Company Law : Important Case Laws for Companies Act 2013

Bal Ramba Vs Master Silk Mills AIR 1955 N.U.R Saurashtra 927

We know we can convert public company to private company as per Section 14. It should be done by special resolution. Such decision is binding upon dissenting shareholders also. However it should be noted that such decision is bona fide and consistent with memorandum of association.

Article 14(1) says such conversion should be with approval of Tribunal.

Section 464 Case Laws

Greeberg Vs Cooperstein / Ram Das Vs Kunut Dhari AIR 1925

Where an association is formed which has a membership in excess of the number(Section 464. Read here) prescribed in the Act, such a body will have no legal existence. It cannot be wound up, cannot sue or be sued by the members. Nevertheless, a member who has paid any money to the association would be able to recover the money from the director or agents or the association before the money so paid has been applied to an illegal purpose.

Smith Vs Anderson

As per Section 464, association of more than 100 person for carrying on business activity for acquisition of gain has to register, otherwise it is deemed as illegal association. But this "carrying on" is continuous and repetitive activity or can it be association for single activity as well ?

Held (inter alia) Brett LJ said that the expression ‘carrying on’ implied a repetition of acts and excluded the case of an association formed for doing one particular act which was never to be repeated. 

Do you really agree ?

Kumarswamy Chettiar Vs ITO

Section 464 renders association of more than 100 person carrying business for gains without registration illegal. However These 100+ people still have to pay taxes and charges. Invalidity in their association doesn't exclude their tax liability. So yes, Dawood gang is liable to pay taxes..!! 

Section 9

Hari Nagar Sugar Mills Vs S.S Jhunjhunwala AIR 1961 SC 1669

 Section 9 talks of effect of incorporation of Company. From date of registration, company becomes legal person and become separate entity from their owners/promoters. Binding contract comes into existence between their members owing to memorandum and articles.

State Trading Corporation India Vs Commercial Tax Officer AIR 1963 SC 1811

Section 9 of Companies Act tells us that after incorporation of company, company become separate legal entity. It become legal person. Is this legal person also a Citizen and can claim fundamental rights ? Supreme Court said Big NO in this case. Legal person is not citizen. Citizen is Legal person by the way.

Section 10- Effect of Memorandum and Articles

Bradford Banking Co. Ltd Vs Henry Brigs, Sons and Co Ltd

Clause 2 of Section 10 states that if member owes money to company because of some terms in Articles or due to some liability, then such amount will be debt on member. He has to pay it.

Members are issued shares. Now assume that member has to pay some money to Company due to some clause in Article or some liability. Also there is clause that Company can have lien over shares, meaning company can take away shares of members if he defaults on payment.

If member mortgage his shares to say some bank or third party, can Company still have lien over those shares ? Can they ask bank to give back shares for default of payment ?

In this case it was held that if member incurred liability after mortgage, company won't have lien.

Hickman Vs Kent Sheepbreeder's Association

Contract comes into existence due to Memorandum and Article between members and Company. Members are bound by Articles.

In this case, in Articles it was stated that dispute would go to Arbitration. When dispute arose one member went to Court. It was held that member is bound by Articles and he should to to Arbitration for dispute

Pender Vs Lushington

In this case it was held that every member has right to vote and that vote to be counted, as it right of property.

Wood Vs Odessa Water Works

Memorandum and Articles creates a contract between Company and it's members/Shareholder. Does it also creates some sort of contract among members/shareholders ? In this case it was held that Memorandum/Articles create contract among members too. So if you holding a share of Tata Motors Ltd and Ratan Tata ji holding a share of Tata Motors you have a contract with him. Great.!!

Similar ruling was given in Welton Vs Saffarey 

 

Ashbury Railway Carriage & Iron Co. Ltd v. Riche and Egyptian Salt and Soda Co. Ltd v. Port Said Salt Association Ltd 

In this case it was held that memorandum  of association of a company is the  main  charter  of  a  company  and  itdefines  the  limitation  on  the  powers  of  a  company.  It states  negatively  that  nothing  shall  be  done  beyond  that  ambit  which  a  memorandum  of  a company prescribes.

 

Pre Incorporation or Preliminary Contract

Vali Pattabhirma Rao Vs Sri Ramanuja Ginning and Rice Factory Pvt Limited

Preliminary contract can either be adopted by Company or not adopted. However if preliminary contract is adopted by a company, then it will be binding on the Company and the third party. Third party is bound by contract once it is adopted and communicated to Third party. In this case there was contract that third party would lease a place to Company. Later that third party refused to lease. However they are bound to lease as contract is binding after Company adopted a contract.

We will be keep adding to this. You can add yours in Comment section. 
 

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