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Companies Act, 1956 —
Enforcement of decree of Foreign Court
The petitioner company used
to deliver the cargo to the respondent company. The petitioner incurred
liabilities due to respondent which petitioner was liable to pay to the third
party. The petitioner initiated proceedings against the respondent for payment
of liabilities on the basis of letter of indemnity in the High Court of
England and Wales, the High Court of England and Wales granted a summary
judgment and a notice was issued under section 433 and section 434 of the
Companies Act, 1956. Further when the respondent failed to comply with the
notice the petitioner filed a petition for winding up of the company. Before
the High Court, the respondent contended that the statutory notice of winding
up is based on the decree of the English Court and the decree does not fulfil
the condition under section 13 of Code of Civil Procedure. The judgment passed
is without jurisdiction without any merit. The respondent did not appear
before the court and the ex parte decree was passed against them. The Court
held that it is the settled law that the judgment given would be the judgment
given on the merits, if the evidence given by the petitioner and the judgment
is based on the consideration of the evidence. The court admitted the
petition.
China Shipping Development
Co. Ltd. vs. Landyard Foods Ltd. [(2007) 77 SCL 197 (Bom)]
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Negotiable Instrument Act,
1881 — Dishonours of cheque for insufficiency of fund — Liability of director
The Appellant was proceeded
against the alleged commission of offence under section 138 of Negotiable
Instrument Act, 1881. The appellant put forth that they where not the
directors of the company at the time of the commission of the offence and the
allegation made in the complaint petition do not satisfy the requirement under
section 141 of the Act so they are not responsible. The appellant further
contends that they where not the directors of the company at the time of
issuance of the cheques. It was shown that director entered into negotiation
with the complainant firm for the financial assistant. To prove that a
vicarious liability of the Director upon complaint it is incumbent to make the
directors they where responsible for the conducts of the business of company.
The Supreme Court further
held that the order passed by the lower court was not correct, the negotiation
for obtaining financial assistant on behalf of the company is not an offence
under section 138 of the Negotiable Instrument Act, 1881 and a vicarious
liability must be proved and cannot be a subject matter of mere interference.
K. Srikanth Singh vs.
North East Securities Ltd. [2007] 77 SCL 214 [SC]
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Oppression and Mismanagement
of the Companies Act, 1956
Managing Director of the
company transferred his flat in the name of the company to avoid attachment –
Transfer held to be invalid — Attachment is justified
The petitioner has filed the
petition against the oppression and mismanagement of the company and the
Managing Director of the company. The petitioner states that the Company Law
Board (CLB) issued attachment of warrant against the property owned by the MD.
The MD resigned from the Company and transferred the flat in name of the
company. In the execution petition filed in the High Court, the Court held
that the director gave his resignation when the order was being passed by the
CLB. The respondent contended that the flat cannot be attached as it did not
belong to the MD but to the company. The court took the view that the MD has
failed to act as the agent of the company and is liable for the execution on
behalf of the company. The resignation of MD has no effect in law. Further it
held that the directors are liable for the acts done and liabilities incurred
prior to resignation which has been determined and adjudicated upon after such
resignation.
John D’Silva vs. Neosonic
Electronics Ltd. [(2007) 77 SCL 129 (Bom)]
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Public Provident Fund Act,
1968 — Lifting the corporate veil
The provident fund
contribution was due from the Universal Pollution Control (India). The
Provident Fund Commissioner demanded money from the company, as both the
company had two common directors. The respondent raised the issue before the
court on the ground of lifting the corporate veil. The court was of the view
that both the company is sister concern and are registered separately under
the Companies Act; the contention has to lifting the corporate veil is without
any merits. The Provident Fund Act has no provision which stated that the
liability of one company will be borne by the other company. The court further
held that the demand by PF Commissioner is not as per the law and the demand
be set aside.
Universal Pollution
Control (India) (P.) Ltd. vs. Regional Provident Fund Commissioner [(2007) 77
SCL 192 (Bom)]
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Securitisation and
Reconstruction of Financial Asset and Enforcement of Security Interest Act,
2002 — Publishing photographs of borrower and security in newspaper for
payment of loan is not violative of Article 21 of the Constitution of India
The petitioner had made a
default in payment of monthly instalments on the loan which he had borrowed
from the respondent bank. The banks issued notice to the petitioner and
proposed to publish the photographs of the petitioner in the newspaper with
the details of the properties. The petitioner filed a writ petition in the HC
of Madras restraining respondent from publishing the photographs as it
violates Article 21 of the Constitution of India .
The court held that statutory
laws provide for notice and publication in the newspaper, so if a borrower
finds new methods to restrain the respondent from pursuing the acts under the
statutory law, the respondent can also invent new methods to recover their
dues. The court further held that there has been no violation of fundamental
right of the petitioner as writ of mandamus can be issued only if there is
violation of fundamental right or public duty while in this case there has
been no violation of fundamental duty by the respondents but the petitioner is
restraining respondent from performing the public duty. It also further held
that the petitioner cannot invoke the writ jurisdiction of the court without,
exhausting the alternative remedy under s.17 of Securitisation and
Reconstruction of Financial Assets and Enforcement of Security Interest Act,
2002.
K.J. Doraisamy vs.
Assistant General Manger, State Bank of India, Erode (2007) 78 SCL 196 (Mad)