Cas

esaresumma r
ise
dbyABHI
SHEKKUMARMI
SHRA,
CLC,8299556360
Sa
lomonv.Sa
lomon&Co.
,Lt
d.(
1897)
Fa
ctsoft
hec
ase
-
Thecas
econcer
nedclai
msofcer
tai
nunsec
ure
dc r
edit
orsinthel
iqui
dationproce
ssofSalomonLt
d.,a
compan
yinwhichSalomonwasthemaj
ori
tysha
rehol
der,andaccor
dingly,wassoughtt
obemade
per
sona
ll
ylia
blefort
hecompa
ny’sdebt
.

I
ssue
-
whethe
r,r
egar
dles
softhese
p ar
atelega
lide
nti
tyofac
ompa ny,ashare
holder
/cont
rol
le
rcoul
dbehel
d
li
abl
eforit
sdebt
,ove
ra ndabovethecapi
ta
lcont
ri
but
ion,
soa stoexposesuc
hme mbe rt
ounl
imi
te
d
per
sonall
ia
bil
it
y.

J
udge
ment
-
TheCourtofAppe a
l,dec
lar
ingt
hec ompanyt obeamyt h,r
easone
dt hatSalomonhadincorpor
atedt
he
companycontr
arytothetr
ueint
entofthethenCompa niesAct
,1862,a ndthatt
helat
terhadconduct
edt
he
busi
nessasanagentofSal
omon,whos hould,the
ref
ore,beres
ponsibleforthedebti
ncurr
edinthecour
se
ofsuchagenc
y.

TheHous eofLords,howe ver

,uponappeal,r
eversedtheaboveruli
ng,anduna nimousl
yhe l
dthat
,asthe
companywa sdulyincorporat
ed,i
tisanindependentperso
nwi t
hitsri
ghtsandl i
abil
it
iesappr
opri
atet
o
it
sel
f,andthat“
themot i
vesofthosewhot ookpa r
tinthepromoti
onofthec ompa nyareabsol
utel
y
ir
rel
evantindis
cussingwha tt
hoseri
ghtsandliabil
it
iesare
”.Thus,t
helegalfi
c ti
onof“corpor
atevei
l”
bet
we e
nt hecompanya nditsowners/
cont
roll
erswa sfir
mlycreat
edbytheSa lomonc ase.

Cas
esaresumma r
ise
dbyABHI
SHEKKUMARMI
SHRA,
CLC,8299556360
St
ateTr
adi
ngCor
pn.ofI
ndi
a,Lt
d.v.CTO(
1964)
I
ssue
-
(
1)whet
he rtheStateTra
din
gCorporat
ion,acompanyregis
tere
dunde
rtheIndi
anCompani
esAct,1956,
i
saci
tiz
e nwi t
hinthemeani
ngofArt.19oftheConst
it
utionandcanas
kfortheenf
orc
ementof
f
unda
me ntalri
ghtsgrant
edtoc
it
ize
nsunde rt
hesai
da r
ti
c l
e;and

(
2)whe
the
rtheSt
at
eTradingCor
por
ationi
s,not
withs
tandi
ngt
hefor
mali
tyofi
ncor
pora
ti
onunde
rthe
I
ndi
anCompani
esAct
,1956,i
nsubs
tanceadepa
rtmentandor
ganoft
heGover
nmentofIndi
awi
ththe
e
nti
ret
yofi
tsc
api
ta
lcont
ri
but
edbyGov
ernme
nt;a
ndc
ani
tcl
ai
mtoe
nfor
ce

J
udge
ment
-
f
unda
ment
alr
ight
sunde
rPa
rtI
IIoft
heCons
ti
tut
iona
gai
nstt
heSt
at
easde
fine
dinAr
t.

Appe
aldi
smi
sse
d,

Re
asons
:

•Di
st
inc
ti
onbe
twe
enpe
rsona
ndc
it
iz
ens

•Al
lci
ti
zensa
repe
rsonsbuta
llpe
rsonsa
renotc
it
ize
ns

I
mpl ie
dPowersofCorporat
eEntit
y:AsCompa ni
esAct,"
Thene wl e
galpe r
sonal
it
yofacomparemerges
f
romt hemomentofi
nc or
porati
onandfromthedat
ethepersonssubs
cribi
ngtoMOAa ndot
herpers
ons
j
oiningasmembersa
rer e
gardedasabodycorpor
ateorCorporat
ionaggregat
eandthenewpers
onbegins
t
of unct
iona
sanenti
ty".Thus,TheCorpor
ati
onhasnophysicalexi
st
enc e
;itisamere"Abs
tra
cti
onof
l
aw"

•Itsfunc
ti
onsbe
ingc
omme
rci
ali
tca
nnotber
ega
rde
dasoneoft
hede
par
tme
ntsoft
heGove
rnme
ntof
India
.

Cas
esaresumma r
ise
dbyABHI
SHEKKUMARMI
SHRA,
CLC,8299556360
Ta
taEngi
nee
ringa
ndLoc
omot
iveCo.Lt
d.v.St
ateof
Bi
har(
1964)
I
ssue
-
Whethe
rthevei
loft
hepeti
oni
ngc
orpor
ati
onc
anbel
if
teda
ndr
ight
sofs
har
ehol
der
soft
hec
o.c
oul
dbe
r
ecogni
sedu/a19ofcons
tt
n.

J
udge
ment
-
SCobs er
vedthat"t
hecorporat
ioni nlawisequaltonatur
alper
sonandha sal egale
ntit
yofit
sown.The
entit
yofc or
porati
onisentir
elysepa r
atef
romt hatofit
sshar
ehol
ders;itbearsit
sownna mesandhasseal
ofi t
sown;itsasset
sareseparat
ea nddist
inc
tfromt hoseofi
tsmembe rs,t
hel i
abi
lit
yofthemembe r
sof
thes har
ehol
dersisli
mite
dt othec api
tali
nvest
e dbythem,simi
lar
ly,thecredit
orsofthemembershaveno
righttotheass
etsofthecorporat
ion."

STCv.CTOc ase
.Itwouldals
omeant hatwhatt
hec ompanycannotachi
evedi
rect
ly,canbeachi
evedby
t
hemindi
rec
tl
ybyr elyi
ngupontheli
ftingthevei
ldoctr
ine.I
fthecompanyArenotcit
iz
e ns,i
tmeans
t
hatt
hecons
ttn
.Intende
dthatt
heyshouldnotgetthebenef
itofar
ti
cle19.
Thevei
lofthecor
por
ati
onc
annotbel
if
tedt
orecogniz
etheri
ght
softhes
harehol
der
sunderar
ti
cle19.A
companyca
nn otl
aycl
aimt
ofunda
menta
lri
ghtunderArt
icl
e19(1)(
g)onthebasi
sofaggr
egat
ionofit
s
cit
iz
ens
.

Cas
esaresumma r
ise
dbyABHI
SHEKKUMARMI
SHRA,
CLC,8299556360
Dai
mlerCo.
,Lt d.v.Cont
ine
nta
lTyr
eandRubbe
rCo.
(
G.B.)
,Ltd.
[1916-17]
I
ssue
-
1.
whe
the
rthec
orpor
ateve
iloft
hec
ompa
nywoul
dbel
if
tedt
ode
ter
minet
hec
har
act
eroft
hec
ompa
ny.

2.whe
the
rthec
o.ha
dbe
comea
nene
myc
ompa
nya
ndc
oul
dbeba
rre
dfr
omma
int
ai
ningt
hea
cti
on.

J
udge
ment
-
1.Thec ompanyi nUKi sal e
ga lenti
ty,acr e
a t
ionoflaw.I tca
ntbee it
herloyalordi
sloyal
.Ther
eisavei
l
betweenthec or
porat
iona ndit
sme mbers,director
s,share
h ol
ders
,e tc
.whichpr ot
ect
sitsmembersfr
om
theli
abili
tyofthecompa ny.Inma nyc ases,itseemslikethatt
hec ompanya ndi t
smembe r
saret
hes a
me
sotodeterminethatwhoi sma nagingundert hema neofc ompanyt hi
sveilisr
e movedtoavoi
dfraud.

2.Thecour
the
ldtha
ttheco.maya
ssumea nene
myc har
act
erwhenper
soninde
fac
toi
ncont
rolofs
uch
compan
ya r
epers
onsofanenemycount
ry.It
sre
alc
ha r
act
erwasGerman.

Thecor
pora
teve
iloft
heco.wa
spi
erc
edt
hrougha
ndi
twa
snota
ll
owe
dtoma
int
ai
nthea
cti
onf
or
re
cover
ingt
hetr
adedebt
s.

Cas
esaresumma r
ise
dbyABHI
SHEKKUMARMI
SHRA,
CLC,8299556360

Le
ev.Le
e’sAi
rFa
rmi
ngLt
d.[
1960]
I
ssue
-
Whe
the
rthepr
inc
ipl
eofSe
par
ateEnt
it
yappl
ic
abl
eornot
?

Whe
the
rMr
s.Le
e(a
ppe
ll
ant
)li
abl
etoc
lai
mcompe
nsa
ti
onunde
rtheWor
ker
’sCompe
nsa
ti
onAc
t,1922?

J
udge
ment
-
Thea
ppe
alwa
sal
lowe
d.I
twa
sane
ces
sar
ycons
eque
nceoft
hes
epa
rat
ele
galpe
rsona
li
tyoft
hec
ompa
ny
tha
tc ont
ract
ualre
lat
ionscouldexis
tbet
we e
nt hedecease
dMrLe ea ndt
hecompany.Asares
ult
,thecour
t
arr
ivedattheconcl
usionthatthe
ywe r
etwos epar
atelega
lent
it
iesandthe
rewasnothi
ngtopre
ventthe
personwhoisinsolec ont
rolofacompanyfrom,atthesameti
me ,bei
ngemplo
yedbythecompany.

Thecompe
nsa
ti
onwashe
ldtobepaidt
othewidow.Thust
hecompanyandit
ssol
egover
ningdir
ect
ors
werehe
ldt
obetwos
epar
ateent
it
ie
s.Ther
efor
ether
ecanbecont
rac
tua
lrel
at
ions
hipbe
tweenthetwo.

Cas
esaresumma r
ise
dbyABHI
SHEKKUMARMI
SHRA,
CLC,8299556360
I
nreSi
rDi
nsha
wMa
nec
kje
ePe
titBa
riAI
R1927
I
ssue
-
Whe
the
rthec
ompa
nie
sfor
medbySi
rDi
nsha
wMa
nec
kje
ePe
ti
twe
ret
obet
rea
teda
sse
par
atel
ega
lent
it
y?

Whe
the
rcont
ent
iont
hatSi
rDi
nsha
wMa
nec
kje
ePe
ti
t’
sne
wlyf
orme
dcompa
nie
swa
sas
hami
sva
li
d?

J
udge
ment
-
Thec ourtr
e markedtha
tthecompa nywa sr e
cognizedundert
hel e
gisl
atur
e,andhe ncecouldnotbe
regar
deda ssimulacr
umors hamj ustbecauseitwa saOnePersonCompa ny.TheCour treli
edheavil
yon
theme ri
tsoftheSa l
omonv.Sa l
omo ncas
e ,anditcont
endedthattheconce
ptofas epar
a t
elegalent
it
y
doesnotgivet hepri
vil
egetotre
ate veryalle
gedtransa
cti
onasar ealt
ransa
ction.TheBomba yHighCour
t
stat
edthatthetrans
acti
onsbetweent heas
s esse
ea ndhi
sc o
mpa nie
swe reofthenatur
eof‘ window
dress
ing’.

TheCour t
,onthefurt
herinspec
tionofthedoc
ument
softhecompany,es
tabl
ishedt
hatthe
rewasne
it
hera
formalt
ransf
er,nordel
ive
r yofsharece
rti
fi
cat
esa
ndneit
herdidt
heorigi
naldocumentsbea
rany
regi
st
rat
ionma rk.

HighCourthel
dthatt hecompanywasf o
rmeds ol
elyands i
mplyforthereasonofeva
dings uperta
xes
.
Thecompa nyf
orme ddi dnobusi
ness
,itwasformedme r
elyasalegalent
it
yt oost
ens
iblyreceivet
he
di
videndsandint
erestandtohandthemovertoa s
sesseetoaspret
endedloans.Thi
scasehighlight
edt
he
fa
ctthatse
para
telegale nt
it
ywouldgrantnoprote
ctioninvol
vingcasesre
lat
e dt
otheprote
ct i
onof
re
venue.

Cas
esaresumma r
ise
dbyABHI
SHEKKUMARMI
SHRA,
CLC,8299556360
CI
Tv.Sr
iMe
ena
kshiMi
ll
sLt
d.(
1967)
I
ssue
-
Whe t
hert
heta
xingoft
heenti
reinte
res
tearne
dont hefi
xeddepos
itsma
deoutonthepr
ofi
tse
arne
din
pudukot
ta
ibytheas
ses
see
'sbranchesi
nthePudukott
aibr
anchoftheBa
niscorr
ect
.

J
udge
ment
-
Thecourthe
ldthatThete
stp r
escribedbyt heFede
ralCou r
tinWa di
acasei
sful
fi
ll
edandtheAppell
ate
Tri
bunalwasrighti
nit
sconclusiont ha
ttherewasaba si
ca r
range
mentorsc
hemebetwee
nt h
easse
s s
ee
CompaniesandtheBankthatthemone ys houl
dbebr oughtint
oBrit
is
hIndi
aaft
eri
twastakenbythe
bor
roweroutsi
detheta
xableterr
itory.

AHWa diav.CI
T-therewa
sabas
ica
rra
ngementbe
tweent
heas
ses
secomp.a
ndt
heba
nk.Li
ft
ingof
cor
por
atevei
lwasa
lloweda
ndITOwasabl
etogoahea
dwitht
heta
xes
.

Cas
esaresumma r
ise
dbyABHI
SHEKKUMARMI
SHRA,
CLC,8299556360
Wor
kme
nv.As
soc
iat
edRubbe
rIndus
tryLt
d.(
1985)
I
ssue
-
Whet
herthetr
ansf
erofsha
resofINARCOLtd.byAssoc
iat
edRub
berIndus
tryLt
dtoAr
ilHol
dingsLt
d
wa
sade vic
etoavoidpa
yme ntofahi
ghe
rbonust
otheworkme
nofthecompany?

Whet
herthec
ompa
nie
s,As
soc
iat
edRubbe
rIndus
tryLt
dandAr
ilHol
dingsLt
dwe
ret
wos
epa
rat
ele
gal
e
nti
ti
es?

J
udge
ment
-
TheSupr emeCour the l
dthatanewc ompa nywa sc rea t
edwhi chwa swhol lyowne dbyt hepr i
nc i
pal
compa ny,ha vingn oa sset
sofitsownl eavingt hes hare sthatwe retransferredbyt heprincipalcompa ny,
withnobus inesstoge nerat
eincomeot hert ha nr eceivingdi videndsfromt hes har
e str
ansferredtoitbythe
pri
ncipa lcompa ny.Thef a
c t
swe r
ec leart
ha tt hes ubs idiar
ywa sbeingus edt ole
ssenthegr osspr of
it
sof
theprincipalc ompa ny.The r
ewa snodi re
c te videnc et opr ovethef actthatt hesubsidi
arywa sformeda s
aninstrume ntt oless enthegrossprofit
so fthepr incipa lcompa nybutwha tc anbee st
ablis
he disthefact
thatt
hebonusoft hewo r
kme nofthec ompa nywa sreduc eda sar e
sult.Itwa sal
sohe ldthatint heyear
1971,theAr ilHol dingsLt d.waswoundupa nda ma lga mat
e dwi t
ht heAs sociat
edRubbe rIndus t
ryLtd
anditwa sclearf r
omt hisacti
ona stowhyt hes ubs i
dia rywa screatedint hef ir
stplace.

TheSupremeCourttooki
ntoacc
ounttheamountofdivi
dendt
hatt
heArilHol
dingsLtd.r
ecei
vedfr
om
t
heshare
so fINARCOf orcal
cul
ati
ngthebonustha
twa sri
ght
lypa
yabl
etothewor kmenoft
he
Asso
ciat
edRubberIndust
ryLtdandheldthatt
heworkmenofthec
ompanyarerighte
ousl
yent
it
ledt
oget
t
hebonusa tt
hera
teof16%f ortheye
a r1969.
Cas
esaresumma r
ise
dbyABHI
SHEKKUMARMI
SHRA,
CLC,8299556360
Gi
lf
ordMot
orCompa
ny,Li
mit
edv.Hor
ne(
1933)
I
ssue
-
Ha
dHor
nevi
ola
tedhi
snon-
compe
tec
lau
sebys
ett
inguphi
scompe
ti
ngc
ompa
ny?

J
udge
ment
-
TheEn
gli
shCo
urtofAppe
alhe
ldt
hatt
hec
omp
anywa
sse
tupt
oeva
deHor
ne’
scont
rac
tua
lobl
iga
ti
ons
.

TheCour
t“p
ier
cedt
hec
orpor
ateve
il
”an
dor
der
eda
ninj
unc
ti
ona
gai
nstHor
ne.

Cour
tsc
an“pi
erc
ethecor
pora
tevei
l”i
facompanyi
ssimpl
yame
rede
vic
etoe
vadel
ega
lobl
iga
ti
ons
,
t
hought
hisi
sonl
yinli
mitedanddi
scr
etec
irc
umst
anc
es.

Cas
esaresumma r
ise
dbyABHI
SHEKKUMARMI
SHRA,
CLC,8299556360
Subhr
aMukhe
rje
ev.Bha
ratCoki
ngCoa
lLt
d.(
2000)
I
ssue
-
Whe
the
rthebur
dent
opr
oveat
rans
act
iona
ssha
m,bogusa
ndf
ict
it
ious
,li
esont
hepe
rsona
ll
egi
ngi
t?

J
udge
ment
-
TheCourtha sobser
vedthatt
heCourtwillbejust
if
iedinpierc
ingthevei
lofincorpora
tioninorde
rto
asc
ert
ai
nt hetruenatur
eofthetr
ansa
ctionastowhot herealpar
ti
estothesa
lewe reandwhe t
heri
twas
bet
weenhus bandsandwivesbehi
ndthef a
cadeofseparat
ee nt
it
yofthecompa ny.TheCour thast
he
powert
odi sregar
dcorpora
teent
it
yifitisusedfort
axe va
sionortocir
cumventt axobl
igati
ons.

Whencir
cumsta
ncesofthecaseandtheint
ri
nsi
cevide
nc eonrecordcl
ear
lypoi
ntoutthatt
hetra
nsact
ion
i
snotbonaf
ideandgenuine,i
tisunnece
ssar
yforthecourtt
of i
ndoutwhet
hert
herespondenthasl
eda ny
e
vide
ncetoshowthatt
het r
ansact
ioniss
ham,bogusorficti
ti
ous.

Cas
esaresumma r
ise
dbyABHI
SHEKKUMARMI
SHRA,
CLC,8299556360
Er
lange
rv.Ne
wSombr
eroPhos
pha
teCo.
(1874-
80)
I
ssue
-
1.Wha
tist
hepos
it
iona
nddut
yofapr
omot
erwhi
lepr
omot
ingac
ompa
ny

2.Whe
the
rEr
lange
risl
ia
blet
ore
fundt
hepr
ofi
tsma
debyhi
m?

J
udge
ment
-
Er
lange
rwasapr
omoterf
orPhos
phate
.TheHous
eofLordsuna
nimousl
yhe l
dthatt
her
ela
ti
ons
hip
be
tweenapr
omot
erandanewlyfor
medcompa
nyatt
rac
tsafi
duci
aryr
ela
tions
hip.

Thema
jor
it
y(Lor
dCa
irnsLCdi
sse
nti
ng)a
lsohe
ldt
hatt
hec
ont
rac
tca
nber
esc
inde
d.

Apr
omot
erowe
sdut
ie
sofgo
odf
ait
handhone
styt
othec
ompa
ny.

Erl
angersho
uldha
vede
cla
reda
nyc
onf
li
ct
ingi
nte
res
tst
othec
ompa
nypr
omot
eda
ndc
annotma
kea
ny
“s
ecre
tprofi
ts
”.

Apromote
rwhobrea
chesa
nydut
ytothecompanybyf
ail
ingtodis
clos
etothecompanyconfl
ic
ti
ng
i
nter
est
swoul
dbelia
ble
.Thecompa
nyi sabl
etose
ekr
eme di
essuchasre
scis
sionofcont
rac
tand
r
ecover
yofpr
ofi
ts
.

Aconst
ruc
ti
vet
rus
tca
nal
sobef
orme
dfort
hepr
ofi
tsga
ine
dbyt
hepr
omot
eri
nbr
eac
hofhi
sorhe
r
dut
ie
s.

Cas
esaresumma r
ise
dbyABHI
SHEKKUMARMI
SHRA,
CLC,8299556360
As
hbur
yRa i
lwa
yCa
rri
agea
ndI
ronCompa
nyLi
mit
edv.
Ri
che[
1874-
80]
I
ssue
-
Whe
the
rthec
ompa
nycane
nte
rint
oac
ont
rac
twhi
chi
sbe
yondt
hes
copeoft
heobj
ectc
laus
eint
he
MOAofthec
ompa
ny?

whe
the
rsuc
hac
ont
rac
twa
sUl
tr
aVi
res
.

J
udge
ment
-
1.Gene
ralcont
rac
tor
smus
tbet
ake
ntoi
ndi
cat
etha
titi
sco
nne
cte
dwi
tht
hebus
ine
ssofMe
cha
nic
al
engi
nee
rs.
2.Import
anceofObject
sc l
ause.
:Its
tat
esaff
ir
ma t
ive
lyt
hea
mbi
tandpowe
rsoft
hec
ompa
nya
nd
negat
ive
lythatnot
hingshouldbedonebeyondtha
tli
mit
.

3.Thecont
rac
twhi
chi
sult
ravi
resi
svoidabi
nit
io.Whati
sfor
bidde
nbyt
hes
tat
utec
annotber
ende
red
int
ravi
rese
venbyt
heuna
nimouscons
entoft
heme mbe
rs.

Thepl
aint
if
fwa
she
ldnote
nti
tl
edt
oda
mage
sfort
hebr
eac
hofc
ont
rac
tont
hepa
rtoft
hede
fenda
nt
compa
ny.

Cas
esaresumma r
ise
dbyABHI
SHEKKUMARMI
SHRA,
CLC,8299556360
Cot
manv.Br
ougha
m[1918-
19]
I
ssue
-
Whe
the
ritwa
sint
ravi
resoft
hec
o.t
oent
eri
ngt
otr
ans
act
ionwi
thot
herc
ompa
ny.

J
udge
ment
-
Astheregis
tra
rhasacc
ept
edthememorandumofc o.andgrant
edacer
ti
fic
ateofincorpora
tion,t
he
val
idit
yofme mora
ndumcannotbecha
llengedanditsmemor a
ndumshoul
dbec onstruedasitst
ood.The
houseoflor
dsexpre
sse
dstr
ongdis
appr
ova loft
heinclus
ionofverywi
declaus
esa sitat
tackstheMa i
n
Objectr
ule.

Thec
laus
ewa
she
ldt
obeva
li
dandt
hea
ctdonei
nbona
fidee
xer
cis
eofi
ttobei
ntr
avi
res
.

Cas
esaresumma r
ise
dbyABHI
SHEKKUMARMI
SHRA,
CLC,8299556360
I
nreJ
onBe
auf
ort
e(London)Lt
d.[
1953]
I
ssue
-
Whe
the
rthec
ompa
nywa
sli
abl
eforpa
yme
ntofde
btsi
ncur
redf
ort
heul
tr
avi
resa
cts

J
udge
ment
-
MOAisac onst
ruc
ti
venot
iceoft hepubli
c.Ifadebti
sbeyondtheobject
softhecompa
ny,i
tisnotl
ia
ble
t
opayfort
hat.I
nc a
seofconsentjudgement,as
sumingitwasi
ntravi
res,aco.ca
nnotdowhati
sbeyond
i
tsl
ega
lpowe rbysi
mplygoingint ocour
tandconsent
ingtoadecr
e e
.

Doct
ri
neofc
onstr
ucti
venoti
cei
sembedde
dint
otheMOA.Int
hatcas
eifathi
rdpa
rty,whe
the
rhe
ac
tua
ll
yknewitornotwereul
tr
avi
res
,hewoul
dbeuna
blet
osuethecompa
ny.
Cas
esaresumma r
ise
dbyABHI
SHEKKUMARMI
SHRA,
CLC,8299556360
Be
llHous
es,Lt
d.v.Ci
tyWa
llPr
ope
rti
es,Lt
d.[
1966]
I
ssue
-
Whe
the
rthec
ont
rac
tisul
tr
avi
rest
hec
ompa
ny.

J
udge
ment
-
Theobje
ctcl
ausecome scl
osetost
at
ingtha
ttheco.c
ancar
ryoutanybusi
nessitwant
sto.Courthe
ldtha
t
t
heclaus
ewa se
ffe
c t
ivetoempowerthecompanytot
akeupanybusine
sswhichthedi
rect
orsbonaf
ide
t
houghtadva
nta
geouslycarr
iedonasanc
ill
arytot
hecompani
esma i
nobje
ct.

Si
ncet
hedir
ect
orshone
stl
ythoughtt
hatthecont
ractc
ouldbeadvant
ageous
lyca
rri
edonasanci
lla
ryt
o
t
hecompa
ny'smainobj
ect
ive.Itwasnotult
ravi
res.Thedefe
ndantcompanywasli
abl
etopaythe
cl
ai
medamount.

Cas
esaresumma r
ise
dbyABHI
SHEKKUMARMI
SHRA,
CLC,8299556360
ReIntr
oduct
ions
,Ltd.
Int
roduc
tions
,Lt
d.v.Na
tiona
l
Pr
ovinci
alBankLtd.[
1969]
I
ssue
-
Whet
heri
nborr
owi
ngthemone
yinque
sti
ont
hec
ompa
nywa
sac
ti
ngwi
thi
nit
spowe
rsa
ndc
oul
dgi
ve
t
hebankava
li
dsec
uri
ty.

J
udge
ment
-
Borr
owingmoneywasapoweroft
hecompany,anditc
ouldnotbeanobj
ect
.Thepower
soft
he
compan
yc oul
dbeus
edonlyf
orthei
ntr
avir
esthecompany.Thust
heco.a
snotent
it
le
dtobor
rowmone
y
f
orpigbreedi
ng.

Theba
nkknewt
hatt
hebor
rowingwa
sfora
nul
tr
avi
respur
pos
eandt
hede
bent
ure
swe
revoi
d.Cot
man
andBr
ought
onc
annots
aveit
.

Cas
esaresumma r
ise
dbyABHI
SHEKKUMARMI
SHRA,
CLC,8299556360
A.Laks
hmanas
wamiv.Li
feI
nsur
anc
eCor
por
ati
onof
I
ndiaAIR1963
I
ssue
-
Whet
hert
hepl
ai
nti
ffc
ons
ent
edt
othes
ubl
et
ti
ngofpa
rtso
fthed
emi
sedpr
emi
sesa
ndi
fso,whe
nandt
o
wha
teff
ect
?

J
udge
ment
-
Ana
ctoft
hec
ompa
nyi
sul
tr
avi
res
,ifi
tisnot
:

•Es
sen
tia
lfort
hef
ulf
il
mento
ftheobj
ect
sst
at
edi
ntheMe
mor
andum

•I
nci
dent
alorc
ons
eque
nti
alt
othea
tt
ai
nme
ntofi
tsobj
ect
s

•Whi
cht
hec
ompa
nyi
saut
hor
ize
dtodobyt
hec
ompa
nyAc
t,i
ncour
seofi
tsbus
ine
ss.

•Wher
eacompanydoesana
ctwhi c
hisul
travi
res
,nolegalr
ela
ti
onshi
poreff
ecte
nsue
sthe
ref
rom.Suc
h
ana
cti
sabs
olut
el
yvoidandcannotber
ati
fi
edevenifa
llshar
eholde
rsagr
ee.

•Thebeare
rsoft
hecompa nywhowerer
espons
ibl
eforpa
ssi
ngtheres
olut
ionul
tr
avir
esthecompanyar
e
per
sonal
lyli
abl
etoma kegood,t
hea
mountbelo
ngingt
othecompanywhichwasunl
awfull
ydisbur
sedi
n
pur
suanceoft
heres
oluti
on.

•Sect
ion13oft
heCompanyAct(
1956)
,re
quir
edt
ospe
cif
ythema
inobj
ectoft
hec
ompa
nya
ndob
jec
t
anc
il
laryt
otheat
ta
inme
ntoft
hema i
nobj
ect
.

•Itwashe l
dthatt
heMe morandumofAs soc
iati
onofac ompanymustbere a
dfai
rl
ya ndit
simport
deri
vedfromar ea
sonabl
einter
preta
ti
onofthelanguagewhichit
semploys.Wher
eapa rt
icul
arac
thasnot
beenprovidedf
orintheMe morandumo fAss
ociat
ion,t
hedirec
tor
scannotseekr
ecours
etotheArti
cl
es
ofAssociati
ont
oimpl yt
hatsuchbusine
ssfal
lswithi
nitsobj
ect
s.

•TheMe morandumofAs s
oci
ati
onhast
obereadwi
tht
heArti
cl
e sofAssoc
iati
on,wherethet
ermsar
e
ambiguousorsi
lent
.Thi
sproc
essmayexpl
ai
nthepr
ovi
si
onsoftheMe morandumits
elfbutca
nnot
ext
endtothescope.

Cas
esaresumma r
ise
dbyABHI
SHEKKUMARMI
SHRA,
CLC,8299556360
TheRoya
lBr
it
is
hBa
nkv.Tur
qua
nd[
1843-
60]
I
ssue
-
1.whethe
rthebankbef
oregi
vingthel
oani
sboundt
oens
uret
hatt
hene
ces
sar
yre
sol
uti
oni
nte
rmsof
deedofset
tl
ementhasbee
npassed.

2.whe
the
rthec
ompa
nywa
sli
abl
efort
hel
oan.

J
udge
ment
-
Therul
einTurquand'scaseisapr e
sumpti
onofr e
gular
it
y.Inot
herwords,aper
sonde a
li
ngwi t
hthe
Companyisenti
tle
dt opresumethatal
ltheinte
rnalpr
ocedur
esoftheCompanyha vebeencompli
edwi
th.
Thi
sisaprac
ticalapproa
cht osolvi
ngprobl
e msfaci
ngoutsi
der
sbecaus
ea nout
siderwouldhave
di
ff
icul
tyt
odi s
cove rwhatisgoingonintheCompa ny.

TheCourtheldt
hattheCompanywa sent
it
le
dtos ueonth
ebond.Astherequi
rementfort
heresol
uti
on
wasamatterofint
ernalr
egul
at
ionfort
heCompa nyandtheBankcoul
dnotknowwhe thersuc
h
re
sol
uti
onha dinfactbee
npassed,i
twasent
it
le
dt opre
sumethatt
heres
oluti
onhadindeedbeenpass
ed.

Cas
esaresumma r
ise
dbyABHI
SHEKKUMARMI
SHRA,
CLC,8299556360
Fre
emana ndLockyerv.Buc
khur
stPa
rkPr
ope
rti
es
(Manga
l),Ltd.[
1964]
I
ssue
-
I
nthea
bse
nceofa
nye
xpr
essa
uthor
it
yinf
avourofMD,whe
the
rthec
ompa
nywa
sboundbyhi
sac
ts.

J
udge
ment
-
Heretheboa r
dofdirec
torsallowedoneoft
he i
rmembe r
stoass
umet heposit
ionofMDe venthoughhe
wasne verappoi
nte
dtotha tposit
ionf
ormal
ly.Hewillbetr
eat
edasifhewa stheMD.Thusi fapers
on
hastheostensi
blea
uthori
tytobi ndacompa
ny,thecompanyisli
abl
ef orcont
ractmadebyhim./Doc t
ri
ne
ofholdingout.

TheCour tofAppealhe
ldtha
tthede
fendantcompanywasboundt opaythepla
int
if
fsfort
hei
r
archi
tec
turework.I
nparti
cul
ar,t
hecour
tfoundthatt
hedef
enda ntcompany’
sart
ic
lesofas
soci
at
ion
conta
inedthepowertoappoi
ntMrShivKuma rKa
poormanagingdi r
ect
or.

Thus,MrShivKumarKapoorwasamanagi
ngdi r
e c
torofthedefendantc
ompa
nywiththeaut
hori
tyt
o
hir
earchi
te
cts
.Int
hesec
ircums
tanc
es,t
hedefendantcompa nywasboundtopa
ythepla
inti
ffa
rchi
tec
ts
fort
hei
rwo r
kbeca
useofMrShivKuma rKapoor’
sa ppa
rentautho
r i
ty.

Cas
esaresumma r
ise
dbyABHI
SHEKKUMARMI
SHRA,
CLC,8299556360
Kot
laVenka
tas
wamyv.Chi
ntaRa
mamur
thy,AI
R1934
Mad.579
I
SSUE-
Whethert
hemort
gagedeedwa
svali
dlyexec
utedsoa
stomaket
hecompa
nylia
ble
?Itwashe
ldt
hatthe
Sec
reta
ryandt
heWor ki
ngDir
ect
orbythemsel
veswer
enotl
ega
ll
ycompet
entt
oexec
utet
hemor
tgage
de
ed.

J
UDGEMENT-
TheCour
tobs
erve
d:

"
Ifthepl
ainti
ffhadc onsul
tedt hearti
cl
esshewouldhavedi s
cover
edt
hatadeedsuchass
hetookre
qui
red
e
xecuti
onb ythreespecif
iedo ffi
cersoft
hecompanya ndshewouldhaveref
rai
nedfromacc
ept
ingade
ed
i
nadequat
elysigned.Notwithstandi
ng,the
refor
e,shema yhaveact
edingoodfai
thandhe
rmone ya
ppl
ied
t
othepurposesofthec ompa ny,thebondisnever
thel
essinval
id.
"TheCourtsa
id:

"Itisfurthera rguedt hatevenift heexecutionoft hebondwa sma r

kedbyirregul
arit
y,ye tt
hemor tgageis
entitl
edt oe nf orceitupont hege neralprincipletha tthe rewa severyreas
ont obeli
evet hattheoff
icer
s
whoe xecute di tha da ut
horitytodos o.Thi spoi ntha sbe e
ndi sc
us s
edbythel ear
nedDi stri
ctJudgeandI
thinkt hevie wwhi chheha stake nofthel awi sc orrec t.Thereareundoubtedlycasesinwhi chthe
principlejus tr efe
rredt ohasbe enre c
ogni zedthel ea dingc asebeing119ER4 74Int hatcaseasb et
we en
thedi rect
orsa ndt hes hare
-holdersthedi re
c t
orse xc ee dedtheirauthor
it
y,butthiswa snotknownt othe
plainti
f f
sandnoi l
lega l
it
ya ppearedont hef aceoft hebond,norwe r
etheshareholdersprejudice
d.Ifa n
ill
egalitydoe sa ppearont hef a
c eofthebond,t hepl a inti
ffwillnotbethusprotect
ed.Hemus tbetakent o
haver e a
dt heCompa niesAc tandtheAr ticlesofAs s oc i
at
ionoft hecompanyhei sde ali
ngwi t
h,andt hus
toha veha dc on st
ructivenoticeoft hei
rc ontents:s ee39Ca l.810."

Cas
esaresumma r
ise
dbyABHI
SHEKKUMARMI
SHRA,
CLC,8299556360
Pe
rci
valv.Wr
ight(
1902)2Ch.421
I
SSUE-
Whe
the
rthedi
rec
tor
sst
oodi
naf
iduc
iar
yinr
ela
ti
ont
othes
har
ehol
der
soft
hec
ompa
ny?

J
UDGEMENT-
Thecourthel
dthatt
her
ewa snosuchfiduc
iar
ydutyt
owardsindi
vidua
lshar
ehol
dersandt
hedir
ect
ors
werenotboundtodi
scl
osenegot
iat
ionswhichul
ti
mate
lyprovedabort
ive
.HisLordshi
ppoi
nte
doutthata
pre
ma tur
ediscl
os ur
eofthi
skindmightwe l
lbea gai
nstt
hebesti
nter
est
softhecompany.
The
rei
sno
quest
ionofunfairdeal
ingi
nthisca
se.Thedi r
ector
sdidnotappr
oachthes
ha r
ehol
der
switht
hevie
wof
obt
ainingthe
irsha r
esThesha
rehol
dersapproachedthedi
rec
tors
,andnamedthepri
ceatwhi
chthe
ywe
re
desi
rousofsel
li
ng.

Hel
dthatthedirec
torsc
ouldre
tai
nthepr
ofi
tssomade
.Likeanyot
herper
sons
,the
ywerefre
etopurc
hase
t
heshar
esi nthema r
ket
,andnotbei
ngtr
ust
eesofs
har
eholde
rst
heywereunde
rnoobl
igat
iontodi
scl
ose
t
henegoti
ationtothem.

Cas
esaresumma r
ise
dbyABHI
SHEKKUMARMI
SHRA,
CLC,8299556360
Bur
landv.Ea
rle(
1902)
I
SSUE-
Whet
herthedi
rec
torwa
sli
abl
etore
payt
othec
ompa
nyt
hes
umof£38,
436,be
ingt
hea
mountoft
he
pr
ofi
tmadebyhimonther
esa
le?

J
UDGEMENT-
Thedirectorwa shel
dnotl i
abletorepaythepr ofittothepl
aint
if
fc ompany.TheirLordshipsofthe
Judici
alCommi t
teeofthePrivyCounc i
lsaid:"The r
eisnoevidencewha t
everofanyc ommi ss
ionor
ma ndat
etoBur landtopurchaseonbe hal
foft hec ompa ny,
orthathewa sinanysenset r
usteefort
he
compa nyforthepurchasedpropert
y.Itma ybet ha thehadanintenti
oninhisownmi ndt oreselli
ttot
he
compa ny,butitwasani nt
entionwhichhewa slibertytocar
ryoutora ba
ndona thi
sownwi ll.
"

Hewa
sunde
rnol
ega
lobl
iga
ti
ont
ogi
vet
hec
ompa
nyt
hebe
nef
itofhi
spur
cha
se.

Cas
esaresumma r
ise
dbyABHI
SHEKKUMARMI
SHRA,
CLC,8299556360
Re
gal(
Has
ti
ngs
),
Ltd.v.Gul
li
ver(
1942)
I
SSUE-
Whethe
rthedi
rec
tor
s,t
hes
oli
ci
tor
sandt
hec
hai
rma
noft
hec
ompa
nywe
rel
ia
blet
oac
countf
ort
hepr
ofi
t
madebythem?

J
UDGEMENT-
Hi
sLor
dshi
pst
at
edt
hata
tal
lma
ter
ialt
ime
sthe
ywe
redi
rec
tor
sandi
naf
iduc
iar
ypos
it
ion,a
ndt
heyus
ed
anda cte
dupont heirexc l
usiveknowledgea cqui
redassuchdirectors
.Theyframe dresol
ut i
onsbywhi c
h
theyma deapr ofi
tforthe mselves
.Theys oughtnoauthor
it
yf romt hecompanyt odos o,and,byreasonof
theirposi
tion,t
heyma del a
rgeprofi
tsforwhi c
htheywe r
eliabletoa c
countt
ot hecompa ny.Thec ourt
he l
dthatthedirec
tors,otherthanthechairman,wereinafiduciaryrel
ati
ontothec ompa nya ndli
ablet
o
repaythec ompanyt hepr ofi
tsthe
yha dma deonthesaleofthes hare
s.Thesubsidiar
ywa snotina
fiducia
ryre l
ati
onshi
pa ndwa snotli
able.

I
twa
sadde
dtha
t"t
hepl
ai
nti
ffc
ompa
nyha
stoe
sta
bli
sht
wot
hings
:

(1)Tha
twh att
hedire
ctorsdi
dwassor
ela
tedtotheaf
fai
rsofthecompanytha
titc
anproper
lybes
aidt
o
havebeendoneint
hec ours
eoft
hei
rmanagementandintheuti
li
sat
ionoft
hei
roppor
tuni
ti
esands
peci
al
knowle
dgea sdi
rec
tors
;a nd

(
2)wha
tthe
ydi
dre
sul
te
dinapr
ofi
ttot
hems
elve
s."

Cas
esaresumma r
ise
dbyABHI
SHEKKUMARMI
SHRA,
CLC,8299556360
I
ndus
tri
alDe
vel
opme
ntCons
ult
ant
sLt
d.v.Cool
ey(
1972)
I
SSUE-
Whe
thert
hedefenda
ntwasa
ccount
abl
etothepl
aint
if
fsfort
hewhol
eofhi
sbe
nef
itunde
rthec
ont
rac
t
a
ndforal
lther
emunera
ti
onandfee
swhichhehadrece
ivedunde
rit
?

J
UDGEMENT-
Uponge nera lrul
e sofequityape rs
onhol dingaf iduciaryp osit
iona sdirectorc annotobtai
nf orhi ms elfa
benefitde rive dfromt heemp loyme ntofthec ompa ny'sfun ds,unlessthec ompa nyknowsa nda ssents.No
direc
torc an,i nthea bsenceofas t
ipulat
iont othec ontrary,pa r
takeina nybe nef
itfromac ont ractwhi ch
requirest hes anctionofaboa rdofwhi chhei same mbe r
.Hes tandsinaf iduc ia
rypos i
tiontowa rdst he
compa ny,a ndi fhema kesanyprofitwhe nhei sa ct
ingf orthec ompa ny,hemus taccounttot hec ompa ny.
Itma kesnodi ffer
e ncethatt
heprofitisonewhi chthec ompa nyitse
lfc ouldnotha veobtai
ne d,the
questionbe ingnotwhe therthecompa nyc ouldha veac quiredit,butwhe t
he rthedi r
ect
ora cquiredi twhile
acti
ngf ort hec ompa ny,northattheinter
e stofthedi r
ec t
ori sasat r
uste eforat hirdpart
y.

I
twashe
ldtha
tthefa
cttha
tCool
eycoul
dnothaveobt
aine
dthecont
rac
tit
sel
fwa si
mmate
rial
.Cool
ey
wasi
nbre
achoffi
duci
arydut
yasadir
ect
orandthe
ref
orehewasli
abl
etoaccountf
ort
heprof
it
shemade
.

Cas
esaresumma r
ise
dbyABHI
SHEKKUMARMI
SHRA,
CLC,8299556360
St
anda
rdCha
rte
redBa
nkv.Pa
kis
tanNa
tiona
lShi
ppi
ng
Cor
por
ati
on[
2003]
Fraudulentbi
ll
sofladinghadbeeni
ssuedi
nordertorel
yuponlet
ter
sofcr
edi
tis
suedbythebank.The
dir
ec t
orsigni
ngthebill
ssoughtt
oavoidpe
rsonalli
abi
li
ty,s
ayi
ngitwast
heActofthec
ompa ny.The
defendantcompanyalsoappeal
edonthebas
isthatt
heclai
mantba
nkhadit
sel
fbeenatf
aulta
nd
contri
butori
lynegl
igent.

I
SSUE-
(
1)Whe
the
rthec
onduc
tofSCBwoul
datc
ommonl
awbeade
fenc
etoac
lai
mforde
cei
t?

(
2)Whe
the
rMr
.Me
hrawa
sli
abl
eforhi
sde
cei
t?

J
UDGEMENT-
Itwouldnotseemjus
tthatafra
udule
ntdefenda
nt'
sli
abi
lit
yshoul
dbereducedont hegr
oundthat,for
whateverr
eason,t
hevict
imshouldnothavemadethepaymentwhic
hthedefendantsuc
cess
full
yi nduce
d
himtoma ke.Inca
seoffraud
ulentmis
repre
sent
ati
onthe
reisnocommonl a
wde f
enceofcont
ributory
negl
igence.

Mr .Me hrama deaf ra

udulentmi s
representati
onintendi
ngSCBt orelyupo nita ndSCBdi dre l
yuponi t.
Mr .Me hrawa stheonlyhuma nbeinginvol vedinma ki
ngther epresenta
tiontoSCB( a par
tfi
rm
administr
ativeassi
s t
ancelikesome onetot ypethelett
erandc ar
r ythepape r
sr oundt heba nk).Itistr
ue
thatSCBr e l
ieduponMr .Me hra
'srepresentat
ionbeingattr
ibutabletoOa kpri
mebe ca us ei
twa sthe
benefic
iaryunde rthecredit
.Butthe yalsor el
ieduponitbeingMr .Me hr
a'srepr es
entation,because
otherwisetherecouldha vebeennor epresentati
ona ndnoa t
tri
bution.Noonec anesca pelia
bili
tyf orf
raud
bys ayi
ngt hatheha scommi tt
edthef r
audonbe halfofsome onee ls
e.M.Me hr awa she ldli
ablenot
becausehewa sadi r
ectorbutbecauseh ec ommi t
tedafraud.

Cas
esaresumma r
ise
dbyABHI
SHEKKUMARMI
SHRA,
CLC,8299556360
Fos
sv.Ha
rbot
tl
e(1843)
I
SSUE-
Whethe
ra nyt
hingconnec
tedwit
hthei
nte
rna
ldi
sput
esbe
twe
ent
hes
har
ehol
der
sca
nbema
det
hes
ubj
ect
ofa
na c
tionbyas har
ehol
der?

J
UDGEMENT-
Theconductwit
hwhic
hthedef
endant
sarec
har
gedint
hiss
uiti
saninj
uryt
othewhol
ecor
por
ati
onby
i
ndivi
dualswhomthecor
por
ati
onentr
ust
edwit
hpower
stobeexer
cis
edonl
yfort
hegoodoft
he
cor
por
ation.Insuchc as
e stheruleistha
tthecorporati
ons houldsueinit
sownna meandini
tsc
orpor
ate
cha
rac
ter.Itisnotma t
terofc oursefora
nyindividualme mbe rofcor
porat
ionthust
oass
umeto
t
hemsel
ve stherightofsuingi nthenameofcorpor a
tion.Inlawt hec
orporat
ionandt
heaggr
ega
teof
membersoft hecorpor
ationa renotthesamethingforpurpos esl
iket
his.

TheCourthel
dthatt
herul
eappli
esonl
yaslongasthecompanyisacti
ngwithi
nit
spowers
.A
sha
rehol
dersi
senti
tl
edtobr
inganacti
onagai
nstt
hecomp anyinres
pectofmat
ter
swhic
ha r
eul
tr
avi
res
t
hec ompanyandwhichnomajor
it
yofsha
reholde
rscansanct
ion.

Ifac a
sea ri
sesofinjur
ytoac orpor
ati
onbysomeofitsmembersforwhichnoa dequatere
me dyremained
exceptthatofsui
tbyi ndi
vidualcor
porat
ersi
nthei
rpri
vat
echaract
ersandaskinginsuc hcha
ract
erthe
protec
tionofthei
rr i
ghtst
owhi chinthei
rcor
porat
echar
act
erth
e ywe r
eentit
le
dt hentheclai
msofj us
tic
e
wouldbef ounds uperi
ort
oa nydiff
icul
ti
esar
isi
ngoutoft
echni
calrule
srespecti
ngthemodei nwhi ch
corporati
onsarerequir
edtosue.

Cas
esaresumma r
ise
dbyABHI
SHEKKUMARMI
SHRA,
CLC,8299556360
Shant
iPr
asa
dJa
inv.Ka
lingaTube
sLt
d.AI
R1965SC
1535
I
SSUE-
Whet
herthemaj
ori
typowerwa
sexe
rci
sedingoodf
ait
hint
heint
ere
stoft
hec
ompa
nyoronl
yde
pri
vet
he
pe
ti
ti
onerofhi
sri
ghtunde
rSec
ti
on62oftheCompani
esAc
t?

J
UDGEMENT-
TheCour thel
dthatthea greementbetwe enthema jor i
tygroupsa ndthepe ti
ti
one rdidnotme anthatifi
n
fut
ur et
herewasanyi ncreaseinthecapitalofthec ompa nythatwi l
lbes ha r
ede quallybyt het hree
. The
compa ny,muchlessthepubl i
climitedcompa nywhe nitwasforme d,notbe i
ngapa rtyoft hea gre
eme nt
wa snotboundbyi t
.Cons equentl
y,itwa sopent othepubl icli
mi te
dc ompa nyini tsgeneralme et
ingto
decidethatne
ws haresshouldnotbei ssuedtot hee xist
ingshareholdersbuttoot herspri
va tely.Thisdid
notme anoppres
sionofmi norit
ys hareholder
s.Thema tt
erwouldha vebe endi f
ferentifthepe r
sonsto
whomt hene wshareswe reeventuall
ya ll
ott
edwe r
ebe namidarsors t
ooge sofma jorit
ygr oupsf orinthat
caseitmightbesaidthatthesetwogr oupsformi ngt hema j
orit
yi nthege neralme eti
ngha da ct
ed
fra
udulentlya
ndunf ai
rl
ya ndde privi
ngt hepetiti
one rofwha thewoul dha vegotunde rsection62.

Theremus tbec ontinuousactont hepar

tofthema j
ori
tyshar
eholders,continui
nguptot hedateofpet
it
ion,
showingthatthea ffair
softhec ompanywe r
ebe i
ngconduct
edi nama nneroppress
ivetos omepa r
tofthe
me mbers
.Thec onduc tmustbebur dens
ome ,ha
rshandwrongfulandme relackofconfidencebetwee
n
t
hema j
ori
tysha reholdersa
ndt hemi nor
it
ys har
ehol
derswouldnotbee noughunlessthelackof
confi
dencespringsf romoppr e
s si
onofami nori
tybyama j
orit
yi nthema nagementofthec ompany'
s
a
ffa
irsa
ndsuchoppr
ess
ionmustinvol
vea
tleas
tanel
eme
ntofl
ackofpr
obi
tyorf
airde
ali
ngt
oame
mbe
r
i
nthematt
erofhi
sprop
rie
tar
yright
sasasha
rehol
der
.

Cas
esaresumma r
ise
dbyABHI
SHEKKUMARMI
SHRA,
CLC,8299556360
Ra
jahmundryEl
ect
ri
cSuppl
yCorpor
ati
onLt
d.v.A.
Na
ge s
hwaraRaoAIR1956SC213
FACT-
apet
it
ionwasbroughtagai
nsttheappe
ll
antbycer
tai
ns har
ehol
der
sonthegr
oundsofmis
manage
me ntby
di
rec
tors
.TheAndhraPradeshHighCourthel
dtha
tthec a
sewasfi
tforanor
derf
orwindi
ngupbei
ng
madeunderSec
tion162(vi)oftheCompani
esAct,1913.

I
SSUE-
Whe
the
rtheor
derf
orwi
ndi
ngupwa
sri
ght
?

J
UDGEMENT-
Itwasfoundbyt hec ourttha
tthea f
fair
soft hecompa nywe rebeinggross
lymi smanaged.Vice
-cha
irman
haddrawnc onsidera
blea mountsforpersonalpurposes;thatl
argeamountswe reowingt ot
he
Governme ntforchargesforsupplyofe l
ectri
cit
y,thatthema chi
ne r
ywa sinthestat
eofde s
pair
;"a
powerfulloca
ljuntawa sruli
ngther oost
"a ndthes har
eholdersoutsi
dethegroupofthec ha
irmanwere
powerlesstosetthema t
tersri
ght.Thesefactswe r
ef oundtobes uffi
cie
ntforrel
iefonthegroundof
mismana gement.

Thec ourtappoint
edtwoa dminist
ratorsforthema nagementofthecompanyf oraperiodofsixmonths
vest
ingint hema l
lthepowe r
soft hedirect
orate.Itwaschal
lengedonthegr oundt hatitwasan
int
erfer
encewi thi
tsma nagement.theSu pre
meCour tobser
ved:"Thecourtswi llnot
,inge ne
ralint
ervene
att
hei nsta
nc eofshar
eholder
sinma tt
ersofinternaladmini
st
rati
on;andwillnoti nte
rferewit
hthe
mana gementofac ompa nybyitsdirector
ssol onga sthe
yareacti
ngwi t
hint hepowe rsconfer
redont hem
underthea rt
icl
esoftheCompa ny."

Cas
esaresumma r
ise
dbyABHI
SHEKKUMARMI
SHRA,
CLC,8299556360
Bhara
tInsur
anceCo.Lt
d.v.Ka
nha
yaLa
lGa
ubaAI
R
1935Lah.792
I
SSUE-
Whether
,ont
hefact
sandint
hecir
cumst
ancesoft
hecase
,asingl
eme mberoft
hecompa
nyca
nma i
ntai
n
as
uitforade
cla
rat
ionast
othet
ruecons
truc
ti
onoftheArt
ic
le3(d)ofthememora
ndumofAs
soc
iat
ion?

J
UDGEMENT-
I
twa sheldthatt
hesuitinsofara srel
atedtodecla
rati
onofme a
ningofthec la
use[i
.e.art
ic
le3(d)]was
conc
erned,thema i
npointinvolvedwa stheinte
rpret
at
ionofacert
aincla
us eintheMe morandumof
Associat
ionrel
at
ingtoapplicat
ionofthea sset
softhecompany.Suchaque sti
onwa snotama tt
erof
i
nter
na lmanagement.As i
ngleme mbe rofthecompanyc o
uldma i
ntai
nas uitforde
c l
ara
ti
ona stothet
rue
cons
truct
ionofthearti
cl
einq ue s
tion.

Rega r
dingthetrueme aningoft heimpugne dcl
aus e
,t hedistincti
onwa sc l
e arl
ydr awnint hec lause
between" a
dvanc i
ngmone yatinterest
"a nd" i
nvesti
ngmon ey".Ifthei ntentionofthedi re
c t
orswa sto
ma kea" t
empor ar
yloan' itwasc l
earthatthetransactionwoul dfallunde rthehe adofa dvancingmo neyat
int
e r
estasment i
onedint hef i
rstpor t
ionoft heclausea ndwoul dnotbea ni nve s
tment.Suc hloa nscould
onlybema deont hesec urityofl a
nd,hou s es
,ma chinerya ndot herpr opert
ys i
tuat
edinI ndia.If,howe ve
r,
thedirect
orsi
nt e
ndedtoi nve stmone y;e .
g.,ingove rnme ntse cur
itie
sorot hers t
ock,t
hedi rectorswould
havefullli
bertytodeci
dewhe therthena tureofthes ecurit
yf orthei nvestme ntwa sorwa snota dequat
e,
withoutref
erencetothek indofs ecurit
yr equi
redforl oansc ove r
edbyt hef i
r s
tporti
onoft hec lause.

Cas
esaresumma r
ise
dbyABHI
SHEKKUMARMI
SHRA,
CLC,8299556360
Radhar
amanan(M.
S.D.
C.)v.Cha
ndr
ase
kar
aRa
ja
(
M. S.
D.)(
2008)6SCC750
I
SSUE-
I
soppr
ess
ionaprecondi
ti
onf
ore
xer
cis
eofpowe
ru/
s242(Cor
res
pondi
ngt
ose
cti
on402oft
he
c
ompani
esAct,2013).

J
UDGEMENT-
oppr
ess
ionisnotacondit
ionpr
ecedentforexer
cis
eofpo we rbythetr
ibunalorCLBunde rsect
ion242of
CA2013.The r
ewa sanacri
monybetwe e
nt woshare
holders/direc
tor
sofapvtc o.res
ulti
nginde a
dlock
inaf
fai
rsofthecompany.Henc
ede s
pitetheabse
nceofa nyoppressi
onont hepartoft
heotherSHst he
companylawboardsdir
ecti
ont
otheotherme mbertopurcha s
etheshareoftheappli
cat
ionupheld.

I
twasHe
ldtha
tnorea
sonpre
vail
edfori
nte
rfe
rencewihttheorder
softhehi
ghcour
tandthusdi
smiss
ed
t
hea
ppea
l.J
ustande
quit
abl
etes
tisnott
ota
ll
ye xc
lude
di ngrantofre
li
efunders
ect
ion397.Des
pit
ethe
abs
enc
eofanyoppre
ssiononthepar
tofothe
rs ha
reholde
r,t
hec
ompa
nyl
awboa
rd'
sdi
rec
ti
ont
oot
her
membert
opurc
hasetheshar
esofappel
la
ntwa supheld.

Cas
esaresumma r
ise
dbyABHI
SHEKKUMARMI
SHRA,
CLC,8299556360
Inr
eGe
rma
nDa
teCof
feeCompa
ny(
1882)20Ch.D.
169
FACT-
Thec ompa nywasincorporat
edforma nuf
act
uri
ngacoff
eesubst
it
uteoutofdat
es.t
hef i
rstobje
ctofthe
compa nytoa c
quir
eaGe rmanpatent
.TheGe r
manEmpiredidnotgra
ntthepate
ntt
ot hec ompany.Itwas
heldthatthecompanyha dbe e
nsetupwi t
htheai
mofwor ki
ngas pe
cif
icpate
ntandthatonc et
hatfail
ed,
theshareholde
rswereentitl
edtosaythatt
heywerenoti
nter
est
edincarr
yingonanyotherbus i
ness.The
compa nywa sacc
ordinglywoundup.

I
SSUE-
Whe
the
r,ont
hef
act
sandi
nthec
irc
ums
tanc
esoft
hec
ase
,itwa
sjus
tande
qui
ta
blet
owi
ndupt
he
c
ompan
y?

J
UDGEMENT-
I
twashel
dtha
tthesubstr
atumofthecompa
nyhadfai
le
d,anditwa
simpos
sibl
etoca
rryoutt
heobj
ect
s
f
orwhic
hitwasfor
me d;andthe
refor
e,i
twasj
usta
ndequi
tabl
etot
hatt
hecompanyshoul
dbewoundup.

Accor
dingt
otheme mor
andumofass
ociat
ionofthecompany,theacquisi
ti
onofaGe r
manpate
ntand
wor
kingunderitwa
sthemainandpr
inc
ipalobje
ctoftheexi
ste
nc eoftheGe r
manDa t
eCof
feeCompany.
Anyothert
hingint
hememorandumwassubsidi
aryandauxi
lia
r yonl
yt otha
tobj
ectofwor
kinga
Ger
ma npat
ent.

Thebasisofthiscas
eisthatt
heme mber
sbande
dtogetherforave r
ys peci
ficpurpose
,andoncethat
purpos
ef a
iledtheywereenti
tl
edtopul
loutoft
heente
r pr
ise.I
na ddit
ion,ac ompanyma ya
lsowoundup
ifenga
gesi nactswhi
cha r
eenti
rel
youts
idewhatc
anfa ir
lyberegardeda sha vi
ngbeenwit
hinthegene
ral
int
enti
ona ndcommonunde rst
andi
ngofthememberswhe ntheybecameme mbe rs
.

Cas
esaresumma r
ise
dbyABHI
SHEKKUMARMI
SHRA,
CLC,8299556360
Se
thMoha
nLa
lv.Gr
ainCha
mbe
rs,Muz
aff
arna
garAI
R
1968SC772
FACT-
Tthecompa nywasc a
rryi
ngonbus i
nessprinc
ipal
lyin"future
s"ingur ,i.
e.
,t hepurchaseandsal
eofgur
onforwardbasisandprovidi
ngf ordeli
veryatsomef ut
uredateandpa yme ntofma rginonsuchdateon
rat
es,asma ybeexpres
s l
yori mpli
edlyagreeduponbyt heparti
es.Byanot i
f i
cat
iontheGovernmentof
Indiapr
ohibit
edentr
yi nt
ot r
ansacti
onsin"fut
ures"ingurwi t
heffectfromt hatdate
.Thea ppel
lant
,a
me mberofthecompany,filedape t
it
ionforwindingupoft hecompa nyonj us ta
nde quit
abl
eground.

I
SSUE-
Whe
the
riti
sjus
tande
qui
ta
blet
owi
nd-
upt
hec
ompa
ny?

J
UDGEMENT-
TheSupr
emeCour
thel
dtha
tsubs
tra
tumoft
hec
omp
anywa
snotde
str
oye
d.The
irLor
dshi
poft
he
Supr
emeCour
tsai
d:

Thereisnoe vi
denc ethatthec ompa nywa sunabletopa yitsdebtsUnde rSe c
ti
on271oft heIndian
Compa nie sAc t
,thec ourtma yma kea norderforwi ndingupac ompa nyi ft hecourti
soft heopinionthat
iti
sj us
ta nde quit
a bletha tthec ompa nyb ewoundup.I nma kinga nor derf orwindingup,t hecourtwill
considerthei nt
erestsoft hes ha re holdersa swellasoft hecredit
ors.Thes ubs t
rat
umoft hecompa nyis
saidtoha vedi s
app e ar
edonl ywhe nth eobjectforwhi chitwa sincorporatedha ssubstanti
allyfai
led,or
whe nitisi mpossiblet oca rryont hebus i
ne s
softhec ompa nye xcepta tal oss,ortheexisti
nga ndpossibl
e
assetsarein s
uffi
cie nttome ett hee xi
stingliabi
lit
ies.I
nt hepresentc as
et heobj ectforwhi c
ht hecompa ny
wa sincorporatedha snots ubsta ntiall
yf ail
ed,andi tcannotbes aidthatthec ompanyc ouldnotc ar
ryoni t
s
businesse xceptatal os s
,nort ha titsa s
s e
tswe r
es uffi
cientt
ome etitslia
bi lit
ies.

Cas
esaresumma r
ise
dbyABHI
SHEKKUMARMI
SHRA,
CLC,8299556360
Alumi
niumCorp.ofI
ndiaLtd.v.La
kshmiRa
tanCot
tonMi
ll
s
Co.Lt
d.AIR1978All.452
I
SSUE-
(
1)Whe
the
rthec
ompa
nyi
sli
abl
etobewoundupont
hegr
oundt
hati
tisc
omme
rci
al
lyi
nsol
vent
?

(
2)Whethe
rthec
ompa
nyha
ssus
pende
dit
sbus
ine
ssf
orawhol
eye
ara
ndi
tisl
ia
blet
obewoundupf
or
t
hisr
eas
on?
(
3)Whe
the
riti
sot
her
wis
ejus
tande
qui
ta
blet
owi
ndupt
hec
ompa
ny?

(
4)Whe
the
rthepe
ti
ti
oni
sma
laf
idea
ndl
ia
blet
obedi
smi
sse
dont
hatgr
ound?

J
UDGEMENT-
TheCour thel
dthatthefa
ctthatt
hecompanyi
sunablet
opayitsdebts
,doesnotne ce
ssa
ril
ye nt
it
let
he
CourttoorderwindingupoftheCompanyast
hediscr
eti
ont
opa sssuchanorder,eveni
nthec as
eofthe
i
nabili
tyofac ompanytopayitsdebt
s,i
sbySect
ion271ves
tedintheCourt.Butthedis
cret
ionhast
obe
exe
rcisedjudi
cial
ly.TheCourtsai
d:

"Thi sme a
nsthatitisonlywhe retheba l
anceofe quit
iesiss hownbyape ti
ti
one rt
ot i
ltappr ecia
blyi n
favourofawi nd i
ngupor dert hati twi l
lbema de" exde bi
toj ust
iti
ae" .Itisinthisspecialse nsethata
petiti
one rrel
yingongr oundc ontainedSe cti
on433c ange tawi ndingupor de rasma tt
erofr i
ght.Itis
issueda sma tt
erofr i
ghtwhe npr ovedc ontentsofther i
ghtpr oduceac ompe lli
nge ff
ect.Itisnotgr anted
me cha nical
lyasama t
terofc ours eonpr oofofc ert
ainfa c
ts.Thepr ovisionofSe ct
ion271( 1)determine
whe nr equirementsofSe ct
ion271( a)willbede eme dtobef ul
fill
ed,butt heydonotl aydownwhe na
windi ngupor dermus tneces sari
lybepa ssed.Itistr
uetha tac redit
ori snotboundt owa itandgi vetimeto
thec ompa nybe yondthetimepr esc r
ibeda ft
erthes t
atut
orynot ice,be forefil
inghispe ti
tion.Butt heCour t
ma y,ift her
ea r
es uf
fici
entc ounte rbalancinge quit
ablegro unds,denya nimme dia
tewi ndingupor der,or
,
ina ppropriat
ec ases
,evenre fusei taltoget
he rinspit
eoft hepr ovedi na bil
it
yofac ompa nyt opa yitsdebt
s.
Exe rciseofsuchdi s
c r
eti
ona rypowe rmu s
tne cessa
ril
ybegove rnedbyj us
tic
ea nde quit
y.

Cas
esaresumma r
ise
dbyABHI
SHEKKUMARMI
SHRA,
CLC,8299556360
MadrasBarAssoc
iat
ionVsUnionofI
ndi
a&Anr
.Wr
it
Pe
tit
ion(C)No.1072Of2013
FACT-
thepet
it
ionwa sfil
edbythepe t
it
ioneral
le
gingtha
tnotwiths
tandingvar
iousdi
rec
tionsgi
ven2010
judgment,t
hene wprovi
sionsintheCompa ni
esAct,2013arealmostonthesameline
saswell
incor
porate
di nt
heCompa niesAc t
,1956andther
efore,t
her
epr ovi
si
onssuff
erfr
omt hevi
ceof
unconst
it
utional
it
y.

I
ssueNo.1:
Cons
ti
tut
iona
lva
li
dit
yofNCLTa
ndNCLATwhe
the
rthec
ons
ti
tut
iona
lofNCLTa
ndNCLATunde
rthe
Compani
esActa
reval
id?

J
UDGEMENT-
TheSupremeCourtu
phel
dthec ons
tit
uti
ona
lofNCLTa ndNCLAT,There
asonsar
easvali
dit
yfol
lows
:
Fir
stl
y,t
hecre
ati
onofNCLTa ndNCLATha sbee
nspecif
ica
ll
yuphe
ldi
n2010judgmentofGover
nment
ofIndi
av.R.Gandhi
,Pr
esi
dent,Ma dr
asBarAss
ocia
ti
on.

TheCourts
peci
fi
call
yrej
ect
edt
hec ont
enti
ontha
ttransf
erri
ngjudi
cia
lfunct
ion,t
radi
ti
ona
ll
ype
rfor
med
bytheCour
ts,
totheTri
buna
lof
fendedthebas
icstr
uc t
ureoftheConst
it
uti
on.

I
ssueNo.2:
Qua
li
fi
cat
ionofPr
esi
denta
ndMe
mbe
rs

J
UDGEMENT-
Itisa
rguedthati
nforast
echni
calmembersofNCLT/NCLATareconc
erned,thepr
ovi
sio
nisa
lmostt
he
samewhi chwasins
ert
edbywayofa namendmenti
ntheCompa
nie
sAc t,1956andcha
ll
enget
othos
e
provi
sionswasuphel
din2010judgment
.

TheCourtheldt
hatonl
ypersonswithajudici
albackgr
ound,t
hatis
,thosewhoha vebe
ena
reJ
udgeof
HighCourtandla
wye r
swit
hpr es
cribedexper
ienc
e,whoa ree
li
gibl
ef orappoi
ntmenta
sHi
ghCour
t
Judge
s,c
a nbeconsi
deredf
orappointmentofJudi
cialMembers
.

Asfarastechnica
lme mbe rsareconce
rne d,TheCourti
nthepresentca
seheldthatonl
ySe cre
taryLevel
Offi
cer
s(i.
e.thosewhoa reSecret
ari
eso rAdditi
onalSe
cret
ari
es)withspeci
ali
sedknowledgeands ki
ll
s
canbeappointedasTe chnica
lMe mbersoft heTri
bunal
.Furt
her,theTechni
calMe mbersshouldbe
pers
onswithe xper
tis
einc ompa nyla
wora ll
iedsubj
ect
sandme reexperi
enceincivi
lse
rvicecannotbe
tr
eat
edasTe chnicalExperti
seincompa nyl a
w,

Cas
esaresumma r
ise
dbyABHI
SHEKKUMARMI
SHRA,
CLC,8299556360
Embas
syPrope
rtyDevel
opment
sPvt
.Lt
d.v.St
ateofKa
rna
taka
andOr
s.MANU/SC/1661/
2019
I
SSUE-
i)WhethertheHighCour toughttoint
erf
ere,UnderAr t
icl
e226/227oftheCons t
it
uti
on,wi
thanOrder
pass
edbyt heNa t
ionalComp anyLawTr ibunalinaproceedi
ngundertheIns
olvencyandBankr
uptcy
Code,2016,ignor
ingthea vai
labi
li
tyofas t
atutor
yreme dyofappea
ltotheNationalCompa
nyLa w
Appell
ateTr i
bunalandifso,underwhatcircumsta
nces;and

ii
)Whet
herques
tionsoff
raudcanbei
nqui
redi
ntobytheNCLT/NCLATinthepr
ocee
dingsini
ti
at
ed
unde
rth
eInsol
vencyandBa nkr
upt
cyCode
,2016,ar
isef
orourc
onsi
der
ati
onint
hesea
ppeals
.
J
UDGEMENT-
Cas
esaresumma r
ise
dbyABHI
SHEKKUMARMI
SHRA,
CLC,8299556360