RCD Case Laws PDF

RCD CASE LAWS CHAPTER 1: SHAREHOLDER DEMOCRACY 1.2: Foss v. Harbottle 1.3: Bharat Insurance Ltd. v. 1.1: Apollo Tyres Limited No action can be brought by a...

RCD CASE LAWS CHAPTER 1: SHAREHOLDER DEMOCRACY 1.2: Foss v. Harbottle 1.3: Bharat Insurance Ltd. v. 1.1: Apollo Tyres Limited No action can be brought by a Kanhya Lal Minority Shareholders rejected re- appointment of MD due to the member against the directors The AOA of Co. provided that it increase in remuneration inspite of in respect of a wrong alleged to cannot provide loan without Losses in the company. So, the be committed to a company. remuneration was capped to security, but Co. provided it 7.5% of PBT. Earlier it was 10% The company itself is the without security. So, Foss vs. proper party of such an Harbottle apply. action. 1.4: Menier V. Hooper’s 1.6: Nagappa v. Madras Race 1.5: Glass v. Atkin Telegraph Works Club Converted the assets of the Majority shareholders of Co. company for their own private An individual shareholder is A are shareholders of Co. B. use. Wrong-doers in control. entitled to enforce his But Co. A passed a resolution individual rights against the in favor of Co. B but against company, such as, his right to Co. A. So, fraud on minority. 1.7: Edwards v. Halliwell vote, the right to have his vote recorded, or his right to stand Resolution requiring special as a director of a company at majority but is passed by a an election. simple majority. 1.8: Ashbury Rly. Carriage and Iron Co. v. Riche 1.9: North-West 1.10: ICICI v. Parasrampuria Transportation Co. v. Beatty Powers of the majority of Synthetic Ltd. members is subject to the Automatic application of Foss The resolution of a majority of provisions of the Company’s v. Harbottle Rule to the Indian shareholders, passed at a duly memorandum and articles corporate would be improper. convened and held general of association. A company Here the Indian corporate meeting, upon any question cannot legally authorise or sector does not involve a large with which the company is ratify any act which being number of small individual legally competent to deal, is outside the ambit of the investors but predominantly binding upon the minority and memorandum, is ultra vires financial institutions funding consequently upon the atleast 80% of the finance. company. CHAPTER 2: CORPORATE DISPUTE 2.1: Shanti Prasad Jain v. Kalinga Tubes Ltd. 2.2: Rajahmundry Electric Supply Corporation v. A. Nageswara Rao O/M not defined and left to courts to decide Vice chairman grossly mismanaged the affairs of the company based on the facts of each case. and had drawn considerable amounts for his personal There must be a continuous act on part of purpose. Shareholders outside the group of the chairman minority, continuing upto the date of were powerless to set matters right. This was held to be petition. sufficient evidence of mismanagement. The Court accordingly The conduct must be harsh, burdensome appointed two administrators for the management of the and wrongful. company for a period of six months vesting in them all the Mere lack of confidence not O/M. powers of the directorate.  2.4: Maharashtra Power 2.5: Chandra Krishan Gupta v. 2.3: Vasudev P Hanji v. Development Corporation Ltd. Pannalal Girdhari Lal Pvt. Ltd. Ashok Ironworks Pvt. Ltd v. Dabhol Power Company Non-availability of Records, Non-Holding Declaration of dividend is left An irregular or illegal action is not of Meetings of the Board, Filing of to the collective decision of the per-se oppressive but the Unaudited Balance Sheets: not O&M Board and its non- illegality of an action may have a declaration cannot be termed bearing upon its oppressiveness. to be an oppressive conduct 2.8: K. S. Mothilal v. K.S. Kasimaris Ceranique (P.) Ltd. The legal heirs to be registered on probate or 2.6: Dale and Carrington will are also entitled to apply. 2.7: Rajkumar Devraj v. Jai Investment (P) Ltd. v. Mahal Hotels Pvt. Ltd P. K. Prathapan A shareholder dies and his heirs 2.9: Bellador Silk Ltd., Increase of share capital of apply for transmission. Shares A member can complain of oppression only a company for the sole were allotted to reduce heirs to in his capacity as a member and not in his purpose of gaining control of minority. Held O&M. capacity as director or creditor. the company would amount to O&M. 2.11: Indian Chemical Products Ltd. v. 2.10: Asha Purandare v. Integrated State of Orissa Controls (P.) Ltd. The power under article 11 to refuse registration of the transfer is a Minor typographical omission not discretionary power. The directors must exercise this power reasonably sufficient cause. and in good faith. The Court can control their discretion if they act capriciously or in bad faith. CHAPTER 4: FRAUD 4.1: S. Dutt v. State of Uttar Pradesh 4.2: Dr. Vimla vs Delhi Administration “With intent to deceive” has observed that it does not “By fraud is meant an intention to deceive; whether it indicate a bare intent to deceive, but an intent to cause be from any expectation of advantage to the party a person to act, or omit. himself or from the ill-will towards the other is to act, on account of deception practiced upon him, to his immaterial.” 4.3: V.R. Dalal v. Yugendra Thakkar, “With intent to deceive” has observed that it does not 4.4: Pratibha Rani v. Suraj Kumar, indicate a bare intent to deceive, but an intent to cause a Stridhan property was entrusted to her in–laws which person to act, or omit. they dishonestly misappropriated for their own use. to act, on account of deception practiced upon him, to his She made out a clear, specific and unambiguous case against in–laws. The accused were held guilty of this 4.5: Suryalakshmi Cotton Mills Ltd. v. Rajvir offence and she was held entitled to prove her case. Industries Ltd Cheque is a property and has been used for a purpose 4.6: OnkarNath Mishra v. State for which the same had not been handed over, attracts “Wrongful mis-appropriation involves 2 parts: section 406 1. Creation an obligation in relation to property over which dominion or control is acquired by accused. 4.7: Alagh v. State of U.P. 2. Misappropriation or dealing with property DD issued for supply of goods but goods not received dishonestly and contrary to the terms of the not wrongful misappropriation of property. obligation created. 4.9: Motorola Incorporated 4.11: Bagga Singh v. State of Punjab Held that deception is necessary ingredient under both Taxation clerk collected tax but deposited after 5 months parts of section. Complainant must prove that held liable u/s 409. inducement has been caused by deception exercised by the accused. 4.12: Bachchu Singh v. State of Haryana Gram Sachiv collected house tax but not deposited held 4.13: Girish Saini v. State of Rajasthan liable u/s 409. A public servant was accused of neither depositing nor making entries of stationery held liable u/s 409.  4.10: Kuriachan Chacko v. State of Kerala 4.14: Arya v. State of Punjab Money circulation scheme was mathematical Negligence in duty without dishonest intention not cheating impossibility and promoters knew fully well that scheme was unworkable and false representations were being 4.15: Balbir Kaur v. State of Punjab made to induce persons to part with their money. Alleged that accused obtained EET Teacher job by forged Assumed and presumed that the accused had committed and bogus certificate and school was not recognized. But offence of cheating under section 420 of the IPC. the certificate did not indicate the school was recognized. So, no forgery. 4.17: Parminder Kaur v. State of UP Mere alteration of document does not make it a forged 4.16: Mohd. Ibrahim and others v. State of Bihar document. Alteration must be made for some gain or False sale deed executed with bonafide intention not cheating for some objective. 4.19: Mangoo Singh v. Election Tribunal 4.20: Ramautar Chaukhany v Hair Ram Word ‘demand’ ordinarily means something more than It was held that the essential requisites of debt are- what is due; it means something which has been (1) Accused removed, concealed or delivered the demanded, called for or asked for. property, (2) Transfer was without adequate consideration, and (3) Acted dishonestly and fraudulently 4.18: Commissioner of Wealth Tax v G.D. Naidu (4) Intended to prevent distribution of that property It was held that the essential requisites of debt are- among creditors (1) Ascertained or ascertainable, (2) An absolute liability, in present or future, and (3) An obligation which has already accrued and is subsisting. All debts are liabilities but all liabilities are not debt. CHAPTER 5: REGULATORY ACTIONS 5.1: SEBI VS. KANAIYALAL PATEL 5.2: ADANI GAS LTD. VS CCI 5.3: SFIO VS. RAHUL MODI Portfolio manager of Passport India Investment ltd. was cousin of accused Faridabad Industries Association The prescription of period and he used provide information of alleged that AGL, by grossly within which a report had to investment by co. earlier. It was abusing its dominant position put be submitted to the Central estimated that the KB earned a total unconscionable terms and Government under Sub- profit of Rs. 1,56,32,364.01/- from conditions in GSA which are section (3) of Section 212 was the alleged trades. Parties held unilateral and lopsided. Held purely directory. involved in fraudulent practices. abuse of dominant position. CHAPTER 7: RELIEF & REMEDIES 7.1: VARKEY V. STO 7.2: VISWANATHAN V. STATE OF KERALA Once an offence is compounded, penalty or Once the matter is compounded, neither department prosecution proceedings cannot be taken for the same nor the assesses can challenge the compounding order. offence. 7.3: Bagi v. State of Karnataka Person having agreed to the composition of offence is not entitled to challenge the said proceeding by filing an appeal.  CHAPTER 8: CRISIS MANAGEMEN MEANING OF CRISIS MANAGEMENT Facebook’s silence about its data Identification of threats to an organization breach and its stakeholders and The methods used by the organization to deal When the news broke, disclosure is the most effective strategy in with these threats. The social media gaint chose to a crisis because the truth always stay silent over allegation that it emerges. Companies and even Crisis management is the process by which an improperly accessed information the government need to explain organization deals with a disruptive and unexpected on millions of people what happened on their own event that threatens to harm the organization or its terms and regain confidence. stakeholders. Coca-Cola PR Crisis Management Coca-Cola’s response H&M uses black child to model “coolest The company came under a CEO to accusations that it monkey in the jungle” hoodie financed a front group storm of criticism defends the to protect its interests A diverse team needs to after The New company by The picture generated at the expense of dissect every message York Times saying it is widespreadoutrage on public health is a case and image to make sure it charged that attempting social media. The company study in PR crisis doesn’t Inadvertently Coca-Cola was to tackle the apologized quickly and management. As offend people of different funding obesity global opined by Coca-Cola later stopped selling the research that obesity races, cultures, genders, CEO Muhtar Kent item. attempted to epidemic generations and views. epitomizes a corporate disprove the link and has response that between obesity always had contains the essential and diet and shift good elements of effective the problem to intentions. lack of exercise. corporate PR crisis management. Nissan’s Boss Gets Arrested Former Nissan chairman Carlos Ghosn sits at the heart of the affair, arrested and charged with understating his compensation by more than $80m over eight years, Under Armour Inc. winks at and causing Nissan to make payments to the company employees’ trips to strip clubs of a Saudi Arabian friend. Although the company was right to end the practice in Lockheed Martin asks people to 2018, the fact that it allowed The company emailed that it it at all shows an astonishing is not going to take its lack of judgment. Executives employees to strip club on need to avoid the temptation share photos of its products their corporate credit cards. to socialize with staffers through activities that are Worlds largest wepon dealer Although it’s important to offensive or exclude team tweeted "do you an amazing engage in conversations on members. photo of one of our products? social media, first be aware eople quickly responded with of how people generally feel pictures showing the impact about your company, of its weapons, including an products and policies. image of UNICEF backpacks Carefully consider possible belonging to children killed responses before asking for in Yemen with a bomb content.  The United Airlines PR Crisis ISSUE In a flight from Chicago to Louisville, the flight was overbooked and United needed to put their employees on this plane. They asked for volunteers to give up their seats but no one volunteered. They decided to choose passengers randomly but one refused since he was a doctor and needed to attend his patients. He was forcefully dragged from his seat and was struck in the process. RESPONSE He apologized: “This is an upsetting event to all of us here at United. I apologize for having to re- accommodate these customers. Our team is moving with a sense of urgency to work with the authorities and conduct our own detailed review of what happened. TAKE AWAY The CEO apologized, but his words caused even more indignation than before. It deserved a heartfelt response, but the tweet showed a lack of understanding and accountability. Online apologies have to be carefully crafted. KFC’s Chicken Crisis: Problems with deliveries of KFC’s highly Not only did KFC recognize mistakes had perishable supplies started immediately: clearly been made, but they also used that KFC started to shut down outlets after to their advantage by injecting their own managers complained their chicken had sense of humour and keeping the not arrived, and by 18 February most of its language straight-forward, clear and to 900 UK restaurants were closed. the point. 9.1 Object of Trial: SEBI vs. Shriram Mutual Fund Intention of parties is irrelevant for imposing penalty 9.2 Criminal Proceeding Vis-a-Vis Civil Proceeding M.S. Sheriff vs. State of Madras Between the civil and the criminal proceedings criminal matters should be given precedence. 9.3 Criminal Proceeding Vis-a-Vis Civil Proceeding Iqbal Singh Marwah vs. Meenakshi Marwah Civil Cases-basis of preponderance of evidence, Criminal Cases-proof beyond reasonable doubt 9.4 Criminal Courts Vis-a-Vis Civil Courts Natvarlal Jani vs. N.N Jain The civil liability or responsibility arising out of a civil nature under a statute is one thing and it is another thing that the penalty imposed by that very statute necessarily has to be treated under CrPC 9.5 Public Prosecutor vs. Company Prosecutor Thamizharasan vs. State of Tamil Nadu Public Prosecutor is a very responsible Office. Public Prosecutor is not a Police Prosecutor. Not a mouthpiece of the Police. Prosecutors cannot be controlled administratively or in any other mode by the Police Department. 9.6 Public Prosecutor vs. Company Prosecutor Balwant Singh vs. State of Bihar “The Criminal Procedure Code is the only matter of the public prosecutor and he has to guide himself with reference to Criminal Procedure Code only”. 9.7 Change in Registered office Mukand Kanaiyalal Patel vs. Swarup Shree Yarn Private Ltd. Company intimated change of R.O but not taken for record by the ROC. So, notice served to changed address is not valid. Service of notice of complaint is a very, very crucial stage, which sets the ball in motion. 9.8 Personal Appearance Bhaskar Industries Ltd vs. Bhiwani Denim and Apparels Ltd. Magistrate may dispense the personal appearance of an accused either throughout or at any particular stage of such proceedings in a summons case. Such discretion need be exercised only in rare instances where due to the far distance at which the accused resides or carries on business or on account of any physical or other good reasons the magistrate feels that dispensing with the personal attendance 9.9 Evidence in absence of Accused - Memorandum of the substance of his evidence Bhaskar Industries Ltd vs. Bhiwani Denim and Apparels Ltd. Normal rule, evidence shall be taken in the presence of the accused. However, in his absence such evidence can be taken but then his counsel must be present in the Court. In all summons cases, Magistrate shall, as the examination of each witness proceeds, make a memorandum of the substance of his evidence in the language of the Court. However, if he is unable to make such memorandum himself, he shall, after recording the reason of his inability, cause such memorandum to be made in writing or from his dictation in open Court. Such memorandum shall be signed by the Magistrate and shall form part of the record. If the accused is present and if he is unable to understand the language in which any evidence is given, the Magistrate should ensure that the evidence is interpreted in the open Court in the language understood by the accused. 9.10 Continuous Action/ Clubbing of Cases/ Default in AGM and Financial Statements Madan Gopal vs. State Several offences are committed in the course of the same transaction may be clubbed. Term suggests a continuity of action and purpose. Several offences are so connected together. Company failed to hold AGM and to place B/s and P&L A/c at the meeting and further failed to file with the ROC annual return and copies of B/s and P&L A/c within the specified periods following the annual general meeting. So, they can be clubbed 9.11 Summoning documents – alleged not transferred the dividend amt. to special account Nutech Agros Ltd. vs. Mohan Rao HC of AP quashed order for summoning certain documents from bank & requiring the manager to appear with regard to not transferring the dividend amt. High Court quashed the summons on the ground that even if the documents were summoned and if it was established that company did not open a special account in bank, the guilt would not get automatically established as in is not necessary that the special account be opened only in Central Bank of India, Adoni Branch. It is always open to the petitioners to establish that such a special account was opened in some other branch or some other bank. 9.12 Company is juristic person not be physically present. Falcon Tyres Ltd. vs. Mohan Rajan The Court rejected the contention that the complainant is a juristic person and such complainant cannot be physically present in Court and hence there is no possibility of the complainant being absent. 9.13 Appearance of Company Associated Cement Company Ltd. vs. Keshvanand Magistrate has powers to acquit the accused if complainant fails to appear and includes the absence of the corporeal person representing the incorporeal complainant and hence the provision is applicable even to company. 9.14 Dropping of Trial Associated Cement Company Ltd. vs. Keshvanand It is open to the accused to plead before the Magistrate that the process against him ought not to have been issued. The Magistrate may drop the proceedings if he is satisfied on reconsideration of the complaint that there is no offence for which the accused could be tried. It is his judicial discretion. No specific provision is required for the Magistrate to drop the proceedings rescind the process. 9.15 Sanction on PSU S.S. Dhanoa vs. Municipal Corporation of Delhi It has been contended that sanction contemplated under Section 197 of CrPC must be restricted only in respect of a Judge or a Magistrate or a public servant who is directly employed by the Government and not by any instrumentality or agency of the Government.” Public sector undertakings, being juristic persons with a distinct legal entity stand on a different footing than the Government departments. Protection by way of sanction under section 197 of CrPC is not applicable to officers of Government companies or public undertakings even when such public undertakings are “State” within the meaning of Article 12. 9.16 Discharge of Accused u/s 227, 239, 245 R.S.Nayak vs. A.R. Antulay Section 227- if Magistrate considers that there is no ground for proceeding against the accused. Section 239- arises when Magistrate considers the charge against the accused to be groundless. Section 245- if Magistrate considers that no case against the accused has been made out which, if unrebutted, would warrant his conviction. 9.17 Can wife be impleaded on death of her husband R.S.Nayak vs. A.R. Antulay Director of the company died when the proceedings where pending. The wife pleaded that the notice was issued to her husband and to discharge her. The HC refused the petition on grounds that she was director of the company during the pendency of the proceedings. Registrar had impleaded the petitioner, as an accused on the death of her husband, not merely because she was the wife of the deceased managing director but because she was a director of the said company and liable to comply with the mandatory requirements of the Act. 9.18 Liability of company vs MD to pay fine Hrushikesh Panda vs. State of Orissa Setting aside a non-bailable warrant of arrest as well as a distress warrant issued against the petitioner in order to realise a fine levied on the company of which he was the Managing Director. Liability of the company is distinct from the liability of its managing director. Legal dues of a company could be realized only by attaching the assets of the company and not by putting the managing director or any of the directors in prison. The company is the offender or the defaulter. 9.19 Trail again for same offence  Bharat Plywood and Timber Products Pvt. vs. Registrar of Companies Ltd. Section 300 of the CrPC provides that so long as an order of acquittal or conviction handed down by a Court of competent jurisdiction stands in respect of a person charged with committing an offence, that person cannot again be tried on the same facts for the offence for which he was earlier tried or for any other offence arising there from. 9.20 State of Punjab vs. Shamlal Murari Procedural law is not to be a tyrant but a servant, not an obstruction but an aid to justice. 9.21 Can wife be impleaded on death of her husband R.S.Nayak vs. A.R. Antulay Director of the company died when the proceedings where pending. The wife pleaded that the notice was issued to her husband and to discharge her. The HC refused the petition on grounds that she was director of the company during the pendency of the proceedings. Registrar had impleaded the petitioner, as an accused on the death of her husband, not merely because she was the wife of the deceased managing director but because she was a director of the said company and liable to comply with the mandatory requirements of the Act. 9.22 unnecessary to write detailed orders Kanti Shah vs. State of West Bengal It is unnecessary to write detailed orders, at all stages of the criminal justice such as issuing process, remanding the accused to custody, framing charge etc. The apex Court further held that at the stage of framing charge there need to be only a prima facie case and there is no need for giving reasons for his decision to frame charges. 9.23 unnecessary to write detailed orders Venkatakrishna Reddy vs. Registrar of Companies It is unnecessary to write detailed orders, at all stages of the criminal justice such as issuing process, remanding the accused to custody, framing charge etc. The apex Court further held that at the stage of framing charge there need to be only a prima facie case and there is no need for giving reasons for his decision to frame charges.