Landmark Judgments of Company Law
The 19 leading Company Law cases — each with a full brief (facts, issues, held, ratio). Verified against the original judgment. Free to read.
Majority rule & minority protection (Foss v Harbottle; oppression & mismanagement)
- Foss v Harbottle Where a wrong is done to a company, the company itself is the proper plaintiff; individual shareholders cannot sue for it.
- Rajahmundry Electric Supply Corporation Ltd. v. A. Nageswara Rao Mismanagement and misapplication of company funds by those in control justify the court appointing an administrator/relief, and member consent given on a false impression may be withdrawn.
- Shanti Prasad Jain v. Kalinga Tubes Ltd. To constitute oppression conduct must be burdensome, harsh and wrongful and lacking in probity, and be continuous up to the date of the petition; a single past act or mere loss of confidence is insufficient.
- Dale & Carrington Invt. (P) Ltd. v. P.K. Prathapan A director who issues further shares to himself to convert a minority into a majority and reduce another shareholder to a minority acts in breach of fiduciary duty and commits oppression.
Doctrines — ultra vires, indoor management, constructive notice
- Royal British Bank v Turquand An outsider dealing in good faith with a company may assume that the company's internal procedures and required resolutions have been duly complied with.
- Ashbury Railway Carriage and Iron Co Ltd v Riche A company's acts outside its memorandum objects are ultra vires, void, and incapable of ratification even by unanimous shareholder consent.
- Dehradun-Mussoorie Electric Tramway Co Ltd v Jagmandar Das An outsider lending to a company is protected by the rule of indoor management and may assume internal borrowing procedures were duly observed.
- A. Lakshmanaswami Mudaliar v Life Insurance Corporation of India A donation by an insurance company, made after nationalisation, to a charitable trust not authorised by its objects was ultra vires and void.
Separate legal personality & lifting the corporate veil (Salomon)
- Salomon v A Salomon & Co Ltd Once incorporated, a company is a distinct legal person separate from its members, even where one person holds nearly all the shares.
- Lee v Lee's Air Farming Ltd A controlling shareholder-director can simultaneously be an employee of his own company, which is a separate person capable of contracting with him.
- Life Insurance Corporation of India v Escorts Ltd The corporate veil may be lifted only in defined exceptional situations; a shareholder generally cannot claim the company's property or assets as his own.
- State of U.P. v Renusagar Power Co Ltd Where a company is the alter ego of another, the veil may be lifted to treat them as one entity for the purpose of the statute in question.
- Delhi Development Authority v Skipper Construction Co (P) Ltd The corporate veil will be lifted where the corporate form is used as a device to perpetrate fraud, defeat the law, or shield ill-gotten gains.
Directors' duties & corporate governance
- Nanalal Zaver v. Bombay Life Assurance Co. Ltd. Directors may issue unissued shares to keep control with existing shareholders if the power is exercised bona fide for the company's benefit and not for collateral personal gain.
- Needle Industries (India) Ltd. v. Needle Industries Newey (India) Holding Ltd. A rights issue resolved upon bona fide and in the company's interest is valid even if it incidentally affects the proportionate holding of a shareholder; mere lack of probity short of oppression does not attract Section 397 relief.
- Dale & Carrington Investment (P) Ltd. v. P.K. Prathapan A director who allots further shares to himself to convert a minority into a majority and seize control, without bona fide need for capital or proper notice, breaches his fiduciary duty and the allotment is liable to be set aside.
Shares, prospectus, winding up & IBC interface
- Innoventive Industries Ltd. v. ICICI Bank On a Section 7 application, NCLT need only ascertain existence of a default; the IBC, being a Parliamentary law, overrides repugnant State legislation under Section 238 and Article 254.
- Committee of Creditors of Essar Steel India Ltd. v. Satish Kumar Gupta The commercial wisdom of the Committee of Creditors on distribution among creditors is paramount and non-justiciable on merits; equal treatment of all creditors is not mandated.
- Swiss Ribbons Pvt. Ltd. v. Union of India The IBC, 2016 is constitutionally valid in its entirety; the financial creditor / operational creditor classification and Section 29A are reasonable and non-arbitrary.
