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TMI Blog1954 (12) TMI 15X X X X Extracts X X X X X X X X Extracts X X X X ..... n in Tiruchirapalli, lent Rs. 50,000 to the Automobiles Ltd. The date when the loan was made was not mentioned to us, but it must have been some time prior to April, 1948. In that month, the Indian Bank Ltd. lent a sum of Rs. 1,00,000 to the Automobiles Ltd., on the mortgage of this and other properties. The Indian Bank sued on the mortgage in its favour, and, on 12th December, 1950, obtained a decree for Rs. 1,05,000, and odd. On 28th September, 1951, the Vasudeva Funds obtained a decree for Rs. 49,000 and odd. Some time before 2nd December, 1953, here too the date was not mentioned to us the Indian Bank Ltd. filed an execution petition for the sale of the hypotheca. While that execution petition was pending, the Vasudeva Funds brought the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as ordered to deposit cash or furnish security of immoveable property by 10th April, 1954. That day the judge was on leave and so the petition was adjourned to 12th April, 1954. On that date the petition to set aside the sale was dismissed on the ground that security as ordered was not furnished. Meantime, that is to say, on 26th March, 1954, one Vaidyanatha Iyer, a shareholder in the Trichinopoly Automobiles Ltd., filed E.A. No. 584 of 1954 to set asids the sale. Among others, he urged the ground that the managing director of the Trichinopoly Automobiles Ltd. had been acting in fraud of the company and that Chellappa Chettiar, the court auction purchaser, was his own nominee. At the same time a separate application for accepting personal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wn cases. The earliest of these is Hoole v. Great Western Railway Co. 3 Ch. App. 262 , where it was held, "an individual member of a corporation may maintain a bill in his own name, without suing on behalf of other persons as well as himself, to restrain the corporation from doing an act which is ultra vires ." The next case is Burland v. Earle [1902] AC 83 . The second paragraph of the head note to the report runs as follows : "The company must sue to redress a wrong done to it; but if a majority of its shares are controlled by those against whom relief is sought, the complaining shareholders may sue in their own names, but must show that the acts complained of are either fraudulent or ultra vires ." The third case is Vadi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... titioner is not permitted to intervene, the company would be put to loss and through the company the petitioner also. On the other side, Mr. Pattabhiraman argued that the contention of counsel for the appellant runs counter to all established legal notions about the position of a limited liability company. A shareholder is not in any sense of the word an owner or part owner or co-owner of any of the properties of the company. The legal ownership of the property is vested in the company and only in the company. The company can act only through its accredited representatives accredited in the manner prescribed by its constitution. If an individual shareholder feels that the managing directors are acting in fraud of the company or otherwise to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the company itself." Again on page 930: "In my opinion, although a shareholder may, in a sense, be interested to see that the company of which he is a shareholder is not deprived of its property, he cannot, as held in Darnell v. Indiana 226 US 388 , be heard to complain, in his own name and on his own behalf, of the infringement of the fundamental right to property of the company for, in law, his own right to property has not been infringed as he is not the owner of the company's properties. An interest in the company owning an undertaking is not an interest in the undertaking itself. The interest in the company which owns an undertaking is the 'property' of the shareholder under article 31(2), but the undertaking is the proper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ollusion with Chellappa Chettiar. In respect of such a conduct, the petitioner has a specific remedy provided under section 153-C of the Indian Companies Act. The first sub-section of it runs as follows: "Without prejudice to any other action that may be taken, whether in pursuance of this Act or any other law for the time being in force, any member of a company who complains that the affairs of the company are being conducted ( a )in a manner prejudicial to the interests of the company, or ( b )in a manner oppressive to some part of the members (including himself), may make an application to the court for an order under this section." And then elaborate provisions follow as to what the court might do on such an application being ..... X X X X Extracts X X X X X X X X Extracts X X X X
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