Was Erlanger liable to Phosphate due to not disclosing his conflict of interest?
It concerned rescission for misrepresentation and how the impossibility of counter restitution may be a bar to rescission. It is also an important illustration of how promoters of a company stand in a fiduciary relationship with subscribers.
Whether the promoters breached their fiduciary duties to the company?
Promoters of a company had acquired a property intending its resale through the sale of shares in the company. In doing so the original directors made a substantial profit which they did not disclose (though it was discoverable). The company became insolvent and investors sought repayment of the hidden profit.
Can the company’s title over the property be set aside even in the absence of conveyance of property by the promoter in favour of the company after its incorporation?
The logic which was followed was that the promoter is a quasi-trustee and can be obliged to transfer the property. Specific Relief Act which was passed in 1963 provided some relief to the Promoters. Section 15(h) of this act says that if a public company has made a contract with the promoters before incorporation, they can impose it. It says that the contracts entered by the promoters are for the benefit of the company. The company should accept the terms of the contract. Not only the companies can enforce pre incorporation contracts, but other parties can also enforce it on behalf of the company.
Whether the company is liable for the loan?
The Memorandum of Association of the Company shall be lodged with the Registrar of Companies. This is available for public inspection since people engaged in business with the Company are free to inspect the document to see whether there is any limitation of powers or limitations on the business. It created a problem it deems outsiders to be aware of any limitations placed on the Company’s management. Therefore, if it was later found that there was an irregularity within the Company regarding any decision, it regards outsiders dealing with the Company to be aware of it.
Whether the company can enter into a contract that is beyond the scope of the object clause in the MOA of the company?
The Ashbury Railways case laid the foundation of the ultra vires rules and confined the acts of the company within the ambit of the object clause of the MOA. This was rendered moot to a great extent after the introduction of the changes in the Companies Act 2006 since section 17 of the Act does not mandate any company to have a MOA.
Whether the plaintiff consented to the subletting of parts of the demised premised and if so, when and to what effect?
The Supreme Court repealed this doctrine. The company was incorporated under the Indian Companies Act, 1882, and had a principal objective to carry life insurance business in all its branches. It was registered under Life Insurance Act.
Whether the shareholders can among themselves enter into an agreement which is contrary to or inconsistent with the Articles of Association of the company?
Shareholder’s Agreement is the agreement made between the shareholders of the company among themselves. This case is related to the validity of provisions of shareholder’s agreement which is in contravention to the Article of Association.
Whether the provisions of an agreement, that are not inconsistent with the act, but are also not part of the AoA, can be said to be applicable?
The legal position is that where the AoA is silent on the existence of an affirmation vote, it will not be possible to hold that a clause in an agreement between the shareholders would be binding without being incorporated in the AOA.
Whether regardless of the separate legal identity of a company, a shareholder could be held responsible for its debt, over and above the capital contribution, so as to make such member personally liable for the company’s debt or not?
“The motives of those who took part in the promotion of the company are absolutely irrelevant in discussing what those rights and liabilities are” and the legal fiction of a “Corporate Veil” between the company and its owners and controllers was created firmly.
The appellant was the Principal and earned excessive money by this business thus he owed to indemnify the company’s debt
Whether a document carrying out a particular transaction is a conveyance within the meaning of the definition contained in Clause 9 of Section 3 of the Stamp Act, and within the meaning of Article 21 of Schedule I of that Act?
Article 21 of Schedule I of the Stamp Act,1899