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TMI Blog1934 (3) TMI 22X X X X Extracts X X X X X X X X Extracts X X X X ..... interfere with the internal management of the affairs of a company, and, if the majority of the shareholders consider that a particular contract of employment should be terminated, the Court would not as a rule consider the matter at the instance of a minority of shareholders. To get over that difficulty, it is contended by the plaintiff that the dismissal of these agents is an act ultra vires the company, and, no doubt the case of acts ultra vires the company does constitute an exception to the general rule that the Court will not interfere in the management of a company. But it is, on the face of it, startling to find it suggested that the dismissal of persons in the employment of the company, or under contractual relations with the company, is an act ultra vires the company. To get over that difficulty the plaintiff alleges that the rights of the agents arise under the memorandum of association of the company, and, therefore, cannot, be altered. But at that point another difficulty arises, i. e., that the memorandum of association, as it has been held many times, does not constitute a contract between the company and a third party who may be named therein. So that, ultimately th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded amongst the objects of the company. Mr. Taraporewala for the plaintiff objects to. that view of the matter, and says that there is no question of any contract between the company and the agents, but directly the company after its incorporation, employs the agents, which it can only do with the agents' consent contractual relations must arise, and the clause must in effect impose on the company an obligation to enter into a contract with a third party. It has been held many times that a company cannot be bound by a contract entered into on its behalf before the company was formed, and, in my opinion, it is not competent to bring a company into existence bound to enter into a contract with a third party, the terms of which have been arranged before the company was formed. It is for the company to consider after its formation whether it will enter into the contract or not. There is a further objection to the plaintiff's case in that, in my opinion, Clause 6 of the memorandum of association, even if construed as the appellant desires, merely imposes on the company an obligation as to management and is not a vital part of the constitution of the company. In support of the view that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company the firm consisted of two individuals, one of whom died in 1880, and the other of whom died in 1908, and none of the present members of the agency firm were ever partners with either of those two individuals. Whatever meaning may be given to the words, "whatever member or members that firm may for the time consist of," it seems to me quite impossible to say that the present members of the firm of Morarjee Goculdas & Co., who were never members of the firm at a time when either of the persons who constituted the firm at the date of the incorporation of the company were alive, can be said to be members of the firm named in the memorandum. The argument of the appellant really seeks to endow this firm with the attributes of a corporation having perpetual succession so far as concerns its relations with the company. It is further suggested by Sir Chimanlal Setalvad that if the clause has the extended meaning contended for by the appellant, it would be void in law, but it is not necessary, in my opinion, to consider that argument. There is another point taken against the appellant, namely, that, again giving to Clause 6 the effect for which he contends, at the most it only outli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... existence of the company, such as for instance, the name of the company, the objects of the company, and so on, can be altered undoubtedly in a limited way in accordance with the provisions of the Indian Companies Act. The learned counsel for the appellant says that the rights of the agents are created by the memorandum of association, but the answer to that is that the memorandum of association does not constitute a contract between the company and a third party, though named therein. Then there is another point, and it is that the condition, on the face of it, is unreasonable, and it is no use saying that the shareholders subscribed on the faith of it. There is no obligation imposed on the agents either to act as agent or go on acting as agent. Supposing, for instance, the agents refuse to work as agents, I do not think it can be contended that the company, or the shareholders or majority of the shareholders interested in the continuance of the company, have no power to appoint other agents in their place. Similarly if the agents are found guilty of fraud, or are not properly managing the business, it cannot be contended that the company cannot appoint other agents in their pla ..... X X X X Extracts X X X X X X X X Extracts X X X X
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