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Author: TYC

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Proper Purpose Rule

Eclairs Group v. JKX Oil, [2015] UKSC 71

ISSUE:

Whether the proper purpose rule could have been made applicable to the imposition of restrictions on the voting rights of Eclairs and Glengary?
Whether the imposed restriction was improper?

RULE:

‘Proper purpose rule’, applies to directors of English companies under s171(b) of the Companies Act 2006. This long-standing equitable rule, codified by the 2006 Act, requires that a director must only exercise powers for the purposes for which they were conferred.

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Duty Towards Shareholders

Reliance Natural Resources v. Reliance Industries Ltd., (2010) 7 SCC 1

ISSUE:

What is the maintainability of a petition under section 392 of the Companies Act?
Whether the Production Sharing Contract overrides all the other contracts and allows the Government the power to control prices?
What is the legal nature of a Memorandum of Understanding and the applicability of the doctrine of “identification” or “attribution”?
What is the binding nature of a Memorandum of Understanding on a company in the absence of an express provision in its Article of Association?

RULE:

The doctrine of identification may only be applicable to small operations, but since RIL and RNRL have more than three million shareholders, one cannot equate the personalities of the companies and the parties involved in such a situation.

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Duty Towards Shareholders

Globe Motors ltd. v. Mehta Teja Singh & Co., (1984) 55 Com Cases 445 (Del)

ISSUE:

Is the request made under Section 20 of the Arbitration Act to refer the matter to arbitration time-barred?
Is the agreement from June 1, 1967, still in effect?

RULE:

For any application for which no time of restriction is specified in any of the Articles in the Schedule to the Limitation Act, Article 137, a residual provision, establishes a limitation period. It stipulates a three-year statute of limitations beginning on the date the right to apply accrues.

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Duty Towards Shareholders

Dale & Carrington v. Prathapan, (2005) 1 SCC 212

ISSUE:

Whether the share allocation was a legitimate act?
Whether the directors of the corporation have a duty to the shareholders?

RULE:

Sections 166(1) through 166(6) of the new Companies Act codify the duties of directors, and since Section 166(7) stipulates consequences for violations, it has elevated the level of accountability because the duty is now both a fiduciary duty and a statutory duty. The shareholder may file a claim under Section 241 for unfair treatment and poor management as well as under Section 166(2), which requires the director to act with good faith and a legitimate purpose in order to avoid violating his statutory obligations as the company's director.

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Duty Towards Shareholders

Sangramsinh P. Gaekwad & Ors v. Shantadevi P. Gaekwad, AIR 2005 SC 809

ISSUE:

Whether Appellant had a fiduciary duty to inform Respondent regarding the benefit of opting for allotment of shares?
Was the issuance of 15000 additional equity shares and allotment of 6475 shares in favour of the Appellants valid?
Was there any act of oppression against the Appellant?

RULE:

According to section 397 of the Companies act, any member of a company who complains that the affairs of the company are being conducted in a manner prejudicial to the public interest or] in a manner oppressive to any member or members (including any one or more of themselves) may apply to the 1 Company Law board] for an order under this section, provided such members have a right so to apply in virtue of section 399.

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Fiduciary Duty of Directors

Percival v. Wright, (1902) 2 Ch 421

ISSUE:

Whether the directors of a company only owe duties of loyalty to the company or to individual shareholders?

RULE:

The directors of a company are not trustees for specific shareholders and are free to buy their shares without disclosing that the sale of the firm's undertaking is currently being negotiated.

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Fiduciary Duty of Directors

Ferguson v. Wilson, (1866) 2 Ch App 77: 15 LT 230

ISSUE:

Whether the agreement that had been made between the shareholders and the company's directors could be specifically performed?

RULE:

The firm cannot function as an individual without the directors acting as its agents. The directors are the company's hands and faces, they establish the principles for its operations.

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Uncodified Hindu Law

Shreya Vidyarthi v. Ashok Vidtyarthi AIR 2016 SC 139

ISSUE:

Whether the property bought by Rama Vidyarthi would be considered as being bought from the joint family funds or out of her own personal funds.
Whether a female could be considered as Karta of Hindu Undivided Family.

RULE:

A widow female cannot act as Karta but has the distinct title of being the manager till the time she acts as a guardian of a minor male coparcener.

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