MANU/TN/3885/2010

IN THE HIGH COURT OF MADRAS

Civil Suit No. 689 of 1999 and Application No. 3189 of 1999
Decided On: 29.10.2010
Appellants: Schmenger GMBH and Company Leder
Vs.
Respondent: Saddler Shoes Private Limited
Hon'ble Judges/Coram:
R. Mala, J.
Counsels:
For Appellant/Petitioner/Plaintiff: C. Uma, Adv.
For Respondents/Defendant: N.L. Rajah, Adv.
Case Note:
Company - Maintainability - Defendant-Company did not make payment of
commission amount due on orders in respect of Foreign Company placed by
Plaintiff-Company for supplying goods - Hence, this Suit - Whether suit filed
by Liaison Officer of Plaintiff was maintainable - Held, in suit for recovery of
money filed by Plaintiff-Company it should be filed by person authorized by
Board of Directors of Plaintiff-Company who should verify and institute suit -
Suit should have been filed by competent person - To institute suit on behalf
of Plaintiff-Company it could only be filed by Directors specifically empowered
by Board of Directors to file suit and in this case only Liaison Officer had filed
suit - Even Director was not competent to file suit on behalf of Company
unless specific power was conferred on him - Thus it was found that suit was
not filed by authorized person - Further there was no proof to show that
Liaison Officer was so authorized by Board of Directors in their meeting
authorizing him to initiate suit - Plaintiff neither filed Memorandum/Articles
of Association nor Resolution of Board of Directors of Company authorizing
Liaison Officer namely person to verify plaint and institute suit - No scrap of
paper had been filed before Court to show as to who was person namely as to
whether Liaison Officer was competent person authorized by Board of
Directors in their Resolution in Meeting to verify plaint and institute suit -
Hence suit filed by Liaison Officer on behalf of Plaintiff-Company was not
maintainable - Suit dismissed.
Company - Entitlement for amount - Whether Plaintiff was entitled for decree
for certain amount together with subsequent interest - Held, even though
Plaintiff-Company filed suit for recovery of "Commission amount" for orders of
goods placed by Defendant-Company for supply of goods to Foreign Companies
to prove same claim was laid only on basis of Exs. P-2, 3, 6 and 7 which were
Photostat copies - However those photostat/xerox/photocopies of documents
exhibited namely Exs. P-2, 3, 6 and 7 were not admissible in evidence -
Further it was found that on basis of Ex. P-7 suit was filed and it was only
Statement of Accounts and to prove same none had been examined -
Document Ex. P-7 was neither verified nor signed by anybody and hence Ex.P-
7 could not be taken into consideration coupled with fact that it was xerox

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copy - Thus Ex. P-7 was inadmissible in evidence and not reliable - Moreover
it was duty of Plaintiff-Company to prove suit claim - However Plaintiff-
Company did not let in any tangible or convincing oral and documentary
evidence before Court to prove same - Hence Plaintiff-Company failed to prove
that Plaintiff-Company was entitled to suit claim from Defendant-Company -
Therefore Defendant-Company was not liable to pay suit claim being
"Commission amounts" due on orders in respect of Foreign Company placed by
Plaintiff-Company for supplying goods - Suit dismissed.
Company - Entitlement for Relief - Whether Plaintiff was entitled to any relief
- Held, since suit was filed by Liaison Officer on behalf of Plaintiff-Company
suit was not maintainable - Further Plaintiff did not prove suit claim - Hence
Plaintiff was not entitled to even any other relief - Suit dismissed.
Ratio Decidendi
"Suit shall not be maintainable if it is not filed by authorized person."
JUDGMENT
R. Mala, J.
1. The Plaintiff, a German Company, filed the suit praying for a judgment and decree to
direct the Defendant-Company, a Chennai based Company, to pay a sum of Rs.
38,87,148.61/-together with interest at 18% per annum on the said amount from
30.6.1999 to the date of payment in full to the Plaintiff and for costs of the suit.
2. The averments in the plaint are as follows:
(a) The Plaintiff-Company is doing business of procuring orders for the sellers
of shoe uppers and finished leather in India, from Overseas buyers. The Plaintiff
also collected commission for the services rendered ranging from 4% to 6% of
invoice amount as mutually decided.
(b) During the course of business, the Plaintiff-Company procured various
purchase orders from the Defendant-Company by overseas buyers and the
Defendant-Company failed to pay the commission amount and so, a meeting
was arranged on 25.2.1998, in which, the Defendant-Company agreed to clear
the outstanding amount due to the Plaintiff-Company within a time frame.
(c) On 2.2.1999, the Defendant-Company issued a Demand Draft for DM
14,089/-and after giving credit to the above payment, the balance amount due
from the Defendant is Rs. 38,87,148.61 as on 30.6.1999. So, the Plaintiff-
Company was constrained to issue notice on 19.7.1999 to the Defendant-
Company and though reply was received by the Plaintiff-Company, the
Defendant-Company did not make payments, and hence, the Plaintiff-Company
was constrained to file the suit for recovery of amount of Rs. 38,87,148.61 with
interest @ 18% p.a. on the said amount from 30.6.1999 to the date of payment
in full to the Plaintiff.
3. The gist and essence of the written statement filed by the Defendant-Company are as
follows:
(a) Since the suit was filed by the Liaison Officer of the Plaintiff-Company, the

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 suit is not maintainable. From 1995, the Defendant-Company honored all the
orders placed through the Plaintiff-Company and the Plaintiff-Company earned
handsome commission on account of such business. In June 1996, the Plaintiff-
Company intimated the Defendant-Company that they were expecting orders
from a very reputed client of theirs for about 20,000 pairs of shoe uppers and
consequently directly, the Defendant-Company has not accepted any orders
from August 1996 to December 1996. In October 1996, the Plaintiff-Company
informed the Defendant-Company that the expected orders would not be
materialized. The Defendant lost nearly DM.2,00,000/- on account of the fact
that the expected orders did not materialize. So, the Defendant-Company raised
the claim against the Plaintiff-Company.
(b) The Plaintiff-Company has been evading to settle the claim and it has
placed some further orders with the Defendant-Company, and the Defendant-
Company properly and diligently processed the same. In February 1998, the
Plaintiff-Company raised the issue of 'Commission'. The Defendant-Company
also reiterated the claim for just compensation for keeping the factory premises
idle for nearly five months and so, the discussion has taken place on 25.2.1998
and it was agreed that the Defendant-Company would pay the following
amounts:
(i) Invoice-Hoegl 1996 - DM.13,617.45;
(ii) Invoice-EURO 1996 - DM.14,089.19 and
(iii) Invoice-Marc 1996 - DM.19,846.82.
(c) The Defendant paid the sums of DM 13,617.45 and DM 14,080.19 to the
Plaintiff. No date was fixed for payment of DM.19,846.82, because the Plaintiff
agreed that they would in the meantime talk to the principals regarding the
compensation to be paid to the Defendant-Company and secondly they would in
any case continue to place orders with the Defendant-Company and so, the
Defendant-Company at last, partly recovered his loss. The Defendant-Company,
in total satisfaction of their part, paid DM.13,617.45 and DM.14,089.19 to the
Plaintiff-Company. As far as sum of DM.19,846.82 is concerned, there was no
concluded contract to pay the said amount, and so, the Defendant-Company is
not liable to pay for the amount of loss @ Rs. 38,87,148.61; on the other hand,
the Plaintiff-Company is liable to pay DM.2,00,000/-. Notice of the Plaintiff-
Company has been suitably replied. The Defendant-Company ultimately prayed
for dismissal of the suit.
4(a). The contents of the additional written statement filed by the Defendant are as
follows:
The plaint does not state the constitution nor gives description of the nature of
legal entity of the Plaintiff-Company. It is not known as to whether the Plaintiff-
Company is a Company registered under the Companies Act, and if it is so, it is
not pleaded as to whether the Liaison Officer is the Principal Officer authorized
to maintain the suit on behalf of the Plaintiff-Company. The plaint is silent as
regards the competency of the Liaison Officer to maintain the suit on behalf of
the Plaintiff-Company. There are no pleadings in the plaint as regards the
authorization, if any, given to the Liaison Officer to maintain the suit and
prayed for dismissal of the suit.

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4(b). The Plaintiff-Company filed rejoinder/reply statement, to the said additional
written statement, contents of which are as follows:
The Plaintiff states that M/s. Schemenger GMBH and Company Leder is a
company registered in Germany, and it conducts its business in India through
its Liaison Office, Schemenger India, which carries on business of procuring
orders for the sellers of shoe uppers and finished leather in India, from
Overseas buyers. As regards the competency of the Liaison Officer, the Plaintiff,
by letters dated 23.6.2004 and 29.11.2007, authorized V. Balagopal as Liaison
Officer in lieu of the previous Liaison Officer Mr. Sridhar Rajaram, leaving the
Plaintiff-Company. It is established that the liaison Officer is competent and
fully capable of representing the Company's interest in the present litigation in
C.S. No. 689 of 1999. The Liaison Officer holds Office for a period of five years
and the suit was instituted in 1999 and in the years that followed, the Company
has seen three Liaison officers, and hence, the suit is maintainable.
5(a). By order dated 8.8.2001, this Court framed the following issues for trial in the
suit:
(i) Whether the Plaintiff is entitled for a decree for a sum of Rs. 38,87,148.61
together with subsequent interest at 18% per annum from 30.6.1999 onwards ?
(ii) Whether the suit filed by the Liaison Officer of the Plaintiff, is maintainable
? and (iii) To what relief the parties are entitled to ?
5(b). On the side of the Plaintiff, Mr. V. Balagopal, the Liaison Officer of the Plaintiff-
Company was examined as P.W.1 and Exs.P-1 to P-10 were marked. On the side of the
Defendant, one Mr. Munna Jamal, the Managing Director of the Defendant-Company was
examined as D.W.1 and Ex.D-1 was marked.
6 . Issue No. 2: Whether the suit filed by the Liaison Officer of the Plaintiff, is
maintainable ?
Learned Counsel appearing for the Plaintiff submitted that the Plaintiff-Company
placed orders for the supply of goods to the Defendant-Company and it is
entitled to get commission and during the discussion in the meeting between
the parties, it was accepted that the Defendant-Company was ready to pay the
amount, but it did not pay the amount and hence, the Plaintiff-Company was
constrained to file the suit for recovery of the Commission amount.
7. At this juncture, learned Counsel for the Defendant-Company submitted that the suit
itself is not maintainable, as the suit had been filed by the Liaison Officer of the
Plaintiff-Company and the Liaison Officer is not the authority to institute the suit and
the Principal Officer alone is having a right to verify the plaint and file the suit.
Furthermore, the Plaintiff did not file any document to show that the Liaison Officer was
authorized by the Memorandum and Articles of Association of the Plaintiff-Company,
and the Plaintiff has also not placed the Resolution of the Board of Directors of the
Plaintiff-Company authorizing Liaison Officer to verify and institute the suit. The Plaintiff
did not also file any Minutes of the meeting of the Company regarding the subject
matter of the suit discussed by the Board of Directors of the Company. Learned Counsel
for the Defendant-Company further submitted that P.W.1, the Liaison Officer of the
Plaintiff-Company joined the Plaintiff-Company only in 2003, but the suit was filed in
1999 and PW1 had no personal knowledge about the transactions. He further submitted
that as per Section 5 of the Companies Act, the Principal Officer alone can verify the

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plaint and no authority had been vested on the Liaison Officer to institute the suit. It is
further stated that as per Order 29 Rule 1 of the Code of Civil Procedure Code, on behalf
of the Corporation, which also includes the nomenclature of "Company", only a
Secretary or any Director or other Principal Officer of the Corporation/Company who is
able to depose to the facts of the case, could institute the suit.
8 . It is now appropriate to consider as to whether the Plaintiff has filed documents to
show that the Liaison Officer was the person competent to file the suit or he is the
person authorized by the Board of Directors of the Plaintiff-Company, to file the suit, as
resolved by them in their meeting, and hence, this Court has to analyze the documents
exhibited and marked through P.W.1, the Liaison Officer of the Company. In this regard,
it is stated by the learned Counsel for the Defendant that the Plaintiff filed Xerox copies
of the documents/exhibits, namely Exs.P-2, 3, 6 and 7, which are not reliable. To
substantiate his case, learned Counsel for the Defendant-Company relied upon the
decision of the Supreme Court reported in MANU/SC/7314/2007 : 2007 (3) CTC 781
(Yashoda.J. v. K. Shobha Rani) and the decision of this Court reported in 2007 (3) CTC
262 (Greaves Ltd. v. V.S. Raghavan) and stated that those photocopies/exhibits are not
admissible in evidence.
9. Before considering the said decisions, it is appropriate to peruse Sections 63 and 65
of the Indian Evidence Act, which read as follows: "Section 63: Secondary Evidence"
Secondary evidence means and includes:
(1) Certified copies given under the provisions hereinafter contained;
(2) Copies made from the original by mechanical processes which in
themselves ensure the accuracy of the copy, and copies compared with such
copies;
(3) Copies made from or compared with the original;
(4) Counterparts of documents as against the parties who did not execute
them;
(5) Oral accounts of the contents of a document given by some person who has
himself seen it.
Section 65: Cases in which secondary evidence relating to documents may be
given.--Secondary evidence may be given of the existence, condition, or
contents of a document in the following cases.
(a) When the original is shown or appears to be in the possession or
power-of the person against whom the document is sought to be
proved, or of any person out of reach of, or not subject to, the process
of the court, or of any person legally bound to produce it, and when,
after the notice mentioned in Section 66, such person does not produce
it;
(b) When the existence, condition or contents of the original have been
proved to be admitted in writing by the person against whom it is
proved or by his representative in interest;
(c) When the original has been destroyed or lost, or when the party
offering evidence of its contents cannot, for any other reason not

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 arising from his own default or neglect, produce it in reasonable time;
(d) When the original is of such a nature as not to be easily movable;
(e) When the original is a public document within the meaning of
Section 74;
(f) When the original is a document of which a certified copy is
permitted by this Act, or by any other law in force in India to be given
in evidence;
(g) When the original consists of numerous accounts or other
documents which cannot conveniently be examined in Court and the
fact to be proved is the general result of the whole collection.
In cases (a), (c) and (d), any secondary evidence of the contents of the
documents is admissible. In case (b), the written admission is admissible.
In case (e) or (f), a certified copy of the document, but no other kind of
secondary evidence, is admissible.
In case (g), evidence may be given as to the general result of the documents by
any person who has examined them, and who is skilled in the examination of
such documents.
10. From the above Sections, it is clear that it is the duty of the Plaintiff to show as to
why the Plaintiff-Company was not in a position to file the original documents while the
Plaintiff sought to mark the secondary evidence, and the Plaintiff has not assigned any
reason as to what happened to the original of the documents exhibited. Sections 63 and
65 of the Indian Evidence Act make it clear that the secondary evidence is admissible in
evidence only in the absence of preliminary evidence; if the original itself is found to be
inadmissible through failure of the party, who files it to prove it to be valid, the party is
not entitled to introduce secondary evidence of its contents. Considering the same,
along with the deposition of P.W.1, it is seen that the Plaintiff-Company did not assign
any reason as to what happened to the preliminary evidence of some of the documents
exhibited and the Plaintiff has not given reasons as to why it had not filed the original
of some of the documents, namely Exs.P-2, 3, 6 and 7.
11. In this regard, it is appropriate to consider the decisions relied on by the learned
Counsel for the Defendants:
(a) MANU/SC/7314/2007 : 2007 (3) CTC 781 (Yashodha,J. v. K. Shobha Rani):
7 . Secondary evidence, as a general rule is admissible only in the absence of
primary evidence. If the original itself is found to be inadmissible through
failure of the party, who files it to prove it to be valid, the same party is not
entitled to introduce secondary evidence of its contents.
8 . Essentially, secondary evidence is evidence which may be given in the
absence of that better evidence which law requires to be given first, when a
proper explanation of its absence is given. The definition in Section 63 is
exhaustive as the Section declares that secondary evidence "means and
includes" and then follow the five kinds of secondary evidence.
9 . The rule which is the most universal, namely that the best evidence the

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nature of the case will admit shall be produced, decides this objection that rule
only means that, so long as the higher or superior evidence is within your
possession or may be reached by you, you shall give no inferior proof in
relation to it. Section 65 deals with the proof of the contents of the documents
tendered in evidence. In order to enable a party to produce secondary evidence
it is necessary for the party to prove existence and execution of the original
document. Under Section 64, documents are to be provided by primary
evidence. Section 65, however permits secondary evidence to be given of the
existence, condition or contents of documents under the circumstances
mentioned. The conditions laid down in the said Section must be fulfilled before
secondary evidence can be admitted. Secondary evidence of the contents of a
document cannot be admitted without production of the original being first
accounted for in such a manner as to bring it within one or other of the cases
provided for in the Section. In Ashok Dulichand v. Madahavlal Dube and
another, [MANU/SC/0278/1975 : 1975 (4) SCC 664], it was inter alia held as
follows:
After hearing the learned Counsel for the parties, we are of the opinion that the
order of the High Court in this respect calls for no interference. According to
Clause (a) of Section 65 of Indian Evidence Act, secondary evidence may be
given of the existence, condition or contents of a document when the original is
shown or appears to be in possession or power of the person against whom the
document is sought to be proved or of any person out of reach of, or not
subject to, the process of the Court of any person legally bound to produce it,
and when, after the notice mentioned in Section 66 such person does not
produce it. Clauses (b) to (g) of Section 65 specify some other contingencies
wherein secondary evidence relating to a document may be given, but we are
not concerned with those clauses as it is the common case of the parties that
the present case is not covered by those clauses. In order to bring his case
within the purview of Clause (a) of Section 65, the Appellant filed Applications
on July 4, 1973, before Respondent No. 1 was examined as a witness, praying
that the said Respondent be ordered to produce the original manuscript of
which, according to the Appellant, he had filed Photostat copy. Prayer was also
made by the Appellant that in case Respondent No. 1 denied that the said
manuscript had been written by him, the Photostat copy might be got examined
from a handwriting expert. The Appellant also filed affidavit in support of his
applications. It was however, nowhere stated in the affidavit that the original
document of which the Photostat copy had been filed by the Appellant was in
the possession of Respondent No. 1. There was also no other material on the
record to indicate the original document was in the possession of Respondent
No. 1. The Appellant further failed to explain as to what were the circumstances
under which the Photostat copy was prepared and who was in possession of the
original document at the time its photograph was taken. Respondent No. 1 in
his affidavit denied being in possession appeared to the High Court to be not
above suspicion. In view of all the circumstances, the High Court to be not
above suspicion. In view of all the circumstances, the High Court came to the
conclusion that no foundation had been laid by the Appellant for leading
secondary evidence in the shape of the Photostat copy. We find no infirmity in
the above order of the High Court as might justify interference by this Court.
(b) 2007 (3) CTC 262 (Madras High Court) (Greaves Ltd. v. V.S. Raghavan):
20. For the foregoing discussion, Exs.P-3 and P-6 cannot at all form basis for

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 fixing the market value. Holding that mere production and marking of document
by consent is not sufficient; to prove its contents and proving of the facts or
contents stated in the document, evidence of person is necessary, in K.
Ramanathan(died) and Ors. v. B.K. Nalini Jayanthi MANU/TN/0731/1996 : 1996
(2) LW 658, First Bench of this Court has held as follows:
... There fore, as held by the Supreme Court in Inder Singh and Ors. v. Union
of India and others, MANU/SC/0528/1993 : 1993 (3) SCC 240 and Periyar and
Pareekanni Rubbers Ltd. v. State of Kerala, MANU/SC/0387/1990 : 1991 (4)
SCC 195, referred to supra, persons connected with the sale transactions or the
attesting witnesses should be examined in order to prove the transactions as
well as the factors referred to therein. The burden of proof is always on the
landlord to prove in each case the market value or the site in which the building
is constructed, the cost of construction of the building and the cost of provision
of any one or more of the amenities specified for fixation of fair rent." (see also
Rahmath Fathima v. Kader Mohideen 1996 (2) LW 637).
12. Considering the above citations, I am of the view that as per Section 63 of the
Indian Evidence Act, for letting in secondary evidence, the Plaintiff has not adduced any
reason as to why the Plaintiff-Company was not able to file preliminary evidence and as
the provisions of Section 65(a) of the Indian Evidence Act also not being satisfied, the
photostat/xerox/photocopies filed by the Plaintiff, are not admissible in evidence and
the same are not reliable.
13. Coming to the aspect of capacity of the Liaison Officer of the Plaintiff-Company to
file the suit, it is worthwhile to quote Ex.P-1 (photocopy) = Ex.P-10 (original), dated
24.11.2006, the terms specified in the authorization letter of the Plaintiff-Company
authorizing the Liaison Officer to take any decision independently and the same reads
as follows:
Pirmasens, 24 November, 2006
To whom it May Concern
This is to authorize Mr. Balagopal; Liaison Officer-Schmenger Leder India, 20
East Avenue, Kesavaperumalpuram, Chennai 600 028 - to take any decision
independently as far as this case (C.S. No. 689 of 1999 - Schmenger GmbH &
Co. Leder v. Saddler Shoes Pvt. Ltd) is concerned,
For
SCHMENGER LEDER
Schmenger GmbH & Co.,
Wernet Hartmann, Managing Director.
Wolfgang Sehnert, Managing Director.
1 4 . As already stated, the Memorandum/Articles of Association of the Plaintiff-
Company, had not been filed before Court and the Resolution of the meeting of the
Board of Directors of the Plaintiff-Company, authorizing the Liaison Officer to file the
suit, has also not been filed before Court. In this context, it is worthwhile to quote
Order 29 Rule 1 Code of Civil Procedure , as follows:

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 Order 29: Suits by or against Corporations:
Rule 1: Subscription and verification of pleading.--In suit by or against a
corporation, any pleading may be signed and verified on behalf of the
corporation by the security or by any director or other principal officer of the
corporation who is able to depose to the facts of the case.
15. It is to be noted that in the said Order 29,Code of Civil Procedure , the Corporation
includes any Company registered under the Companies Act, 1956. In the suit for
recovery of money filed by the Plaintiff-Company, it should be filed by the person
authorized by the Board of Directors of the Plaintiff-Company, who shall verify and
institute the suit. The suit should have been filed by the competent person. To institute
a suit on behalf of the Plaintiff-Company, it can only be filed by the Directors,
specifically empowered by the Board of Directors to file the suit, and in this case, only
the Liaison Officer has filed the suit. Even the Director is not competent to file the suit
on behalf of the Company, unless the specific power is conferred on him. The Power of
Attorney should have been issued to the Director to file the suit on behalf of the
Company on the basis of the Resolution passed by the Board of Directors in their
meeting held in that regard. The suit is only then held to be validly instituted by the
competent person who has been authorized by the Company and when once the
Resolution is passed, authorizing the Managing Director by giving Power of Attorney in
favour of the Director of the Company and then no further Resolution in that regard is
necessary. The Company can always authorize some person to sign on behalf of the
Company and if the Company does not chose to do so, it can act in accordance with
Order 29 Rule 1 Code of Civil Procedure and it can rely on the Order 29Code of Civil
Procedure , as in fact, a constituting agent to sign if necessity of giving an express
authority. In that way, Order 29 Code of Civil Procedure is read only merely as a
permissive and not mandatory. In some cases, if the suit is filed by the Company, even
the Secretary is competent person to sign and verify the pleadings. As per the
Memorandum/Articles of Association of the Company, if the Directors who were jointly
authorized to decide to institute the suit, and when the Directors have passed no
Resolution deciding to initiate the suit, binding the institution with the result of the suit,
and the suit having been filed without there being any Resolution and as the
Corporation/Company could only file the suit, if there is any Resolution for the same,
the suit is not maintainable. In the present case, the suit is not filed by the authorized
person under Order 29 Rule 1 Code of Civil Procedure and suit as such is not
maintainable and in the case on hand, there is no proof to show that the Liaison Officer
was so authorized by the Board of Directors in their meeting, authorizing him to initiate
the suit.
16. Now, it is appropriate to consider the decisions relied upon by the learned Counsel
for the Defendant-Company:
(a) AIR 2000 Himachal Pradesh 11: (Himachal Pradesh High Court) : H.P.
Horticultural Produce Marketing and Processing Corporation Ltd., v. United
Insurance Company Ltd. and Anr.:
16. Assuming Shri.K.K. Gupta was the Managing Director of the Plaintiff at the
relevant time, the onus was on the Plaintiff to show the powers of management
held by him either by virtue of an agreement or of a resolution passed by the
Plaintiff in general meeting or by its Board of Directors or by virtue of its
memorandum or article of association. In the absence of evidence showing the
authority of Shri.K.K. Gupta to file the suit for and on behalf of the Plaintiff, it

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is held that the suit has not been filed by a duly authorized person. The issue is
decided against the Plaintiff.
(b) MANU/TN/0665/1997 : 1999 (98) Company Cases 151 (Madras) : 1998 (1)
ML J 724 (Madras High Court-Division Bench): Swadharma Swarajya Sangha v.
Indian Commerce and Industries Co. Pvt. Ltd.:
2 . A reading of the above article leads to an inference that it is the directors
who should jointly authorize to decide to institute or institute a suit. Conceding,
the directors have passed no resolution deciding to institute a suit binding the
institution with the result of the suit. The suit having been filed without there
being any resolution and as the Corporation can only file a suit if there is a
resolution for the same, the suit was not filed by an authorized person under
Order 29, Rule 1 of the Code of Civil Procedure. The suit as such is not
maintainable.
(c) MANU/WB/0035/1965 : AIR 1965 Cal 169: Calcutta High Court: Al-Amin
Seatrans Ltd., v. Owners and Party interested in Vessel M.V-'Loyal Bird':
23: It is well settled that under Section 291 of the Companies Act except where
express provision is made that the powers of a company in respect of a
particular matter are to be exercised by the company in general meeting in all
other cases the Board of Directors are entitled to exercise all its powers.
Individual directors have such powers only as are vested in them by the
Memorandum and Articles. It is true that ordinarily the Court will not unsuit a
person on account, of technicalities. However, the question of authority to
institute a suit on behalf of a company is not a technical matter. It has far-
reaching effects. It often affects policy and finances of the company. Thus,
unless a power to institute a suit is specifically conferred on a particular
director, he has no authority to institute a suit on behalf of the company.
Needless to say that, such a power can be conferred by the Board of Directors
only by passing a resolution in that regard.
31. In the instant case, however, the facts are quite different. No authority has
been given in the Articles of Association to the directors to delegate the power
as was the case in the Articles of Association in Ebrahim Sait's case
(MANU/TN/0279/1938 : AIR 1938 Mad 962 H.M. Ebrahim Sait v. South India
Industrial Ltd.) Furthermore, in fact, there is no resolution of the Board of
Directors to give any specific rights to the Managing Director. So far as the
Article 62, is concerned, the powers given to the Managing Director with regard
to management were subject to control and supervision of the Board of
Directors and the management by the Managing Director had to be carried on in
consultation with the Chairman. Article 57 also provided that the management
by the Managing Director was to be done with the approval of the Board of
Directors. Article 65 is also without prejudice to the other articles. In my
opinion, whatever powers have been conferred on the Managing Director by the
Articles of Association are subject to the control and supervision of the Board of
Directors and he is under an obligation to manage in consultation with the
Chairman. In the instant case, it is submitted on behalf of the Plaintiff-
Respondent that the Managing Director and authority to institute the suit by
himself irrespective of the pleasure or control or supervision of the Board of
Directors and without consulting with the Chairman. It was also submitted that
the power of the Managing Director also extended to appoint a constituted

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Attorney for the company, i.e. the Plaintiff.
33. In the instant case it is quite clear that there were talks and consultations
between the Managing Director and the Chairman which are reflected, inter alia,
by the agreement between the Managing Director and the Chairman dated
12.9.91. The said agreement provided that money given as loan by the
Managing Director of the Plaintiff to any companies except Loyal Shipping Pvt.
Ltd. would be recovered by Managing Director within 3 months time. So, there
was not only consultation between them, but there was an agreement that
money due from Loyal Shipping Pvt. Ltd. would not be recovered. It has not
also not been alleged anywhere that there was any further or other
consultation. The Managing Director knew sufficiently well that he could not get
any resolution passed by the Board of Directors giving him power to institute a
suit against the Loyal Shipping Pvt. Ltd. After all the Managing Director as also
the Chairman of the two companies are common. It is also quite clear that no
attempt was made by the Managing Director to get any specific authority to
institute the suit by or in the name of the Plaintiff Company against Loyal
Shipping Pvt. Ltd. or its vessel. The Managing Director also knew very well that
he could not even get a resolution or authority in his favour even in a general
meeting because he could not get any resolution passed due to the equal
division in two groups and the casting vote which the Chairman could exercise.
In my opinion, the right of management of the Company's affairs was vested in
the Board of Directors and the Managing Director could only act subject to the
control and supervision of the Board of Directors. There was no specific
authority granted to the Managing Director either to institute any suit or to
appoint any Constituted Attorney of the Plaintiff Company. In my opinion, the
Managing Director did not have any power or authority in the facts and
circumstances of this case to institute any suit on behalf of the Plaintiff or to
appoint any Constituted Attorney of the Company without prior approval of the
Board of Directors.
53. I, therefore, hold that the suit has been instituted at the instance of the
Managing Director alone without any specific power or authority in him to
institute the suit and the Managing Director had no power either to institute the
suit by himself or through his agent or to appoint any Constituted Attorney for
the said purpose. The suit has been instituted without due and proper authority
and the suit, is therefore, liable to be dismissed on that ground alone and all
interim orders are liable to be vacated....
(d) MANU/DE/0138/1991 : AIR 1991 Delhi 25: M/s. Nibro Limited v. National
Insurance Co. Ltd.
23. On the analysis of the judgments, it is clear that Order 29, Rule 1 of the
Code of Civil Procedure does not authorise persons mentioned therein to
institute suits on behalf of the corporation. It only authorises them to sign and
verify the pleadings on behalf of the corporation.
2 4 . In my view, the provisions of Companies Act, 1956 and particularly
Sections 14, 26, 28, Schedule I Table A and Sections 291 are very clear.
25. It is well-settled that under Section 291 of the Companies Act except where
express provision is made that the powers of a company in respect of a
particular matter are to be exercised by the company in general meeting in all

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other cases the Board of Directors are entitled to exercise all its powers.
Individual directors have such powers only as are vested in them by the
Memorandum and Articles. It is true that ordinarily the court will not unsuit a
person on account of technicalities. However, the question of authority to
institute a suit on behalf of a company is not a technical matter. It has far
reaching effects. It often affects policy and finances of the company. Thus,
unless a power to institute a suit is specifically conferred on a particular
director, he has no authority to institute a suit on behalf of the company.
Needless to say that such a power can be conferred by the Board of Directors
only by passing a resolution in that regard.
2 6 . Chapter IV of the Delhi High Court (Original Side) Rules deal with the
question of presentation of suits. Under this Rule, suit can be presented by a
duly authorized agent or by an advocate duly appointed by him for the purpose.
This authorization, in my view, in the case of a company can be given only after
a decision to institute a suit is taken by the Board of Directors of the company.
The Board of Directors may in turn authorise a particular director, principal
officer or the secretary to institute a suit.
(e) MANU/TN/0073/1994 : 1998 (92) Company cases 719 (Mad) Indian
Commerce and Industries Pvt. Ltd. v. Swadharma Swarajya Sangha:
16. Learned Counsel appearing for the Appellant relies upon the decision in
Nibro Ltd. v. National Insurance Co. Ltd. MANU/DE/0138/1991 : AIR 1991 Delhi
25 and K.N. Sankaranarayanan v. Shree Construction and Services Pvt. Ltd.
MANU/TN/0077/1994 : 1993 (2) ML J 298 in support of his contention that the
suit filed by Mrs. Lalitha Rathnam without a proper resolution by the other
directors is not maintainable. In the present case, the suit has been filed by
Swadharma Swarajya Sangha represented by its director, Mrs. Lalitha Rathnam,
as the Plaintiff. From the cause title, it is seen that the suit has been filed by
the Plaintiff by one of its directors, viz., Mrs. Lalitha Rathnam. But in the plaint,
there is no averment that she has been duly authorised to file the same. In
spite of the matter being raised in the written statement, no re-joinder has been
filed by the Plaintiff to make a positive averment that she possessed the
requisite authority to file the suit. Therefore, it cannot be stated that the suit
has been validly instituted. In the decision relied by learned Counsel appearing
for the Appellant, viz., Nibro Ltd. v. National Insurance Co. Ltd. 1991 (70)
Comp. Cas. 388, it has been held by the Delhi High Court as follows:
(headnote):
Individual directors have such powers only as are vested in them by the
memorandum of article. It is true that ordinarily the Court will not non-suit a
person on account of technicalities. However, the question of authority to
institute a suit on behalf of a company is not a technical matter, it has far-
reaching effects. Order 29, Rule 1, of the Code of Civil Procedure, does not
authorize persons mentioned therein to institute suits on behalf of a
corporation-it only authorizes them to sign and verify the pleadings on behalf
of the corporation. Thus, unless a power to institute a suit is specifically
conferred on a particular director, he has no authority to institute a suit on
behalf of the company. Such power can be conferred by the board of directors
only by passing a resolution in that regard.
17. From the above decision, we are led to the conclusion that in the absence

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 of a resolution by the directors, the filing of the suit for ejectment by Mrs.
Lalitha Rathnam is not maintainable. Hence, it is an irregularity going to the
root of the matter. It is not an internal management of the company in which
courts cannot interfere as contended by learned Counsel appearing for the
Respondent. The filing of the suit is an initial infirmity with regard to the
maintainability of the suit which is incurable. It cannot be equated with an
administrative act like the appointment of an architect as in the case of Freeman
and Lockyer (A firm) v. Buckhurst Park Properties (Mangal) Ltd. 1964 34 Comp.
Cas 405 (CA) : 1964 2 WLR 618 as relied on by learned Counsel appearing for
the Respondent. The decision relied on by learned Counsel appearing for the
Appellant in K.N. Sankaranarayanan v. Shree Consultations and Services Pvt.
Ltd. MANU/TN/0077/1994 : 1993 (2) ML J 298 also lays down the same
principle that there must be specific conferment of power on the director for
instituting a petition on behalf of the company and instituting a petition on
behalf of the company without proof of authorization is an invalidity which
cannot be cured and the petition is not maintainable on that ground. Thus, it
seen that the contention of learned Counsel appearing for the Appellant, that as
per the decision in Nibro Ltd. v. National Insurance Co. Ltd.
MANU/DE/0138/1991 : AIR 1991 Delhi 25 and K.N. Sankaranarayanan v. Shree
Consultations and Services Pvt. Ltd. MANU/TN/0077/1994 : 1993(2)ML J 298
the suit is not maintainable for want of a valid resolution by the board of
directors authorizing Mrs. Lalitha Rathnam to file the suit against the Defendant
and in the absence of such a resolution, the suit has to fail as not maintainable
is well founded and the judgment and the decree of the trial court has to be
reversed on this question. It is more so when this plea has been raised as one
of the grounds of appeal also and it is a legal plea, which can be raised at any
stage. Considering these aspects, I hold on the point in the appeal that the
Appellant is not liable to be evicted from the suit property.
17. In the decision reported in MANU/HP/0003/2000 : AIR 2000 H P 11 (cited supra), it
is held by the High Court of Himachal Pradesh that even though the suit was filed by the
Managing Director of the Plaintiff-Company, it is the duty of the Plaintiff to prove that
he is the competent person and he has the authority to file the suit on behalf of the
Plaintiff-Company therein. But admittedly, in the case on hand, none of the documents
had been filed before Court to show that the Liaison Officer was duly authorized to
institute the suit. As per Ex.P-1 (xerox copy) and its original Ex.P-10, the Liaison Officer
Mr. Balagopal is authorized to take any decision independently as far as the present
C.S. No. 689 of 1999 is concerned.
18. As per the decision reported in MANU/DE/0138/1991 : AIR 1991 Delhi 25 (cited
supra), the individual Directors have such powers only as are vested in them by the
Memorandum and Articles of Association. To prove the same, in the present case,
neither the Articles nor the Memorandum of Association had been filed before Court.
Even as per the Division Bench decision of this Court reported in MANU/TN/0665/1997 :
1999 (98) Comp. Cases 151(Mad) : 1998(1)ML J 724 (cited supra), the suit having been
filed without there being any Resolution and as the Corporation/Company can only file a
suit if there is a Resolution for the same, the suit was not filed by an authorized person
under Order 29 Rule 1 of Code of Civil Procedure , and hence, the Division Bench held
that the suit as such was not maintainable.
19. As per the decision of the Supreme Court reported in MANU/SC/0002/1997 : 1996
(6) SCC 660 : 1997 (90) Comp. Cas 329 : AIR 1997 SC 3 (United Bank of India v.
Naresh Kumar), the plaint can be signed and verified by a competent person and even

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during the appellate stage, the appellate Court, in exercise of its power under Order 41
Rule 27 Code of Civil Procedure , can require a Power of Attorney to be produced and
the appellate Court can order the competent person of the Company to be examined as
a witness to prove the ratification. In the case on hand, in the additional written
statement filed by the Defendant, the competency of the Liaison Officer has been
questioned by the Defendant, even though the Plaintiff-Company filed the
rejoinder/reply statement to the said additional written statement, it did not let in any
oral and documentary evidence to prove that the person, namely Mr. Mukhtar Parvez,
Liaison Officer was authorized by the competent authority to verify the plaint and
institute the suit.
2 0 . The abovesaid decision reported in MANU/SC/0002/1997 : 1996 (6) SCC 660 :
1997 (90) Comp. Cases 329 : AIR 1997 SC 3 (United Bank of India v. Naresh Kumar)
(cited supra), has been referred to by the High Court of Himachal Pradesh in the
decision reported in 2004 (118) Comp. Cases 328 (Apple Valley Resort v. H.P. State
Elec. Board), in which it was observed by the High Court of Himachal Pradesh that
Order 29, Rule 1 of Code of Civil Procedure only authorizes the persons mentioned
therein to sign and verify the pleadings on behalf of a Corporation/Company and it does
not authorize such persons to institute an action on behalf of a Corporation/Company;
the question of authority to institute an action on behalf of a Company is not a technical
matter; it has far-reaching effects and it often affects policy and finances of the
Company; therefore, unless a power to institute an action is specifically conferred on a
particular Director, he would have no authority to bring an action on behalf of the
Company; the power to institute an action on behalf of the Company can be conferred
on a Director or any other Officer of the Company only by the Board of Directors by way
of a Resolution in that regard; in the absence of a specific provision of the Board of
Directors authorizing the Liaison Officer to institute the petition (suit) for and on behalf
of the Company or power conferred on the Director by the Memorandum and Articles of
Association, the petition (suit) cannot be said to have been laid by a duly authorized
and competent person for and on behalf of the Company; the High Court of Himachal
Pradesh further held that the suit was bad and liable to be dismissed on that ground
alone.
21. Since the Plaintiff neither filed the Memorandum/Articles of Association, nor the
Resolution of the Board of Directors of the Company, authorizing the Liaison Officer -
namely the person to verify the plaint and institute the suit. Hence, as per the decisions
cited above, I am of the view that the suit itself is not maintainable.
22. In the present case, no scrap of paper had been filed before this Court to show as
to who is the person, namely as to whether the Liaison Officer is the competent person
authorized by the Board of Directors in their Resolution in the Meeting, to verify the
plaint and institute the suit. Hence, the suit filed by the Liaison Officer on behalf of the
Plaintiff-Company, is not maintainable. The second issue framed in this suit is answered
against the Plaintiff.
2 3 . Issue No. 1: Whether the Plaintiff is entitled for a decree for a sum of Rs.
38,87,148.61 together with subsequent interest at 18% per annum from 30.6.1999
onwards ?
Even though the Plaintiff-Company filed the suit for recovery of the
"Commission amount" for the orders of the goods placed by the Defendant-
Company, for supply of goods to Foreign Companies, to prove the same, the
claim was laid only on the basis of Exs.P-2, 3, 6 and 7, which are Photostat

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 copies. As already decided by this Court, those photostat/xerox/photocopies of
the documents exhibited, namely Exs.P-2, 3, 6 and 7, are not admissible in
evidence.
24. Admittedly, there was a meeting held on 25.2.1998 between the Plaintiff and the
Defendant, in which, the Minutes have been recorded and the xerox copy of the Minutes
alone had been marked as Ex.P-2. As already decided in the earlier paragraphs, Ex.P-2
which is the xerox copy, is inadmissible in evidence. Furthermore, to prove Ex.P-2,
none of the signatories to Ex.P-2 was examined. So, I am of the view that Ex.P-2 is
inadmissible in evidence and it cannot be taken into consideration.
25. Ex.P-7 is the Statement of Accounts as on 30.6.1999, which again is the xerox
copy. On the basis of Ex.P-7, the suit was filed and it is only Statement of Accounts and
to prove the same, none had been examined. Furthermore, the document Ex.P-7 was
neither verified, nor signed by anybody and hence, Ex.P-7 also cannot be taken into
consideration, coupled with the fact that it is xerox copy. To prove every statement
therein, no relevant and connected document was produced before the Court and the
person who prepared the Statement of Account, was not examined before this Court.
While considering the argument advanced by learned Counsel for the Defendant that in
the Statement of Accounts, the Commission amount was mentioned in German currency
"DM" and the Exchange Rate has also been mentioned, but to prove as to what is the
Exchange Rate on the relevant date, no Certificate from the Reserve Bank of India had
been filed before Court to show as to what is the Indian value for DM Currency shown
therein. So, I am of the view that Ex.P-7 is inadmissible in evidence and not reliable.
26. While perusing the reply notice Ex.P-8, in paragraphs 6(b) and 7 to 9, it is stated
as follows:
6(b): No date was fixed for payment of DM 19846.82 because your client had
agreed that they would in the meantime talk to their principals regarding the
compensation to be paid to my client and secondly they would in any case
continue to place orders with my client so that my client could at least partly
recover his loss.
7 . My client in total satisfaction of their part of their commitments paid the
sums of DM 13,617.45 and DM 14,089.19 to your client. As far as the sum of
DM 19,846.82 is concerned there was no concluded contract to pay the said
amount. My client had merely expressed their intention to pay if your clients
settled my client's dues. However your client failed to honour my client's claim
for taking a decision about payment of compensation to my client and further
also stopped placing any orders with my client from July 1998.
8. My client therefore contends that there is no amount due from them to your
client and your claim for Rs. 38,87,148.61 is totally baseless. Your client on the
other hand are due to my clients a sum of DM 2,00,000 from which the amount
of DM 19,846.82 may be deducted.
9. My client therefore reiterates that no amounts are due to your client from my
client and the situation actually is vice-versa.
2 7 . In such circumstances, it is the duty of the Plaintiff-Company to prove the suit
claim. But the Plaintiff-Company did not let in any tangible or convincing oral and
documentary evidence before the Court to prove the same. Hence, I am of the opinion
that the Plaintiff-Company failed to prove that the Plaintiff-Company is entitled to the

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suit claim from the Defendant-Company.
28. Hence, I am of the view that the Plaintiff-Company miserably failed to prove that
the Defendant-Company is liable to pay the suit claim being the "Commission amounts"
due on the orders in respect of Foreign Company, placed by the Plaintiff-Company for
supplying the goods. Issue No. 1 is answered against the Plaintiff-Company.
29. Issue No. 3: To what relief the parties are entitled to ?
In view of the answers given to Issue Nos. 1 and 2, since the suit is filed by the
Liaison Officer on behalf of the Plaintiff-Company, the suit is not maintainable.
Furthermore, the Plaintiff did not prove the suit claim. Hence, the suit is liable
to be dismissed and the Plaintiff is not entitled to even any other relief.
30. For the foregoing reasonings:
(a) The suit is dismissed with costs.
(b) Consequently, A. No. 3189 of 1999 is closed.

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