Page 193 - DMGT407Corporate and Business Laws

Corporate and Business Laws

Notes with banks and financial institutions, contract of employment, guarantees issued by the company
and all formal documents and documents executed on stamp papers.
Use of seal outside India (s.50). Where a company has any business or transaction in a place
outside India a facsimile (exact reproduction) of the common seal may be kept there. The seal
should also contain the name of the place where the seal would be used. For such use there must
be power in the articles. A person must be properly authorised to use the seal, who shall sign his
name and also put the name of the place and the fact that he has been authorised to do so by the
specified resolution.
As per s.48, a company may, by writing under its common seal, empower any person, either
generally or in respect of any specified matters, as its attorney, to execute deeds on its behalf in
any place either in or outside India. It further provides that a deed signed by such an attorney on
behalf of the company and under his seal where sealing required, shall bind the company and
have the same effect as if it were under its common seal.

7.2.9 Company may Sue and be Sued in its own Name

Fallout of separate legal entity is that the company, if aggrieved by some wrong done to it may
sue or be sued in its own name.

Example: In Rajendra Nath Dutta v. Shibendra Nath Mukherjee (1982) (52 Comp. Cas.
293 Cal.), a lease deed was executed by the directors of the company without the seal of the
company and later a suit was filed by the directors and not the company to avoid the lease on the
ground that a new term had been fraudulently included in the lease deed by the defendants.
Held that a director or managing director could not file a suit, unless it was by the company in
order to avoid any deed which admittedly was executed by one of the directors and admittedly
also the company accepted the rent. The case as made out in the plaint was not made out by the
company but by some of the directors of the company and the company was not even a plaintiff.
If the company was aggrieved, it was the company which was to file the suit and not the
directors. Therefore, the suit was not maintainable.

Self Assessment

Fill in the blanks:
4. The shares of a company are transferable in the manner provided in the ………………..of
the company.
5. ………………………..is the official signature of a company.
6. A company is at law a different person altogether from the………………………..

7.3 Lifting of the Corporate Veil

The advantages of incorporation are allowed to be enjoyed only by those who want to make an
honest use of the ‘company’. In case of a dishonest and fraudulent use of the facility of
incorporation, the law lifts the corporate veil and identifies the persons (members) who are
behind the scene and are responsible for the perpetration of fraud.

Following are some such cases:
1. For the protection of revenue: The Court may not recognise the separate existence of a
company where the only purpose for which it appears to have been formed is the

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