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M.N. Clubwala v. Fida Hussain Saheb, 1964

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M.N. Clubwala v. Fida Hussain Saheb, (1964) 6 SCR 642, 651 This case interpretation/case summary is written by Ms. Swati Sharma a student at the Faculty of Law (Delhi University). If you also want to publish your articles or case interpretations/summaries, send your work to  niyamskanoon09@gmail.com . Case Details PETITIONER:  MRS. M. N. CLUBWALA AND ANR. Vs. RESPONDENT: FIDA HUSSAIN SAHEB AND ORS. DATE OF JUDGMENT: 03/02/1964 BENCH: MUDHOLKAR, J.R. SUBBARAO, K. CITATION: 1965 AIR 610 1964 SCR (6) 642 Introduction   The case of M.N. Clubwala v. Fida Hussain Saheb (1964) under the Delhi Rent Control Act is a landmark judgment that clarifies the distinction between a lease and a license and the jurisdiction of the Rent Controller. The primary issue in this case was whether the agreements between the landlord (M.N. Clubwala) and the shopkeepers (Fida Hussain Saheb) created a lease or a license.  Facts of the Case M.N. Clubwala (Landlord) used his building as market by
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Cotman v. Brougham [1918-19]

 Cotman v. Brougham Case Summary 

Introduction

A very interesting case in the Court in which, a company in its object clause of MoA mentioned various acts in respect of making itself capable to involve in almost any kind of businesses. Though after registration of MoA incorporation certificate is to be issued by the registrar which becomes a conclusive evidence. But what if the MoA not complying the Act registered by the registrar, and incorporation certificate issued by the registrar. In this case the Court had been dealt with all these issues.  


Facts

The Essequibo Rubber and Tobacco Estates Ltd. (E. company) registered under Companies (Consolidation) Act, 1908. The E. company underwrote and took up shares in another company the business of which was not connected or mentioned in its objects. When the other company went on to liquidation, the E. company which was also on liquidation, was placed in list B of contributors in respect of 14000 pounds due upon those shares. To remove its name from the list of contributors, the E. company made an application on the ground that the whole transaction was ultra vires. 

MoA of the E. company mentioned a variety of objects in cl.(3) such as;-

  1. to develop property abroad
  2. promotion of other companies and dealing in their shares, etc
It also concluded that “the objects set forth in any sub-clause of this clause shall not, except when the context expressly so requires, be in any wise limited or restricted by reference to or inference from the terms of any other sub-clause, or by the name of the company. None of such sub-clauses or the object therein specified or the powers thereby conferred shall be deemed subsidiary or auxiliary merely to the objects mentioned in the first sub-clause of this clause, but the company shall have full power to exercise all or any of the powers conferred by any part of this clause in any part of the world, and notwithstanding that the business, undertaking, property, or acts proposed to be transacted, acquired, dealt with, or performed do not fall within the objects of sub-cl. 1.”

Issues

  1. Whether the transaction was ultra vires or not? 

Case History and Decisions-

  1. Application to Neville J. by the E. company got refused. 
  2. E. company appeal to the Court of Appeal also dismissed.
  3. The company appealed before this Court.

Ratio Decidendi of this Court-

  1. Clause 3,8 and 12 of the MoA are wide enough to cover the transaction made by the company.
  2. The Act put a great responsibility on registrar in registering an MoA and giving incorporation certificate to the company. The registrar can refuse registration if he finds that the Act have not been complied with. 
  3. S.17 of Company (consolidation) Act, 1908 makes the certificate of incorporation as conclusive evidence.
  4. The narrower the objects expressed in MoA, less is the subscriber's risk.
  5. A MoA not specifying or disclosing the real object or objects with the intent to include every conceivable form of activity is of worst kind and non-compliant to the Act.
  6. The Act provides a model forms of MoA in Schedule 3 that should be used in all matters to which those forms refer.
  7. When a substratum of the company is gone, a winding up order may be issued under S. 129(vi)
  8. The winding up of a company by the reason of failure of substratum is a question of equity between a company and its shareholders. Whereas whether a transaction is ultra vires or not is a question of law between company and third party.
  9. There should be a main purpose in a MoA which  mention a variety of acts.

Decision

  1. Agreed with both the lower Courts and held that the transaction was intra vires.
  2. Dismissed the appeal with costs.


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

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Workmen of Dimakuchi Tea Estate v. Dimakuchi Tea Estate, AIR 1958 SC 353

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