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TMI Blog1951 (10) TMI 13X X X X Extracts X X X X X X X X Extracts X X X X ..... share capital of Rs. 800 each with interest at 6 per cent. from February 21, 1942, onward and "participating in the income and profits obtained by the Dhulia-Amalner Motor Transport, Limited, up to the date of the decree." On the plaintiff failing to make the option, the appellate decree directed the accounts of the Dhulia-Amalner Motor Transport, Limited, to be made on the basis of the said company "making such profits as may be attributable to the use of the permit, furniture, goodwill, etc., of the Union." The learned Judge went on to say; "For either sort of accounts a preliminary decree for taking accounts by a Commissioner is passed." In the other appeal (No. 145 of 1943) which arose out of Suit No. 63 of 1942 the learned Judge directed a preliminary decree to be drawn up for taking accounts of the plaintiff's share in the Dhulia-Amalner Motor Owners' Union from July 22, 1941, up to the date of the suit. The plaintiff in the said suit (defendant No. 13 of the other suit No. 82 of 1942) was also given an option to become a shareholder of the limited company on payment of Rs. 800 together with interest at 6 per cent. per annum from February 21, 1942, onward. Now, the facts f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er rupee was set apart and out of this collection one-half was to remain as the Reserve Fund for the Union and the other half was to go towards the payment by way of remuneration. Two owners of cars were to attend for duty at the Dhulia and the Amalner stands...................." It is to be remembered that it was a partnership at will. Within a short time difficulties were experienced in the working of the partnership business and, on July 23, 1941, what Mr. Kotwal for the appellant calls a kararnama was passed. That document is Exhibit 166. It describes itself as a kararnama but in fact is a letter which was written by 13 partners of the firm to the manager of the firm. Therein, amongst other things, it was suggested in this kararnama that in future the partnership firm should not be carried on in accordance with the partnership deed, that the said partnership deed should be cancelled and that a private limited company should be formed. Thereafter a notice, Exhibit 136 dated August 19, 1941, was sent out to the members of the Union for convening a general meeting. On August 24, 1941, the general meeting was held. It was attended by ten out of the seventeen partners of the firm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e pertinent resolution was resolution No. 1 which stated that immediate steps should be taken for making a valuation of the buses and for taking possession of the buses. The next general meeting of the Union was held on January 5, 1942, and it is contended for the appellant that it was an important meeting. My attention was drawn to resolution No. 1 which was passed then and which stated: that a company was to be formed, the buses were to be handed over to the company after making the valuatoion and shares were to be issued on the basis of the said valuation. It may be noted that this meeting was attended by all the partners of the firm. Eleven persons were in favour of the resolution and five remained neutral. Those who remained neutral were the present plaintiff and his colleagues. The last general meeting of the Union, which was referred to in the arguments in these appeals, was held on January 31, 1942, and resolution No. 3 which was passed then is said to be an important one. It stated that the reserve fund should be distributed amongst the partners of the firm and account of the business of the firm should be made up to January 31, 1942, and the amounts should be distributed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ame of the Dhulia-Amalner Motor Owners' Union my decision is thus against the appellant, it is impossible to confirm the decree of the. lower appellate court which is based on a complete ignorance of the legal position. It is ignorance of law embodied in the statute.--the Indian Companies Act--to say that the difference between the Union and the private limited company in this case lay merely in the change of name from "the Dhulia-Amalner Motor Owners' Union" to "the Dhulia-Amalner Motor Transport Limited." The fundamental basis, which was a wrong basis of the decree passed by the lower appellate court was as though the business done by the private limited company was a continuation of the business done by the Union; or else the decree for accounts which has been passed would be a manifestly absurd decree. Now, it is to be noted that the limited company, in substance and in form, was 'not' the same entity as the Union with merely a changed name. The company has a distinct entity of its own, quite different from the entity of the Union and the entities of the shareholders, and the business which was done by it was not the same business as was done by the Union, nor was it a continua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the partnership firm call upon another set of partners to render accounts of a business done by a third person altogether, and yet that is what in substance and effect has been done by the decree of the lower appellate Court. Now, it is a well settled principle of law that a limited company has a distinct entity of its own, which is created by the statute, in this case the Indian Companies Act. If we turn to the Indian Companies Act, section 23 thereof lays down: "(1)On the registration of the memorandum of a company, the registrar shall certify under his hand that the company is incorporated, and in the case of a limited company that the company is limited. (2)From the date of incorporation mentioned in the certificate of incorporation, the subscribers of the memorandum, together with such other persons as may from time to time become members of the company, shall be a body corporate by the name contained in the memorandum, capable forthwith of exercising all the functions of an incorporated company, and having perpetual succession and a common seal, but with such liability on the part of the members to contribute to the assets of the company in the event of its being wound ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of individual corporators. In saying this, I do not at all mean to suggest that if it could be established that this provision of the statute to which I am adverting had not been complied with, you could not go behind the certificate of incorporation to shew that a fraud had been committed upon the officer entrusted with the duty of giving the certificate, and that by some proceeding in the nature of scire facias you could not prove the fact that the company had no real legal existence. But short of such proof it seems to me impossible to dispute that once the company is legally incorporated it must be treated like any other independent person with its rights and liabilities appropriate to itself, and that the motives of those who took part in the promotion of the company, are absolutely irrelevant in discussing what those rights and liabilities are...............I can only find the true intent and meaning of the Act from the Act itself; and the Act appears to me to give a company a legal existence with, as I have said, rights and liabilities of its own, whatever may have been the ideas or schemes of those who brought it into existence. Either the limited company was a legal enti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e rights and liabilities are." As his Lordship put it tersely (page 31): "Either the limited company was a legal entity or it was not. If it was, the business belonged to it and not to Mr. Salomon. If it was not, there was no person and no thing to be an agent at all; and it is impossible to say at the same time that there is a company and there is not." There is thus no substance in the argument urged for the plaintiff that those who promoted an artificial creation in the shape of this company did so to employ the said creation as an agent for their own business. There is also no force in the plaintiff's contention that there is a company in the sense that the majority section of the partners of the partnership firm are employing it as an agent to do their own business and that there is no company in the sense that the entity of the Union and the company is the same with only a change in the name. As Lord Halsbury said, you cannot say at the same time that there is a company and there is not. In Ramkanai Singh v. Mathewson, a patni lease actually granted was challenged and one of the grounds of the challenge was that the transaction which was sanctioned was a transaction of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sections and authorities are altogether beside the point. Section 37 of the Partnership Act can obviously not apply to the facts of this case for the simple reason that the business of the company is not the business of the shareholders who are partners in the partnership firm and are also the promoters of the company. It is impossible to say in this case that the business which is done by the company is the business which certain of the partners of the partnership firm are doing with the property of the firm or that the profits which accrue from the business are the profits of the above-mentioned partners or the firm attributable to the use, by them, of the property of the firm. Section 67 of the Indian Trusts Act also has no relevance here, since there is no question at all of any trust or fiduciary relationship between the company and the minority section of the partners in the firm (plaintiff and his colleagues defendants Nos. 13, 14 and 16) and no question at all of any breach of trust by the company. In Ahmed Musaji Saleji v. Kashim Ebrahim Saleji, on which Mr. purshottam has relied, it was observed by their Lordships of the Privy Council (page 96): ".................It is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al Thakursidas v. Lakhmichand Muniram, is beside the point for the purpose of these appeals. At page 444 of Aggarwala's Indian Trusts Act we find that this is what is stated: "If a trustee pay trust-money into a bank to the account of himself, not in any way earmarked with the trust, and also keep private money of his own to the same account, the Court will disentangle the account, and separate the trust from the private money, and award the former specifically to the cestui que trust. In the case of a person occupying a fiduciary position, although not an express trustee, as a factor or agent, the same rule is equally applicable". Here again it is to be noted that defendants Nos. 1 to 12 and defendant No. 15 as promoters of the company and shareholders thereof did not occupy any fiduciary position in relation to the plaintiff and defendants Nos. 13, 14 and 16 and therefore also the observations relied upon by Mr. Purshottam would not help him. For the above-mentioned reasons, although I am in agreement with the conclusion of the learned Judge of the lower appellate Court that the partnership firm has not been dissolved in this case, I find myself unable to confirm the judgment ..... X X X X Extracts X X X X X X X X Extracts X X X X
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