9911796707
TMI Blog1995 (7) TMI 331X X X X Extracts X X X X X X X X Extracts X X X X ..... d premises directly from the applicant. The respondent, to overcome clause 1( f ) of the lease deed, wants to clandestinely transfer its major shares retaining a negligible share to the said bank and also Dubai National Air Travels and Ajmer Travels. It would amount to subletting. The cheques issued were dishonoured for want of funds. Hence, the applicant has filed the suit and the present application is to restrain the respondent from entering into any transaction for sub-letting the premises for transferring its major shares for allowing the demised premises to be occupied by any person in breach of covenants of the lease deed dated May 2, 1994. The respondents in their counter contend briefly as follows : The allegation that the respon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts have recognised lifting corporate veil and going to the true meaning of a particular transaction. The board of directors and shareholders cannot circumvent the agreement. The induction of new shareholders and the new management taking over would amount to dividing the contractual obligation arising under the lease deed. The application may, therefore, be ordered. The suit has been filed by the plaintiff for permanent injunction restraining the defendant and their men from entering into any transaction for subletting the demised premises by transferring his major shares allowing the demised premises to be occupied by third parties in breach of covenant of the lease deed dated May 2, 1994, entered into between the plaintiff and the defen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the company, is a right of the company registered under the Companies Act and it cannot be stated that under the corporate veil, the respondent is trying to sublet the premises to Ajmer Travels and Dubai National Air Travels to get over the condition in the lease deed. Learned counsel appearing for the applicant has drawn the attention of this court to the provisions of section 34 of the Companies Act and would argue that where two persons who were the joint owners of leasehold rights in land attempted to circumvent an injunction against alienation of certain rights by transferring the leasehold rights to a private limited company (of which they alone were the shareholders and directors) which alienated the rights, the court held that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lf of the defendant. Even assuming that they have called for subscription for the shares or sale of the shares held by them, it cannot be considered as an act done by them under the veil of the corporate entity. As regards the true legal position of a company or corporate body and the circumstances under which its entity as a corporate body will be ignored and the corporate veil lifted, so that the individual shareholder may be treated liable for its acts, the Supreme Court (see Tata Engineering and Locomotive Co. Ltd. v. State of Bihar [1964] 34 Comp. Cas. 458 , 468) has expressed itself as follows : "The true legal position in regard to the character of a corporation or a company which owes its incorporation to a statutory authority ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... articipate in the profits of the company in which he holds the shares, if and when the company declares, subject to the articles of association, that the profits or any portion thereof should be distributed by way of dividends among the shareholders. He has undoubtedly a further right to participate in the assets of the company which would be left over after winding up. Bacha F. Guzdar v. CIT, AIR 1955 SC 74 ; [1955] 25 Comp. Cas. 1 ." From the above, we can safely come to the conclusion that the property of a company cannot be considered to be the property of members. We can even refer to the fact that when the majority of the shareholders of a company have migrated to India, it was held that it does not and cannot change the nationa ..... X X X X Extracts X X X X X X X X Extracts X X X X
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