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Gulshan Prakash v. State of Haryana (2010) 1 SCC477

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Gulshan Prakash v. State of Haryana (2010) 1 SCC 477||Case Summary  Introduction  In this appeal, the Court has interpreted Article 15(4) of the Fundamental Right. It has been added by the 1st Amendment Act, of 1951. Facts The State of Haryana instructed Maharshi Dayanand University (MDU), Rohtak to conduct entrance examination for MD/MS/PG courses for the Session 2008-2009. The appellant made a representation to the Health Secretary for providing reservation for SC and ST in the Post Graduate courses, Since there was no response from the Health Secretary the Appellant filed a petition in the High Court.  The High Court dismissed the petition of the appellant therefore the appellant approached the Supreme Court by Special Leave Petition under Article 136. Appellant Contentions  MDU, Rohtak has provided 20% reservation for the graduate level courses or undergraduate courses therefore the said University should also provide reservation in for the PG courses.  The Government o
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Re Introductions, Ltd. Introductions, Ltd. v. National Provincial Bank Ltd. [1969]

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Re Introductions, Ltd. Introductions, Ltd. v. National Provincial Bank Ltd. [1969] Case Summary

Introduction 

A bank with full knowledge of the objects and power mentioned in the MoA of a company provided a sum of credit. On a simple reading of the clause of MoA, the bank satisfied itself that the company is empowered to borrow but they further did not enquire and provide credit to the company. The Court observed that the clauses of the MoA based on which the bank gave the loan were not an object but only a power, and that should be used for the particular purpose or object mentioned in the MoA. The power to borrow can not be an object of a company.

Facts 

The appellant company was incorporated in 1951 to provide facilities for British festivals to people who come from abroad. Subsequently, for some years, the company connected its business with deck chairs at a seaside resort. In 1961 the company transferred its share and elected a new board who decided to be involved in the business of "pig breeding".

New directors of the appellant company approached the National Provincial Bank Ltd. (Respondent) to open a bank account and credit for its new business of "Breeding Pig". Very soon the bank account became overdrawn therefore the company offered two debentures secured by the company's assets when a security was demanded by the bank. The company also presented its MoA and AoA before the bank and the bank was well aware that the money borrowed was getting used for an ultra vires act. 

The respondent bank depended on the words mentioned in sub-clause (N) of the MoA of the company which empowered the company in general terms to borrow, in particular by the issue of debentures, and to secure the loan by charge. Also in the memorandum it was expressly declared that each of the preceding sub-clauses shall be construed independently of and shall be in no way limited by reference to any other sub-clause and that the objects set out in each sub-clause are independent objects of the company.

The new venture proved a disastrous failure, and the company was ordered to be wound up in 1965. The bank asked for their credit but was denied by the liquidator.

Bank contended 

  • We read the memorandum but there was a sub-clause (N) in the memorandum which says: The company can borrow or raise money by issuing debenture, it gives an express power to borrow money 
  • Each of the precise sub-clauses shall be construed independently. 
  • The company's director can carry on any trade that is advantageous for the company in the opinion of the director as per sub-clause (D) of the memorandum. 
Issue 
  1. Whether the debenture held by the bank is valid against the liquidator?
  2. Whether in borrowing the money in question the company was acting within its powers and could give the bank a valid security.

Ratio Decidendi 
  1. The power given under subclause (N) to borrow money does not mean the power to borrow for any purpose.
  2. Power or an object to borrow money is not an and in itself and must be for some purpose of the company within the MoA. A bank must satisfy itself by its purpose.
  3. As said In "Re David Payne & Co. Ltd., Young v. David Payne Co., Ltd. [(1904)";
    1. Where the company has a general power to borrow money for its business, a lender is not bound to enquire into the purpose for which the money is required and the misapplication of the money does not avoid a loan in the absence of knowledge of the part of lender that the money is misapplied. 
    2. But In the present case, the bank knew that borrowing was not for legitimate purposes.
  4. The company's director can carry on any trade but is subject to the memorandum. As per section 4, the memorandum is a charter of the company. 
  5. The borrowing must be for a legitimate or intra vires to the object laws of the company.
  6. As per  Justice Buckley: the power given under sub-clause (N) differs from the object clause of the company.
  7. Power has to be exercised in the limit of the object clause. 
Judgment 
  • The appeal was dismissed as the bank knew about the Ultra Vires act of the company. 

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Ashbury Railway Carriage and Iron Co. Ltd. v. Riche (1875)

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Ashbury railway carriage v riche|| Case Summary  Introduction   This case is related to the " Doctrine of Ultra Vires". In this case, the directors of the appellant company made an agreement with the plaintiff which was beyond the objectives, as mentioned in its MoA, of the appellant Company. Since the agreement was beyond its objectives, the appellant company repudiated the agreement later. Therefore the suit was brought by the plaintiff to recover the damages. Facts   The directors of the appellant company (Ashbury Railway Carriage) had contracted to obtain a concession from Gillon and Poeters Baerston, who obtained this right from the Belgian Government, to make a railway.  For this purpose, the directors of the appellant company again entered into a contract with Riche, a contractor, the purpose of which was to establish a société anonyme,  and as the plaintiff went on with the work, the appellant company had to pay into the hands of société anonyme,  Earlier the sharehol
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Workmen of Dimakuchi Tea Estate v. Dimakuchi Tea Estate, AIR 1958 SC 353

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Workmen of Dimakuchi Tea Estate v. Dimakuchi Tea Estate, AIR 1958 SC 353 Case Summary Introduction The case of Workmen of Dimakuchi Tea Estate v. Dimakuchi Tea Estate involved a dispute between the management of the Dimakuchi Tea Estate and its workers. This case has discussed and cleared the meaning of the expression "any person" used in S.2(K) of the Industrial Dispute Act, 1947. The Supreme Court ruled in favour of a limited interpretation of the term "any person" thereby excluding the present appellant from the ambit of the Industrial Disputes Act of 1947. This decision denied the jurisdiction of the Industrial Tribunal to adjudicate the dispute and extended the benefits and protections of the Act to the employers. Facts of the Case The dispute was raised over the termination of the service of Dr K.P. Banerjee, who was appointed as an Assistant Medical Officer in the Respondent's estate (Dimakuchi Tea Estate), on the grounds of being incompetent. Although th
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