ice – cream
manufacturers and to carry on any other business which may seem to the
company capable of being conveniently carried on in connection with the
above or calculated directly to enhance the value of the company’s properties
and rights.”13

7
1 JUDY ALLEN, MARKETING YOUR EVENT PLANNING BUSINESS: A CREATIVE APPROACH TO GAINING THE
COMPETITIVE EDGE, (Wiley 2013).
8
DIMITRA PAPADIMITRIOU ET. AL., Event Sponsorship as a Value Creating Strategy for Brands, 17 J. PROD.
BRAND. MANAG. 212, (2008).
9
THE COMPANIES ACT, 2013, § 4(1)(c), Act No. 18, Acts of Parliament, 2013 (India).
10
AVTAR SINGH, COMPANY LAW 63 (17th ed. 2018).
11
(1895) 1 QB 711 (CA).
12
(1921) 1 Ch 359.
13
Factsheet at pg. 1 ¶ 5.

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“i. To advertise and adopt means of making known the business activities of
the Company in any way as may be found expedient suitable.”14

9. It is humbly submitted that MoA of the company unequivocally states that the company
can carry on any business which seems to be advantageous and enhance the value of the
company’s properties, and adopt expedient and suitable means to advertise business
activities. Therefore, the doctrine of ultra vires is not to be applied in the strictest sense to
prohibit anything that is not expressly written in the memorandum. Even according to the
report of expert committee set up under the Ministry of Corporate Affairs15, with the
growth of the economy and increase in the complexity of the business operation, the forms
of corporate organizations keep on changing, and in this scenario, the rigid regulation can
inhibit the company’s interest and promotion.

I.I.II. Main object rule of construction

10. It is argued that when a company's subjects are represented in a sequence of clauses, the
true law of construction is to look for the section that embodies the principal or primary
object of the company, and to consider all other clauses, however broadly articulated, as
solely additional to this primary aim, and therefore limited and regulated by it.16

11. In Cotman v. Brougham17, Lord Wrenbury observed that, “......the function of the
memorandum is taken to be, not to specify, not to disclose, but to bury beneath a mass of
words the real object or objects of the company with the intent that every conceivable form
of activity shall be found included somewhere within its terms.”

12. Reliance must be to the object of the company:

“…….any other business which may seem to the company capable of being
conveniently carried on in connection with the above or calculated directly
to enhance the value of the company’s properties and rights.”18

14
Factsheet at pg. 2 ¶ 6.
15
INDIA, MINISTRY OF CORPORATE AFFAIRS, Report of Expert Committee, Classification and Registration of
Companies, Available from http://www.mca.gov.in/Ministry/reportonexpertcommitte/chapter3.html.
16
FRANCIS PALMER & R DUNLOP, PALMER'S COMPANY PRECEDENTS PART I 276 (17th Ed. 1956).
17
Cotman, supra note 3.
18
Factsheet at pg. 1 ¶ 5.

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13. The word “any other business to enhance the company’s business” must be taken in
connection with the main object, i.e., any business with respect to restaurant, bar, etc.
Organising Super Chef is a marketing tactics exercised in the course of the business of
restaurant to attract more customers and to create a brand image of the company, thus is
intra vires.

I.II. THAT THE FUNDING OF SUPER CHEF IS A BONA FIDE EXERCISE OF POWER HENCE IS

INTRA VIRES.

14. It is maintained that since an act is specifically forbidden, it cannot be held to be ultra vires
if it is legitimately incidental to the company's main business and the company sincerely
attempts to carry out the laid down purpose by following a prescribed approach treating it
as effective, economical, and secure way of serving the object.19

15. In Bell Houses Ltd v. City Wall Properties Ltd.20 observed that an act done in bona fide
exercise of power to be intra vires and held that:
“a company can carry on any other trade or business whatsoever which can,
in the opinion of the board of directors, be advantageously carried on by the
company in connection with or as ancillary to the general business of the
company”.

16. Further, in Deuchar v. Gas Light & Coke Co.21, it was retained that as long as the
corporation is really attempting to carrying out one of the legitimate objects, the precise
procedure used is irrelevant, unless that process is expressly prohibited by the statutory
constitution.

17. It is submitted that the clauses which authorises a company to carry on any business which
is beneficiary for the company leaves the object on the discretion of the directors’ bona
fide.22 Since, the organisation of the Super Chef event is a bona fide step taken by the
company to promote its business have proximate nexus with the interest of the business,
hence is outside the purview of doctrine of ultra vires.

19
Gajadhar Prasad Choudhary And Ors. v. State of Bihar And Ors., AIR 1984 Pat 105.
20
(1966) 2 QB 656 : (1966) 2 WLR 1323 (CA).
21
(1924) 1 Ch 422, 435.
22
AVTAR SINGH, COMPANY LAW 69 (17th ed. 2018).

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II. THAT SPICY CHILLY LTD. CAN ENTER A JOINT VENTURE WITH THE OTHER TWO
COMPANIES.

18. A joint venture is described as any collaboration in which two or more parties collaborate
23
to manage a company or accomplish a commercial aim. It is humbly submitted before
the hon’ble National Law Tribunal that Spicy Chilly Ltd. can enter a joint venture with the
Sand Spa Ltd. and Daily Dairy India Pvt. Ltd because, firstly, the joint venture agreement,
authorised by the company’s constitution, is intra vires, and, secondly, the only
requirement in the MoA for joint venture agreement is to cover proposed activity.

II.I. THE JOINT VENTURE AGREEMENT, AUTHORISED BY THE COMPANY’S CONSTITUTION, IS

INTRA VIRES

19. It is submitted that there is no specific legal provision that prohibits a company from
forming a partnership with another corporation or with ordinary persons, apart from the
fact that a corporation cannot legally use its assets for reasons not approved by its
constitution.24

20. In re: European Society Arbitration Acts--ex parte Liquidators of the British Nation Life
Assurance Association25, observed that a very clear objects are required to authorize
entering into agreements with other companies to work in partnership or joint venture and
share profits. The same opinion was reiterated by the hon’ble Calcutta HC in Ganga Metal
Refining Co. Pr. Ltd. v. Commissioner of Income Tax.26

21. It is submitted that object of Spicy Chilly Ltd expressly authorize the company to enter
joint venture with other companies. The object of the company state as follows:
“ii. To be interested in and to promote and undertake the formation and
establishment of such institutions, business pools, combines, syndicates-
industrial, trading or manufacturing as may be considered to be conducive to
the interest of the Company and acquire, promote, and or subsidize any
industry of undertaking and to carry on any other business (industrial,
trading, manufacturing or other ) which may seem to the Company capable

23
THE COMPANIES ACT, 2013, § 2(6), Act No. 18, Acts of Parliament, 2013 (India).
24
18 RODERICK I ‘ANSON BANKS, LINDLEY & BANKS ON PARTNERSHIP 100 (Sweet & Maxwell 2002).
25
(1878) 8 Ch D 679.
26
AIR 1967 Cal 429.

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of being conveniently carried on in connection with any of the main objects

of the company or otherwise calculated, directly or indirectly to augment the
resources of the Company or to render any of the Company’s properties or
rights for the time being profitable;”27

22. The company is authorised by its very constitution to enter into joint venture
agreements and clearly states that the company can promote and undertake
formation of such combines and syndicates28 which is advantageous to the interest
of the company.

II.II. THE ONLY REQUIREMENT IN THE MOA FOR A JOINT VENTURE AGREEMENT IS TO

COVER PROPOSED ACTIVITY.

23. It is contended that until and unless the Joint Venture contract's provisions are included in
the Joint Venture firm's AoA, the Joint Venture agreement would not bind the Joint
Venture company.29 Therefore , the terms of the joint venture arrangement must be
expressly incorporated into the joint venture company's AoA. T he key provision of the
MoA, however, would be to make the main object clause sufficiently broad to include the
intended activities of the company.30

24. While deciding, in S.A. Builders Ltd. v. Commissioner of Income Tax31, whether the
company has to necessarily and directly operate the businesses as mentioned in the MoA
so as to qualify as carrying out business activity or whether making of investment in
subsidiaries, joint ventures and partnership which in turn are operating in the business as
referred in the MoA of the company is reason enough to hold that the business has been
set up in terms of its MoA, the Apex Court held that:
“In my considered view there is no legal or statutory requirement of direct
and first-hand business operations to be conducted by the appellant himself

27
Factsheet at pg. 2 ¶ 7.
28
Syndicate, BLACK’S LAW DICTIONARY. (4th ed. 1951).
29
VB Rangaraj v. VB Gopalkrishnan and Ors 73 Comp Cas 201 (SC) (1992).
30
NISHITH DESAI ASSOCIATES, Joint Venture in India, 6 (2014). Accessed from:
http://www.nishithdesai.com/fileadmin/user_upload/pdfs/Research%20Papers/Joint_Ventures_in_India.pdf.
31
(2007) 1 SCC. 781.

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and indulgence in business activities through subsidiaries who are in same

line of business activities as stipulated in Memorandum of Association.”

25. “In S. Shivashanmugam And Ors v. Butterfly Marketing Pvt Ltd.32 a suit was filed before
the Madras HC contending that the company had exceeded its power by doing the ultra
vires transaction, i.e., entering into the partnership firm. The hon’ble court observed that
it is not necessary for them to decide the question pertaining to the provision contained in
the companies MoA since they are sufficiently wide enough to enable the company to enter
into the partnership with the defendant in the suit.”

26. Moreover, it is acquiesced that the capital and technology in the modern world move into
companies through joint venture opportunities. It was observed by the report of Expert
Committee set up under the Ministry of Corporate Affairs that there should be an
appropriate exception to the doctrine of ultra vires under Companies Act.33 Further, it is
universally admitted that the present state of the law of ultra vires is unsatisfactory. The
Cohen Committee proposed a complete abrogation of the rule; the Jenkins Committee
proposed a more complicated reform

27. Therefore, it is submitted that the MoA of Spicy Chilly is specific enough to authorise the
agreement entered by the Spicy Chilly Ltd and since the agreement operating is as alluded
to in the company's MoA is justification enough to believe that the business has been set
up in accordance with the MoA.

32
(2005) 5 CompLJ 117 Mad.
33
India, supra note 15.

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PRAYER

Wherefore in the light of the issues raised, arguments advanced and authorities cited, it
is humbly requested that this Hon’ble Court may be pleased to adjudge and declare
that:

i. the Spicy Chilly Ltd. is authorized to fund Super Chef by the virtue of section 4(1)(c) of
the Company Act, 2013.
ii. the Spicy Chilly Ltd. is authorised by its constitution to enter a joint venture agreement
with Sand Spa Ltd. and Daily Dairy Pvt. Ltd.

And pass any such order, writ or direction as the Hon’ble Court deems fit and
proper, for this the appellant shall duty bound pray.

DATE___/___/______ ALL OF WHICH IS RESPECTFULLY SUBMITTED,

SD/-
COUNSEL FOR THE DEFENDANT

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