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TMI Blog2015 (9) TMI 1131X X X X Extracts X X X X X X X X Extracts X X X X ..... o have instituted fresh proceedings on a revival, after the initial forfeiture of the certificate of incorporation. The petition which was infirm on the date of filing cannot be resuscitated on the basis of a subsequent event, to the prejudice of the respondent. The petitioner would also be disentitled to claim that any such relief be moulded in its favour, to avoid multiplicity of proceedings or such other hardship, on account of the petitioner not having stated the actual state of affairs as on the date of filing of the petition, which the respondent has brought to light subsequently. The petitioner seeking to take this impropriety in its stride and to glibly seek to defend its position is hardly appreciable. - Petition dismissed. - CO. PETITION NO. 66 OF 2010 - - - Dated:- 28-7-2015 - ANAND BYRAREDDY, J. For The Petitioner : Smt. Smt. E. Massilamani, B.K. Nandakumar and Suraj Govindaraj, Advs. For The Respondent : Dhyan Chinnappa, Sr. Adv. and Arunkumar, Adv. ORDER 1. The petitioner is a company incorporated and registered under the laws of the United States of America and is said to have its registered office in California, United States of America. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and responsibilities of the Sellers to obtain all rights, obligations and benefits of those contracts. And further that the contract which the respondent had with ITI, was part of those contracts. It is stated that under the said agreement, the following obligations were cast on the respondent, namely : a. That the Sellers , transferred all their rights in the purchase orders with ITI Limited to the aforementioned subsidiary of the petitioner. In consideration of which, US $ 2,311,642.00 (Two Million Three Hundred Eleven Thousand Six Hundred and Forty Two) shares in Arasor International Limited (i.e. the Parent Company of the Petitioner) were transferred in the favour of the Sellers on 30.1.2007. b. Further, a joint bank account was to be opened, wherein all the receivables under the Purchase Orders including those from ITI Limited were to be deposited. The Sellers had to provide a Special Power of Attorney authorising the Purchaser i.e., the aforementioned subsidiary of the petitioner, to unilaterally operate the bank account. It is stated that the respondent had failed to comply with the above obligations. And further it is alleged that the respondent had fai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g advice. The respondent has entered into a Consultation and Project Services Agreement with the said Mr. Ajay Jalan. The said consultant is paid consultancy fees and as per the provisions of Rule 31(1)(b) of the Income Tax Rules, tax is deducted at source vide Form No.16A. It is stated that had the said Mr. Ajay Jalan been an employee of the respondent, he would have been issued Form No.16, and not Form No.16A. That as could be seen from the said agreement, Mr. Ajay Jalan was an independent consultant, who had been engaged as a consultant with a defined scope of work. The said consultant was neither authorized to sign on behalf of the respondent nor did his signature bind the respondent. Therefore, it is contended that the endorsement by the said consultant on the said letter dated 10.7.2008 was not an acknowledgement of debt by the respondent. Moreover, the consultant had endorsed the said letter dated 10.7.2008 without knowing the various disputes concerning the supply of goods by the petitioner and also without knowing the imposition of liquidated damages on the respondent. As such, the said letter dated 10.7.2008 could not by any means, be treated as an acknowledgement of debt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ranchise taxes in Delaware between October 14, 2005 and the date of its filing of the petition. It is contended that the appellant had obtained a certificate of Mr. Christopher L. Rasmussen, Attorney, licensed to practice in the State of California who confirms that as of the date of the certificate, the respondent had forfeited its right to initiate or continue any legal proceedings. A copy of the certificate is produced as Annexure -A. The appellant states that under Section 510 of the Delaware Code, the charter of a company which does not pay the State of Delaware the state franchise taxes or does not make the annual filing, void and all powers conferred by law including the power to sue under Section 122(2) are declared inoperative. Since the respondent has been declared to be void in the State of Delaware, the respondent does not have power to initiate or continue any proceedings in India. Similarly, under California Statutory (Section 23301 of the California Revenue and Taxation) and case law, a corporation, which is declared forfeited, as is the case with the respondent, whose headquarters was in California and where it operated its business, loses its rights, powers an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny's charter temporarily became inoperative for non-payment of taxes or failure to file a complete annual report. The petitioner - Company temporarily becoming inoperative did not mean that the petitioner - Company lost its existence. The petitioner - Company had applied for renewal of its charter, upon which the State of Delaware issued a certificate of revival. On the issuance of the said certificate of renewal, the Petitioner - Company was renewed and revived vide certificate of revival dated 2.8.2011. That Mr. Jeffrey W. Bullock, Secretary of States, State of Delaware, USA has also certified that the Petitioner - Company is in good standing and has its legal corporate existence. Further, upon revival, the Petitioner - Company gets revived from the date of its incorporation and all the acts done become valid, retrospectively. Pursuant to Section 312 of the Delaware Corporation Code, any corporation whose certificate of incorporation has been forfeited or becomes void, may procure a restoration, renewal and revival of its certificate of incorporation, together with all rights, franchisees, privileges and immunities and subject to all of its duties, debts and liabi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the California Revenue and Taxation, the petitioner loses all rights, powers and privileges to initiate or defend lawsuit. It is therefore contended that the application deserves to be allowed on the basis of this categorical admission of the Petitioner. Sufficient material is placed on record along with the application to substantiate the applicant's stand that the Petitioner could not have initiated proceedings at the relevant point of time. It is contended that in suppressing the fact that the very basis for instituting the proceedings, i.e., the status and the capability of initiating the present proceedings before this Court, the petitioner has not approached this court with clean hands. It is the cardinal law of the land that No one is entitled to the aid of a court of equity when that aid has become necessary through his or her own fault . It is therefore contended that on the principle of equity and natural justice also, the present petition deserves to be dismissed. Even assuming, though not acceding to the fact that the status of the petitioner is revived retrospectively, the petitioner cannot be permitted to take advantage of its own mistake, willful su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... title shall apply to any corporation that has expired by its own limitation, and when so applied, all references in those sections to a dissolved corporation or dissolution shall include a corporation that has expired by its own limitation and to such expiration, respectively. xxx 312 Renewal, revival, extension and restoration of certificate of incorporation. (a) As used in this section, the term certificate of incorporation includes the charter of a corporation organized under any special act or any law of this State. (b) Any corporation may, at any time before the expiration of the time limited for its existence and any corporation whose certificate of incorporation has become forfeited or void pursuant to this title and any corporation whose certificate of incorporation has expired by reason of failure to renew it or whose certificate of incorporation has been renewed, but, through failure to comply strictly with the provisions of this chapter, the validity of whose renewal has been brought into question, may at any time procure an extension, restoration, renewal or revival of its certificate of incorporation, together with all the rights, franchises, privileg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncorporation had not been forfeited or void pursuant to this title, or had not expired by limitation. Such reinstatement shall validate all contracts, acts, matters and things made, done and performed within the scope of its certificate of incorporation by the corporation, its officers and agents during the time when its certificate of incorporation was forfeited or void pursuant to this title, or after its expiration by limitation, with the same force and effect and to all intents and purposes as if the certificate of incorporation had at all times remained in full force and effect. All real and personal property, rights and credits, which belonged to the corporation at the time its certificate of incorporation became forfeited or void pursuance to this title, or expired by limitation and which were not disposed of prior to the time of its revival or renewal shall be vested in the corporation, after its revival and renewal, as fully and amply as they were held by the corporation at and before the time its certificate of incorporation became forfeited or void pursuant to this title, or expired by limitation, and the corporation after its renewal and revival shall be as exclusively ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t made pursuant to this sub-section shall reduce the amount of franchise tax due under Chapter 5 of this title for the year in which the renewal or revival is effected. (h) If a sufficient number of the last acting officers of any corporation desiring to renew or revive its certificate of incorporation are not available by reason of death, unknown address or refusal or neglect to act, the directors of the corporation or those remaining on the board, even if only 1, may elect successors to such officers. In any case where there shall be no directors of the corporation available for the purposes aforesaid, the stockholders may elect a full board of directors, as provided by the bylaws of the corporation, and the board shall then elect such officers as are provided by law, by the certificate of incorporation or by the bylaws to carry on the business and affairs of the corporation. A special meeting of the stockholders for the purposes of electing directors may be called by any officer, director or stockholder upon notice given in accordance with 222 of this title. (i) After a renewal or revival of the certificate of incorporation of the corporation shall have been effected, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is laid down thus :- It is true that 8 Del S 510 provides that, upon forfeiture of a charter for failure to pay franchise taxes, all of the corporation's powers become inoperative, but this provision must be read in light of *715 8 Del. C. S 312 which provides for a method of reinstating corporate charters which have been forfeited. Sub-section (e) provides that upon reinstatement of a charter all contracts and other matters done and performed by the corporate offices during the time the charter was inoperative shall be validated, and be the exclusive liability of the corporation. 2. Boxco Ltd., In re [1970] 2 WLR 959 (Quorum Pennyquick., J), wherein it is laid down as follows:- The company, which was struck off the register for failure to file its annual returns, purported to create a legal charge certain property during the period when legally it was no longer in existence and its directors were in ignorance of that fact. The company petitioned the court for the restoration of its name to the register under section 353(6) of the Companies Act, 1948, and for an order that the legal charge had been duly created and the particulars duly registered under Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ried to its logical conclusion. ' In the light of the above, the learned counsel for the petitioner would contend that the objection as regards the maintainability of the petition is untenable and ought to be rejected, on the face of it. And would on the other hand, seek that the petition be admitted and the so called dispute, as regards the admitted debt, be considered in due course. 8. The learned Senior Advocate, Shri Dyan Chinnappa, appearing for the counsel for the respondent, on the other hand, would point out that the provisions of the Delaware Code cited by the learned counsel for the petitioner are to be read in context and cannot be said to support the case of the petitioner. It is pointed out that Section 278 of the said Code is in relation to the winding -up and dissolution and would not be relevant to a situation where the status of the Corporation is voided and its certificate of incorporation is forfeited. The relevant Section, it is pointed out, is Section 510, which reads as follows: 510 Failure to pay tax or file a complete annual report for 1 year; charter void; extension of time. If any corporation, accepting the Constitution of this State and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nspolymer Industries, Inc. should not be dismissed under Supreme Court Rule 29(b) for failure of the corporation to appear and be represented by an attorney who sir admitted to practice law in Delaware as well as for failure of the Notice of Appeal to comply with the requirements of Supreme Court Rule 6; and an answer to the notice having been filed by Wm.Jess Barrentine purporting to appear per se (sic), and on behalf of the corporation as its President Majority Shareholder ; and the matter having been duly considered, it appears to the Court that; (1) A corporation, though a legally recognized entity, is regarded as an artificial or fictional entity, and not a natural person, Robert Charles Clark, Corporate Law, 1987 1.2 (1986). While a natural person may represent himself or herself in court even though he or she may not be an attorney licensed to practice, a corporation, being an artificial entity, can only act through its agents and, before a court only through an agent duly licensed to practice law. Annotation, propriety and effect of Corporation's Appearance Pro Se, through Agent who is not Attorney, 19 A.L.R.3d 1073 (1968). See James v. Daley Lewis, D.Del. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... seeks justice in a perfect legal system gets it when he asks for it. But because human institutions of legal justice function slowly, and in quest of perfection, appeals and reviews at higher levels are provided for, the end product comes considerably late. But these higher Courts pronounce upon the rights of parties as the facts stood when the first Court was first approached. The delay of years flows from the infirmity of the judicial institution and this protraction of the Court machinery shall prejudice no one. (See: Bhajanlal v. State of Punjab [1971] 1 SCC 34) With reference to the decision in Patterson v. State of Alabama [1934] 294 US 600, it is further held as follows: The impact of subsequent happenings is: first, its bearing on the right of action, second, on the nature of the relief and third, on its impotence to create or destroy substantive rights. Where the nature of the relief as originally sought, has become obsolete or unserviceable or a new form of relief will be more efficacious on account of developments subsequent to the suit or even during the appellate stage, it is but fair that the relief is moulded, varied or re-shaped in the light of dated facts. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its and at times even those that have occurred during the appellate stage and permit pleadings to be amended for including a prayer for relief on the basis of such events but this is ordinarily done to avoid multiplicity of proceedings or when the original relief claimed has, by reason of change in the circumstances, become inappropriate and not when the plaintiff's suit would be wholly displaced by the proposed amendment and a fresh suit by him would be so barred by limitation. It is contended that if viewed in the light of the principles laid down as above, the institution of the petition before this court by a non-existent entity, in the eye of law , being invalid and infirm, could not gain currency - no matter if the certificate of incorporation was subsequently revived. It is contended that though it may be possible in a situation to claim that the proceedings were validly instituted but the subsequent revocation of the incorporation and revival thereafter, may enable a suitor to claim that the proceedings abated temporarily, during the hiatus brought about in a such a situation, the same cannot be said of proceedings invalidly instituted in the first instance. The rig ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a suspended corporation may sue or defend in order to protect its assets. Bratonn v. Slininger, 93 Idaho 248; 460 P2d 383 Similarly a corporation suspended for failure to pay taxes was allowed to bring suit a month after its suspension under a state statute providing for corporate dissolution only if the taxes were not paid within five years of the suspension. Raleigh Swimmig Pool Co. v. Wake Forest Counry Club, 11 NC App 715; 182 SW2. On the other hand, many states restrict the capacity of suspended corporations to sue or be sued. Rimco Enterprises Inc. v. Texas Electric Service Co. (Tex Civ App Fort Worth) 599 SW2d 362, often by specifically forbidding a corporation from maintaining an action while under suspension for failure to pay franchise taxes, Mather Constr. Co. v. United States, 201 Ct Cl 219; 475 F2d 1152, 17 FR Serv 2d 458; Graceland v. Peebler, 50 Cal App 2d 545; 123 P2d 527 or corporate fees, York York Constr. Co. v. Alexander (dist Col App)296 A2d 710 or while in default under a statute requiring the filing of an annual report. Babe, Inc. v. Baby's Formula Service, Inc. (Fla App D3) 165 So 2d 795, 6 ALR3d 320; Adams v. Edward M.Burke Homes, Inc., 14 Mich Ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers is based upon the fact of dissolution, such a dissolution must be shown rather than a cause for dissolution. Valley Bank Sav. Institution v. Ladies' Congregational Sewing Soc., 28 Kan 423. But while a court has no power to decree the nonexistence of corporation in a suit between private parties, this rule only applies if the party wants to test the legality of a corporation's existence, if a state has already acted to terminate the corporation's existence, a private party may raise the lack of corporate existence as a defense to an action involving purely private rights. Hearth Corp. v. C.B.R.Dev. Co. (Iowa) 210 NW2d 632 (ovrld on other grounds Miller v. Register Tribune Syndicate, Inc. (Iowa) 336 NW2d 709) (Emphasis supplied) In the light of the above , the decisions relied on behalf of the petitioner in the case of Frederic G, Grapf Son Inc. (supra) and Boxco Ltd. In re (supra) do not support the case of the petitioner. In so far as the decision in the Bombay Gas Co.'s Case (supra) is concerned, the effect and consequence of the striking off the name of a company by the Registrar of Companies under the English Companies Act, 1985 and under Section 56 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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