TMI Blog2004 (3) TMI 434X X X X Extracts X X X X X X X X Extracts X X X X ..... ff, as defendant No. 2 had not paid the entire balance consideration, no delivery was given by the plaintiff. It is further averred that defendant No. 1 - vessel was laid up at the port/Harbour of Oostende Port, Belgium since 27-6-2000 and hence, there was no crew on board. The case of the plaintiff is that defendant No. 2 clandestinely removed the vessel from the closed basin and sailed the vessel out of the Oostende Port without paying the balance consideration of US $ 3,60,000. That for this purpose, it is averred, the defendant No. 2 utilized a forged bill of sale dated 30-6-2003 and obtained a certificate of registration dated 6-11-2003 issued by the Belize Ship Registry. 3. In the circumstances, the plaintiff seeks declaration to the effect that the plaintiff is the sole owner of the vessel and title vests with the plaintiff, that defendant No. 2 or any person claiming through the said 2nd defendant does not have any right, title or interest in the vessel and the vessel is required to be restored in lawful possession of the plaintiff. Over and above such a declaration, the plaintiff has also sought a mandatory injunction against defendant No. 2 or any other person claimin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... awarding adequate damages for wrongful arrest. The basis for the stand adopted by the defendants is the factum of the plaintiff company having been dissolved on 16-12-2003 after having been struck off from the Register of Companies House of the United Kingdom. 7. Before adverting to the contentions raised on behalf of the respective parties it is necessary to briefly recapitulate facts which are admitted and undisputed. The plaintiff, a limited company, has come into existence on 29-6-2000 bearing company No. 04023540. The plaintiff purchased the vessel on 27-6-2000 from one Audrey Ventures Company Limited, U.S.A. The vessel was originally plying under the name of Princess Christine which has subsequently been changed to the present name, i.e. , MV San Fransceco Di Paola . The plaintiff has no other property and no other business. Since the day the vessel was purchased by the plaintiff it has been lying in the closed basin of Oostende Port, Belgium. The vessel required extensive repairs. The last account of the plaintiff company has been made upto 30-6-2002 (dormant) and similarly last return was made upto 29-6-2002. The next return due was 27-7-2003. The Company Secretary ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eholder-Director became aware of this fact only when OJMCA was served on the plaintiff, and hence, the plaintiff has taken appropriate steps to have the company restored to the Register by moving appropriate application on 8-3-2004. Mr. Thakor also accepted the fact that the vessel being the only asset of the plaintiff company and having entered into an agreement to sell on 1-7-2003, the shareholder Director had pursuant to the said agreement directed the Company Secretary to move an application for having the name struck off from the Register. That accordingly on 18-7-2003 the Company Secretary had moved such an application. It is reiterated with emphasis that sole shareholder Director was not aware of any subsequent developments viz. post 18-7-2003 and hence, the application seeking restoration. It was submitted that the law was well settled that upon an order of restoration being made the company would stand restored to the Register and the consequence of such restoration would be that the company and all other persons would be placed in the same position as if the company s name had not been struck off from the Register. Reliance was placed on provisions of sections 651, 652 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... her submitted that, as stated in the OJMCA, the plaintiff had no locus standi to present the suit, the plaintiff being a non existent entity in law and hence, there was not only a fraud perpetrated on the Court but the entire plaint was based on suppression of material facts. It was urged that the Court was required to apply the test as to whether an ex parte order of arrest of the vessel would have been made by the Court if the factum of dissolution of the Company had been disclosed in the plaint. The test was, according to the counsel that there should be full and frank disclosure of all material facts. 11.1 It was further submitted that the plaint was even otherwise bad in law and the suit should not be entertained as the same had been presented by a person who has not only failed to identify himself but has prima facie not even shown the authority on the basis of which the suit has been presented. Inviting attention to the power of attorney accompanying the plaint, viz. , Exh.13, it was submitted that the said power of attorney did not mention the address of Mr. Shridhar Burke who was signatory to the plaint nor is the power shown to have been executed and authentica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t been gone into as both the sides have presented their case only in relation to be preliminary issue : viz. , whether the plaintiff could have presented the suit in the circumstances of the case. In the circumstances, the question before the Court is not as to what is the effect of an order of restoration but as to whether on the date of filing the suit a company whose name has been struck off from the register of the companies and as a consequence dissolved, can initiate any legal proceedings so as to be valid in law. 14. Section 33 of the Companies Act, 1956 (the Act) provides for Registration of Memorandum and Articles. The effect of such registration is as laid down in section 34 of the Act, i.e. , the Registrar shall certify under his hand that the company is incorporated. From the date of incorporation, the subscribers of the memorandum and other persons, namely the members, shall be a body corporate by the name contained in the memorandum, capable of exercising all the functions of an incorporated company, and having perpetual succession and a common seal. 15. One of the characteristics of a company thus is that it is an incorporated body of persons. It is not mer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to sue in damages for libel or slander as the case may be. - Metropolitan Saloon Omnibus Co. Ltd. v. Hawkins [1859] 28 L.J.CL. 830. 18. In the case of Agarwalla H.P. v. Union of India [1963] BLJR 127, it has been held that a limited company has a separate legal personality and its directors cannot be made liable for legal liability incurred by the company. 19. A one-man company is a distinct assessable and legal entity as much as any other company - O.K. Trust v. Rees 23 TC 217; Stanely v. Gramophone Typewriter 5 Tax Cases 358 (CA); I.R. v. John 8 TC 20 (CA). An individual may control a company; but it does not necessarily follow, because the individual controls the company, that the business carried on by the company controlled is necessarily a business carried on by the Controller. - Kodak v. Clark 4 TC 549. 20. In the case of Mrs. Bacha F. Guzdar v. CIT AIR 1955 SC 74, the Apex Court was called upon to decide the rights of shareholder qua the rights of a company. It has been laid down : ". . . That a shareholder acquires a right to participate in the profits of the company may be readily conceded but it is not possible to accept ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ole. 22. Therefore, a shareholder has a limited, restricted right only after an order of winding up is made, liabilities of the company discharged and then if any surplus of assets is left. In the present case it is not possible even for the plaintiff to make a statement that the shareholder is entitled to the vessel as being net surplus of assets after discharging all liabilities of the company. In fact, during the course of hearing a stand is adopted that one Mrs. Luany Rodriguez Salas, is the sole shareholder and director of the plaintiff company and hence is an interested person. Once the position is admitted that the company is struck off from the register and dissolved as a consequence there is no question of any particular shareholder, even the sole shareholder, making a claim to the property of the company without showing that all liabilities of the company stand discharged. 23. One more aspect of the matter is that the limited company is a separate legal entity distinct from its shareholder. Merely because there is only one shareholder, the entities which are otherwise distinct, one is a natural person and the other is an artificial juristic person, it cannot be co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etent officer, the Apex Court laid down as under : "9. In cases like the present where suits are instituted or defended on behalf of a public corporation, public interest should not be permitted to be defeated on a mere technicality. Procedural defects which do not go to the root of the matter should not be permitted to defeat a just cause. There is sufficient power in the Courts, under the Code of Civil Procedure, to ensure that injustice is not done to any party who has a just case. As far as possible a substantive right should not be allowed to be defeated on account of a procedural irregularity which is curable. 10. It cannot be disputed that a company like the appellant can sue and be sued in its own name. Under order 6 rule 14 of the Code of Civil Procedure a pleading is required to be signed by the party and its pleader, if any. As a company is a juristic entity it is obvious that some person has to sign the pleadings on behalf of the company. Order 29 rule 1 of the Code of Civil Procedure, therefore, provides that in a suit by or against a corporation the Secretary or any Director or other Principal Officer of the Corporation who is able to depose to the facts of the ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... holder of the plaintiff, but whether this can really amount to a procedural irregularity only. At the cost of repetition it requires to be reiterated that on the date of presentation of the suit the company was admittedly struck off from the Register and dissolved. There can be therefore, no question of ratification of an action which a non existent entity could not have initiated in the first instance. 29. As laid down by the Supreme Court in the case of United Bank of India ( supra ) in the case of a corporation primarily a pleading is required to be signed by the Secretary, or any director or other Principal Officer who is able to depose to the facts of the case. That such person may sign and verify pleadings even in absence of any formal document authorising such person by virtue of the office such person holds; and if he does so, the action can be ratified by the corporation subsequently expressly by a resolution, or impliedly by conduct. Here admittedly, the plaint is signed and verified by a person who is neither secretary, nor director, nor Principal Officer of the plaintiff. Hence, he is not a person who is able to depose to the facts of the case. This becomes abunda ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter has been made and the restoration shall, in law, relate back". In the same paragraph further it is stated : "the plaintiff had filed the suit in extreme urgency and could not make an application for restoration". This affidavit is sworn on 5-3-2004. As against the two statements made by the same person there is one more affidavit without date, notarized on 7-3-2004 and presented in the Court on 8-3-2004 wherein it is stated that : "I say that I have signed the witness statement of claim and sent it to Holman Fenwick and Willan, London Solicitors to enable them to take all necessary steps for restoration of the company. I have been informed that the filing procedure will be completed by London opening on Monday, 8th March, 2004 and an application would be made to the Court for urgent restoration of the company. . . ." Hence, we have three statements of the same lady stating at one place that restoration application is already made on 5-3-2004, another where it is accepted that as the suit was filed in extreme urgency the plaintiff could not make an application for restoration and third one where it states that the application is being moved on 8-3-2004. These by themselves do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mpany s application for dissolution and show cause as to why the company should remain on the register. 21. Accordingly, the company was struck off from the Register under section 652(5) of the Companies Act, 1985 on 9th December, 2003 and dissolved by voluntary dissolution by notice in the London Gazette dated 16th December, 2003 (p. 6)." Therefore, the contention raised on behalf of the plaintiff that the sole shareholder-director had no knowledge about the proceedings under section 652 of the 1985 Act, or that it had escaped attention is not only not supported by any evidence on record, but stands falsified by this statement of claim : when she accepts that a letter dated 21-7-2003 and then a notice dated 2-9-2003 were received from the Registrar of Companies. The statement during course of hearing that she realised (that the company had been dissolved) only when she was served with OJMCA is thus patently false. 33. In the case of VASSO (Formerly ANDRIA ) [1984] 1 LLR 235 the Court of Appeal says : "It is axiomatic that in ex parte proceedings there should be full and frank disclosure to the Court of facts known to the applicant, and that failure to make such di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct and that amounted to serious misrepresentation. The principles applicable are same whether it is a case of misstatement of a material fact or suppression of material fact." (p. 201) 35. The Supreme Court in the case of S.P. Chengalvaraya Naidu v. Jagannath [1994] 1 SCC 1 states : "5. The High Court, in our view, fell into patent error. The short question before the High Court was whether in the facts and circumstances of this case, Jagannath obtained the preliminary decree by playing fraud on the Court. The High Court, however, went haywire and made observations which are wholly perverse. We do not agree with the High Court that there is no legal duty cast upon the plaintiff to come to court with a true case and prove it by true evidence . The principle of finality of litigation cannot be pressed to the extent of such an absurdity that it becomes an engine of fraud in the hands of dishonest litigants. The courts of law are meant for imparting justice between the parties. One who comes to the Court, must come with clean hands. We are constrained to say that more often than not, process of the Court is being abused. Property-grabbers, tax-evaders, bank-loan-dodgers and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... terminative stand as a response to the conduct of the former either by word or letter. 17. It is also well settled that misrepresentation itself amounts to fraud. Indeed, innocent misrepresentation may also give reason to claim relief against fraud. 18. A fraudulent misrepresentation is called deceit and consists in leading a man into damage by wilfully or recklessly causing him to believe and act in flasehood. It is a fraud in law if a party makes representations which he knows to be false, and injury ensues therefrom although the motive from which the representations proceeded may not have been bad. 19. In Derry v. Peek [1889] 14 AC 337 it was held : In an action of deceit the plaintiff must prove actual fraud. Fraud is proved when it is shown that a false representation has been made knowingly, or without belief in its truth, or recklessly, without caring whether it be true or false. A false statement, made through carelessness and without reasonable ground for believing it to be true, may be evidence of fraud but does not necessarily amount to fraud. Such a statement, if made in the honest belief that it is true, is not fraudulent and does not render the person ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would render the transaction void ab initio . Fraud and deception are synonymous. ****** 29. In Chittaranjan Das v. Durgapore Project Ltd. [1995] 2 Cal.LJ 388 it has been held : (Cal LJ p. 402, paras 57-58). 57. Suppression of a material document which affects the condition of service of the petitioner, would amount to fraud in such matters. Even the principles of natural justice are not required to be complied with in such a situation. 58. It is now well known that a fraud vitiates all solemn acts. Thus, even if the date of birth of the petitioner had been recorded in the service returns on the basis of the certificate produced by the petitioner, the same is not sacrosanct nor the respondent company would be bound thereby. " (pp. 327-330) Applying the aforesaid principles it is clear that : ( i ) there is absence of full and frank disclosure; ( ii ) there is a misstatement of a material fact or suppression of material fact; and, there is withholding of a vital fact by the plaintiff. This amounts to commission of fraud on the Court. Misrepresentation itself amounts to fraud. A representation is fraudulent not only when the person making it knows it to be false, but ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompany cannot maintain any action for recovery of its assets. No effective relief can be given in such action, as the company is not a party and the assets cannot be restored to its coffers. On this ground in Coxon v. Gorst 1891-2 Ch. 73 an action by creditors for recovery of moneys due to the dissolved company was dismissed, and in re Lewis Smart Ltd., In re 1954-1 WLR 755 it was held that a pending misfeasance summons abated on the dissolution of the company. 14. The plaintiffs contention that the properties of a dissolved company passed to its shareholders is based upon American law, which is stated in American Jurisprudence, 2d, Corporations, Art. 1659 thus : ****** 15. The law in our country is very different. Here the winding up precedes the dissolution. There is no statutory provision vesting the properties of a dissolved company in a trustee or having the effect of abrogating the law of escheat. The shareholders or creditors of a dissolved company cannot be regarded as its heirs and successors. On dissolution of a company, its properties, if any, vest in the Government. . . ." (p. 850) 39. In so far as applicability of order VI rule 14 of the Code of Ci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntiff or shareholder can be termed as a person who appears to the Court to be interested. It is not necessary for the present purpose to determine this question as, on behalf of the plaintiff, it is an accepted position that the plaintiff does not seek restoration under section 651 of the 1985 Act. 43. Section 652 of the 1985 Act provides powers to the Registrar to strike off a defuntct company off the register. Sub-sections (1) and (2) of section 652 pertain to the procedure to be adopted. Sub-section (3) provides that if the Registrar either does not receive an answer in response to the communication required to be sent under sub-sections (1) and (2), or receives an answer to the effect that the company is not carrying on business or is not in operation, he may publish in the Gazette a notice and also send a notice by post to the company that at the expiration of three months from the date of such notice the name of the company will be struck off from the register and the company will be dissolved, unless a contrary cause is shown. Sub-section (4) of section 652 pertains to a situation where a company is being wound up and hence, is not relevant for the present purpose. Sub-s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 653 of the 1985 Act it is apparent that a company or any member or creditor can apply to a Court if the company or member or creditor feels aggrieved by the name of the company having been struck off from the register, while sub-section (2) of section 653 of the 1985 Act provides for the condition on fulfilment of which the Court may exercise discretion of restoring the company to the register. The Court is required to be satisfied that at the point of time when the name of the company was struck off from the register ( a ) company was carrying on business or was in operation, ( b ) or otherwise, that it is just that the company be restored to the register. Therefore, the person applying for restoration has to be a person who is aggrieved. The concept of aggrieved here means that the order of striking off has resulted in a situation which is detrimental to the applicant, viz. , company or any member or creditor. Therefore, unless the applicant is aggrieved there is no question of making an application seeking restoration. Upon an application being made the Court is required to ascertain whether the company was carrying on business or was in operation at the time of the striki ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der of arrest. 50. There is a serious dispute between the parties as regards whether any sale has been effected by the plaintiff as averred by the defendants in OJMCA. In this context the defendants have in paragraphs 10 of OJMCA, in support of their averments that the plaintiff had executed a sale in favour of the defendants, placed reliance on factum of the Director of the plaintiff having provided a copy of her passport for identification purpose and provided confirmation that she was a Director of the plaintiff company. In support of the averment a copy of the passport has been annexed and marked as Exhibit-6 of OJMCA. No explanation is forthcoming on behalf of the plaintiff even though an affidavit-in-reply has been tendered as to in what circumstances the said lady had furnished a copy of her passport to the defendants. Therefore, this is one factor which remains uncontroverted and would go to show that the plaintiff has not approached the Court with full and true disclosure of all material facts. 51. In relation to the payment of sale consideration it is averred by the defendants in paragraph 12 of OJMCA that defendant No. 2 had paid all outstanding dues of Oostende ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to instruct their Indian Advocates and appraise them of all facts and documents. The difficulty has been compounded by different time zones, the fact that many of the documents are in foreign language and the office of their Belgian lawyers being closed over the intervening week end. Although every attempt has been made in the circumstances to bring all relevant facts and documents to the notice of this Hon ble Court, it is possible that due to oversight and inadvertence and want of translations, something may be omitted or overlooked. The plaintiffs therefore crave liberty from this Hon ble Court to place the same on record at a later stage, should this be necessary or advised." At the time of hearing on 1-3-2004 a specific query was put to the learned counsel of the plaintiff as to what had prompted insertion of such paragraph in the plaint. The answer was that having regard to the urgency and the documents being in foreign language, it was found necessary to make such averment. All that can be said after hearing the parties in relation to such averment is that it appears that the plaintiff has sought to prevaricate and build a proposed defence, with the knowledge that the sui ..... X X X X Extracts X X X X X X X X Extracts X X X X
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