Top 20 Landmark Judgements of Corporate Law
- State Trading Corporation of India v. C.T.O
Where in a case State Trading Corporation sought relief in form of appropriate writs against of the State governments on accounts of sales tax corporation, the Court answered the issue raised which was if a company is a citizen and has fundamental rights.
The court held that a company is not a citizen as it cannot enjoy the rights under the Constitution of India or Citizenship Act. Neither the provisions of the Constitution nor the Citizenship Act apply to it. Though a company does not possess fundamental rights, yet it is person in the eyes of law.
- Salomon v. Salomon & Co. Ltd
The son of the owner of the company wanted to became the business partner and then later the company had debentures and was put on liquidation. The issue raised was if the counter-claimed wanting the amounts paid to Salomon paid back, and his debentures be cancelled.
The principal of separate of legal entity was explained and emphasized in this infamous case. It has established that a registered company is an entity distinct from its members, even if the person holds all the shares in the company.
- Durga Parsad v. Baldeo
On the orders of the government, Durga Prasad built some shops on his own expense in a market which was to be paid by owners of the shopkeepers later. The issue that came before the court was the need for consideration.
It was held that consideration should be at the desire of the promisor. A promise to subscriber to a public or a charitable object is unenforceable because there is not benefit to the promisor. But where the other party has undertaken a liability on the faith of the promise made by the promisor, it is enforceable.
- Bates v. Standard Land Co.
Where a question came before the court if company is a person. It was held that company is an artificial person who acts through a board of directors elected by shareholders and are the brains and the only brains of the company, which is the body. A company can surely act only through them.
- Dermatine Co. Ltd. v Ashworth
A bill of exchange drawn upon a limited company in its proper name was duly accepted by 2 directors of the company. The rubber stamp by which the word of acceptance were impressed on the bill was longer that the paper of the bill and hence the word ‘Limited’ was missed in the memorandum. Whether directors can be held liable came as the issue before the court.
It was held that the company was liable to pay and the directors were not personally liable.
- In re Crown Bank
Where object clause of a company object clause allowed it to act as a bank and also to invest in securities land to underwrite issue of securities. The company abandoned its banking business and confined itself to investment and financial speculation. It came as an issue before the court if the company can do so or not.
Held, the company was not entitled to do so.
- Re South of England Natural Gas and Petroleum Co. Ltd.
The issue as considering an office as public office came before the court where the distribution of 3,000 copies of a prospectus among the members of certain gas companies was to be considered.
It was held to be an offer to the public because person other than those receiving the offer could also accept it. One may note that under Section 67 an offer or invitation to any section of the public, whether selected as members or debenture holders of the company or as clients of the person making the invitation, will be deemed to be an invitation to the public.
- Sri Gopal Jalan & Co. v. Calcutta Stock Exchange Association Ltd.
Where the shares has to be allotted among the members/ partners of the company, the issue on when does the share is actually allotted came before the court.
It was observed that it is only after allotment that shares come into existence. Reissue of forfeited shares is not an allotment. Court further explained allotment of shares as the appropriation, out of the previously not appropriated capital of the company, of a certain number of shares to a person.
- Introduction Ltd. v. National Provincial Bank Ltd.
A company was formed with the main object of providing information and facilities to the overseas visitors to the Festival of Britain in 1950. The company later engaged in pig breeding as its sole activity. For this purpose, it borrowed money from a bank which took debentures as a security. The bank was given a copy of the Memorandum and it knew that the only business being carried on by the company was pig breeding. Whether does the engagement in pig breeding by the company from its main object leads to liquidation of the company.
Held, the loan was for a purpose known to be ultra vires and therefore, the debentures were sold.
- In re Opera Photographic Ltd.
In this case, there were only two directors and one of them who was holding 51% of the shares wanted to remove his fellow director. The Articles required the quorum of two. The fellow director did not attend the meeting to frustrate him. Whether absence of one director lead to removal of that director.
The Central Government ordered a meeting to be called with the presence of one as a sufficient quorum.
- Palaniappa Mudliar v. Official Liquidator, Pasupathi Bank Ltd.
Where an application for shares in a company was made by a father as a guardian of his minor daughter, if a minor can be a contributor was questioned.
It was held that the transaction as void ab-initio, and neither minor nor her guardian could be placed on the list of contributories. Subsequently, the company went into liquidation and the liquidator placed the father’s name in the list of contributories.
- Ramasgate Victoria Hotel Co. v. Monterfiore, Monterfiore
The court applied for shares on June 28. But allotment was made on November 23 and he refused to take the shares. The issue that came before the court if the shares had lapsed.
In this case it was held that the offer had lapsed and the applicant was not liable to pay for the allotment.
- McConnel v. Wright
It has been held that the measure of the damages is the loss suffered by reason of the untrue statement, omissions, etc. the difference between the value which the shares would have had and the true value of the shares at the time of the allotment.
- Indian Chemical Products v. State of Orissa
The state of Orissa had become entitled 9 to the shares of the Maharajas. But the company refused to register the shares in the name of state’s representative. Is the company bound to deliver?
It was held that the company was bound to register the shares in favor of the state’s representative because it was a case of transmission. And the state became entitled to the shares due to the operation of law.
- Balfour v. Balfour
A couple entered into an agreement for business purposes. Being a family themselves, if become a matter of question if that agreement can ever become a contract.
The Court in this famous case held that Agreements which do not create legal relations are not contracts. Further, Agreements between husband and wife in domestic affairs is not a contract.
- Kaye v. Croydon Tramways Co.
Where there was a provisional agreement between 2 companies for the sale of the undertaking of the one company to the other, the notice calling the meeting of the shareholders to consider the agreement for sale of the undertaking did not disclose that there was a provision in the agreement for the payment of compensation to the directors. The issue that came before the court was if the notice was to be considered.
The Court held that the notice could not make the full and fair disclosure of all the material facts to the considered and voted upon at the meeting and therefore the resolutions passed at the meeting were invalid and ineffective.
- Misrilal Dharamchand Ltd. v. B. Patnaik Mines Ltd.
Winding of the business was decided on the grounds due to withdrawal of directors and the company had become insolvent and cannot pay its dues. If the winding up could be permitted?
The Court ordered for winding up but stayed the operation of the order for six months so as to enable the company to pay the petitioner, if it could do so within this period and in case of failure the order was to come in force.
- New Brunswick etc. Co. v. Muggeridge
The true nature of company’s venture should be disclosed. The statements which do not qualify to the particulars mentioned in the prospectus or any information is intentionally and willfully concealed by the directors of the company, would be considered as mis-statement.
- Seth Moham Lal v. Grain Chambers Ltd
Winding of the business was decided on the ground of the Dysfunctional board of directors due to withdrawal of directors by respondent and Company is insolvent and cannot pay its dues. If the winding up could be permitted?
The Court opinioned that substratum of the company is said to have disappeared when the object for which it was incorporated has substantially failed, or when it is impossible to carry on the business of the company except at a loss, or the existing and possible assets are insufficient to meet the existing liabilities.
- In Re Yenidjee Tobacco Co. Ltd.
Where there were only 2 shareholders and directors of a private limited company became so hostile to each other that neither of them would speak to the other except through the secretary. The issue that came before the court was if the company can be continued.
Held, there was a complete deadlock and consequently the company be wound up.