Top 20 Landmark Judgements of Corporate Law
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The State Trading Corporation of India Ltd. & Ors V. The Commercial Tax Officer, Visakhapatnam & Ors; 1963
FACTS:
The State Trading Corporation had approached the court for the issuance of special writs against agencies of the state governments based on sales tax which were targeted on the corporation. The petition was to ascertain the facts in Article 32 of the Constitution which allows the Supreme Court to issue special orders for the enforcement of the rights of citizens. The question as to whether the State Trading Corporation which is a company that is registered under the Indian Companies Act, 1956 can be regarded as a citizen and can seek for the enforcement of the fundamental rights of citizens and whether the STO is an organ of the government and can request for the enforcement of the rights of citizens against a state as under part III of the constitution of India.
JUDGEMENT:
The Appeal was dismissed by the Supreme Court on the 26th of July 1963 because as implied by the Powers of the Corporate entity; all citizens are persons but all persons cannot be a citizen and a Company or a corporation ceases to be a person from the date of its incorporation. Also, since the corporation performs the functions of a commercial entity, it cannot be regarded as an organ or a department of the government of India.
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Salomon v Salomon & Co. Ltd; 1896
FACTS:
Aaron Salomon’s business was incorporated into a company in 1892 which comprised of himself, wife, daughter and four sons. Mr. Salomon as the company’s managing director had taken for himself a £10,000 debt out of the £39,000 amount for which the company was sold. An advance of £5000 was paid to Mr. Salomon by Edmund Broderip on the Security of the debentures. Soon after the transaction, there was a decrease in sales followed by a strike action which led to the downturn in the business. To enforce his security, Mr. Salomon was sued by Mr. Edmund because of his position and responsibility in the Company and whether Mr. Salomon is responsible for the debts himself.
JUDGMENT:
The High Court ruled that Mr. Salomon was the Company’s creditor since it had started as a sole proprietorship and having been changed into a company, the largest shares belong to Mr Salomon. This decision was upheld by the Court of Appeal. However, the argument of agency and fraud were rejected by the judges of the House of Lords because of the condition of the law on the formation of a company which require a minimum of seven persons and the law does not specify the number of shares which would be owned by each of the shareholders. Therefore, the principle of Separate Entity separates the personality of a company from its members which allows it to sue and can be sued.
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Durga Prasad V Baldeo; 1880
FACT:
Durga Prasad had constructed some shops at the market with the promise of paying commissions on the sales made from the shop. Baldeo had spent some money for the improvement of the condition of the market on the authority of the government. The issue of a consideration was brought before the court.
JUDGEMENT:
The court nullified the agreement because of the lack of a consideration which must be as desired by the promisor.
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Bates v. Standard Land Co.
FACT:
The question of the distinction of the personality of a person and that of a company was brought before the court.
JUDGEMENT:
It was held that members of the board of directors constitute the pillars of the company by which the company can only act or take decisions through them.
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Re South of England Natural Gas and Petroleum Co. Ltd. 1911
FACT:
The shareholders of the company had received copies of the Prospectus with the title that clearly specified that it is meant for private circulation. This was not advertised to the public.
JUDGEMENT:
The court ruled that the prospectus was a public offer of shares despite the indication that described it as private circulation only.
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Sri Gopal Jalan & Co. v. Calcutta Stock Exchange Association Ltd; 1963
FACT:
The question of the meaning of the word allotment as found in Section 75(1) of the Companies Act, 1956 was brought before the court. The plaintiff had complained that the company has failed to file a return of the allotment of his shares with the registrar as required by the law.
JUDGEMENT:
The Court held that the re-issue of a forfeiture share is not the same as an allotment of a share as prescribed under Section 75(1). The term allotment was described as the acceptance of the company to take the offer of shares.
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Ramasgate Victoria Hotel v. Montefiore; 1866
FACT:
Mr. Montefiore who was the defendant in the case had wanted to buy shares from the hotel which was owned by the complainant. He made an advanced deposit to the hotel owner’s bank account with the intention of completing the transaction in June. After six months, he received a letter of acceptance of the offer from the complainant by which time the shares had lost its value and the defendant had lost interest in the business. However, Mr. Montefiore refused to proceed with the transactions but did not withdraw his shares. An action of specific performance of the contract was filed by the complainant against Mr. Montefiore. And the question of the existence of an agreement between the parties was brought before the court.
JUDGEMENT:
The court dismissed the hotel’s action for specific performance that a great deal of time had passed before the offer was made. A period of six months which has elapsed was enough time for the expiration of the offer of shares.
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Balfour v Balfour; 1919
FACT:
Mr and Mrs Balfour were living together while he worked as a civil engineer with the government in Ceylon (Sri Lanka). Now, both had suffered from rheumatic arthritis. She was advised by her doctor to stay back in England because of the unfavorable climatic condition in Ceylon. Mr Balfour had promised to provide her with £30 a month of which he failed to keep the promise. She sued Mr Balfour for the failure to keep to his terms of the agreement.
JUDGEMENT:
The court held that the promises between husband and wife cannot be deemed as a contractual agreement. Mere promises cannot form a contract.
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Seth Mohan Lal v. Grain Chambers Ltd; 1967
FACT:
The respondent company was formed for carrying out specific business that relates with the exchange of commodities that included gur. The Articles of association of the company made it compulsory for all the members in the company to participate in the company’s business transactions. The company’s transactions were carried out based on the 1913 Companies Act which did not contain any prohibition against the entering of a director into transactions with the company. The Act was amended in 1936 which prohibited directors from entering into transactions with the company; this did not change the Company’s mode of operation. The appellant company had entered into a transaction with the respondent and had made huge deposits in monetary terms to the account of the respondent in respect to the transaction. The Indian government had on February 15, 1950 issued an order that prohibits any person from entering into transactions on ‘future’ in gur or make or receive payments relating to any futures after the said date. The appellant filed a petition against closing of the company following their resolution to settle all outstanding transactions before the closing day at the prevailing rate.
JUDGEMENT:
The appeal court held that the notification had voided any outstanding transaction in guts and futures. Thus, no case was made out from the closing of the company and the notification against the transactions in futures in gut was to operate in the prospective.
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Re Yenidje Tobacco Co Ltd; 1916
FACT:
Yenidje Tobacco Company Limited had two directors who had equal number of shares in the company and they had strong disagreement on how the company could be managed. There were no provisions by which the issue could be resolved.
JUDGEMENT:
The Court of Appeal ruled that the company can be dissolved based on the provisions of the Companies (Consolidation) Act; 1908, which is now referred to as Section 122 (1)(g) of the Insolvency Act 1986.
