A place and 5. Words sufficient in law to show incorporation. No particular words are necessary for the creation of a particular corporation; any expression showing an intention in corporation will be sufficient. It was held that the corporation was distinct from its members and that the transfer was valid.
It implies two persons to exist under the same name, the one a human being and the other, the corporation sole, which is a creature of the law and continues to exist though the human beings changes.
Two persons are deemed to be occupying the throne of England- one the queen in flesh and blood and the other is the Corporation sole which is the creature of law. This Queen never dies though the Queen in flesh and blood may die.
The court observed the Corporation sole is not endowed with a separate legal personality. It is composed of one person only who is incorporated by law.
The same person has a dual character, one as a natural person and the other as Corporation sole, the later being created by Statute. Difficulties arose as to the conveyance legal paper transferring ownership of property of the Seisin to a person for the benefit of church. The Corporation sole was invented so that the Seisin could be vested in it. Today, under English law, there are number of bodies which can be said to be examples of Corporation sole. Noted them are a parson, a bishop, public trustee, the postmaster General etc.
The Act does not apply to proceedings, by or against the Queen in her private capacity. This invariably leads to the conclusion that the Crown is Corporation sole meaning thereby the queen who adorns the Crown, is different from the one i. It thus refers both to the individual who has died and to the Corporation sole which survives, i. If this device of Corporation sole is not accepted the following consequences would result on the death of a ruling monarch:- 1.
Parliament would stand dissolved and 3. Crown appointments would be automatically terminated. It is a juristic person?. In law the word includes natural person and artificial persons like corporation and joint stock companies, but it does not include a State or Government, for although a state is a moral person, having an understanding and a will, capable of possessing and acquiring rights and of directing and fulfilling obligations, the state in its political organization is entirely different and distinct from the inhabitants who may happen to reside there.
In State Trading Corporation of India v Commercial Tax officer, in this case Supreme Court held that company or corporation is not citizen of India and cannot, therefore claim such of the fundamental rights as have been conferred upon citizens.
V State of Bihar, the petition was filed by the company and some shareholders also joined it. They argued that though the company was not a citizen but its shareholders were citizens and if it was shown that all its shareholders were citizens the veil of corporate personality might be lifted to protect their fundamental rights. This fictitious personality is attributable to the necessity for forming an individual organization existing by itself and managing for its beneficiaries, that is to say, the members of it and its affairs.
Savigny developed the concept of the persona ficta. Juridical persons are those who exist only for juridical purposes. One of the arguments against the theory is that from the point of view of ownership, the fiction theory takes us nowhere. If a corporation aggregate be only an imaginary person which exists only in the eyes of the law, how can a non-existing imaginary person hold property?
But rights can only be had by real persons; so a corporation must be real and not an imaginary person. Its reality is psychic. Gierke is a leading exponent of realist Theory which refutes the fiction theory. The realistic theory maintains that a corporation has a real psychic personality recognized, and not created, by the law. The realist theory is also known as the sociological theory of the group personality of the corporation. They hold that the collective will is, in psychology, different from the individual.
An individual, all by himself may come to a particular decision; but in association with others he may come to a totally different decision.
The will of the many is different from the will of an individual. So a corporation has a real psychic will, and is, therefore, not a fictitious creature of the law but a psychic personality recognized by the law. It is by grace or concession alone that the legal personality is granted, created or recognized.
To determine, however, the real nature of the corporation and its state of affairs, the brackets have to be removed, for the names of the members of the corporation are kept in brackets. If and when the brackets are removed, one would be able to see what the corporation is, what its true nature is, and how its members are revealed through the removal of brackets.
The great defect, however, in the reasoning of the upholders of this theory of corporate personality is that rights, duties and liabilities are thought to be possessed by natural persons alone and not by corporations which are legal entities.
It was developed in France by Vareilles-Sommieres. The individual also has a head, a body with limbs that satisfy inter-dependent functions. Corporations, such as the state, the university, the club, social and public utility organizations, have also limbs in them and wills of their own.
A corporation, according to this theory, is a subject of legal rights and is liable to duties also. According to this theory, a subject of legal rights need not be a human being.
The municipal corporation or company incorporated and registered under the Companies Act is an example of Corporation aggregate, on the other hand, a sovereign is a corporation sole.
Essential conditions for the existence of Corporation - There are three conditions necessary for the existence of a corporation - 1. There must be a group or body of human being associated for certain purposes 2. There must be organs through which the body or the group acts. A will is attributed to corporation by a legal fiction A corporation is either a corporation aggregate or a corporation sole. There are two kinds of Corporation or a Company. The number of corporations aggregate is very large and they are of various kinds.
Their importance is also very great in the field of law. Thus, we have a very large number of Limited companies having millions of shareholders spread in different parts of the world. It is to be observed that a limited company is something different from its shareholders. It has a personality of its own which is different from its shareholders.
The property of the company is not the property of the shareholders. The assets and liabilities of the company are different from those of its members. It is liable for tort. Even if the member of shareholders is reduced to one the shareholder and the company are two distinct persons. A name by which the persons are incorporated 4. A place and 5.
Words sufficient in law to show incorporation. No particular words are necessary for the creation of a particular corporation; any expression showing an intention in corporation will be sufficient. Soloman was the owner of a business which he turned in to a limited liability company.
The other members of the company were his wife and children. The total number of issued shares were 20, of which Soloman took 20, shares and his family members took the remaining six. Soloman also took mortgage debenture to the amount of pound in part payment for the business. Later on the company became insolvent. The trial judge and the court of appeal held that the creditors had the prior claim to the assets since the company 15 The House of Lords reversed this, holding that the company was in law a person distinct from Soloman and that, therefore, Soloman was preferentially entitled to the assets as the secured creditors.
Another important case dealing with a company as a separate entity from its members is Farrar V Farrar Ltd Justice Lindley said in this case- A sale by a person to a corporation of which he is a member is not, either in the form or in substance, a sale b y a person to himself. To hold that it would be to ignore the principle which lies at the root of the legal idea of a corporate body and that idea is that the corporate body is distinct from the persons composing it.
A sale by a member of a corporation itself is in every sense a sale, valid in equity as well as at law. The leading American case on the point is Peoples Pleasure Park V Rohleder18 , where the question was whether a restrictive covenant that title to land should never pass to a colored person operated to prevent a transfer to a corporation of which all the members were Negroes.
It was held that the corporation was distinct from its members and that the transfer was valid. Indian courts have also recognized the judicial personality of a company or corporation distinct from the members which compose it.
In fact, this principle had secured a place in India even earlier than Solomans case. In this case certain persons transferred a tea estate to a company and claimed exemptions from Ad valorem duty on the ground that they themselves were the share-holders in the company and therefore it was nothing but a transfer from them to themselves under another name.
Rejecting this, the Court observed that the company was a separate person a separate body altogether from the share holders and the transfer was as much a conveyance, a transfer of the property, as if the shareholders had been totally different persons.
In a number of other cases this principle has been recognized. D , 61 South Eastern Rep. It implies two persons to exist under the same name, the one a human being and the other, the corporation sole, which is a creature of the law and continues to exist though the human beings changes. The live official comes and goes, said Salmond in a passage which has become the classic description of the corporation sole, but this offspring of the law remains the same for ever.
The most outstanding example of Corporation Sole is the Crown in England. Two persons are deemed to be occupying the throne of England- one the queen in flesh and blood and the other is the Corporation sole which is the creature of law.
This Queen never dies though the Queen in flesh and blood may die. The court observed the Corporation sole is not endowed with a separate legal personality. It is composed of one person only who is incorporated by law. The same person has a dual character, one as a natural person and the other as Corporation sole, the later being created by Statute.
In this case the court rejected the contention of the appellant that the commissioner has a separate legal personality as corporation sole under section 80 of the Act, Madras Hindu Religious and Charitable Endowment Act 19 of , which states that the commissioner shall be a corporation sole and shall have perpetual succession and a common seal and may be sued in his corporation name and that he is exempt from disciplinary proceedings for any act or omission committed in his capacity as commissioner.
Their lordships observed, In our opinion, the object of the legislature in enacting section 80 and 81 of the Act was to constitute a separate fund and to provide for the vesting of that fund in the commissioner as a corporation sole and thereby avoid the necessity of periodic conveyance in the transmission of title to that fund. The idea of corporation sole originated according to Maitland with a piece of land, known as the parsons globe, which was vested in a parson in his official capacity.
Difficulties arose as to the conveyance legal paper transferring ownership of property of the Seisin22 to a person for the benefit of church. The Corporation sole was invented so that the Seisin could be vested in it.
Today, under English law, there are number of bodies which can be said to be examples of Corporation sole. Noted them are a parson, a bishop, public trustee, the postmaster General etc. The Act does not apply to proceedings, by or against the Queen in her private capacity.
This invariably leads to the conclusion that the Crown is Corporation sole meaning thereby the queen who adorns the Crown, is different from the one i. The chief manifestation of this is to be seen in the proclamation that is made on the death of the reigning monarch in England. The proclamation says, The king is dead, long live the King. It thus refers both to the individual who has died and to the Corporation sole which survives, i.
If this device of Corporation sole is not accepted the following consequences would result on the death of a ruling monarch Pending actions in the Royal Court would lapse on the Kings death and would have to be restarted when a new sovereign occupies the throne. Parliament would stand dissolved and 3. Crown appointments would be automatically terminated. What is the position of Indian State?
It is a juristic person. In Shiv Prashad V Punjab State25, the Punjab High Court observedThe natural and obvious meaning of the expression is that person is a living human being, a man, woman or child, an individual of the human race. In law the word includes natural person and artificial persons like corporation and joint stock companies, but it does not include a State or Government26, for although a state is a moral person, having an understanding and a will, capable of possessing and acquiring rights and of directing and fulfilling obligations, the state in its political organization is entirely different and distinct from the inhabitants who may happen to reside there.
The state is an organized political institution which has several of the attributes of a corporation, e. As regards Ministers of Indian Government, they are appointed by the President or the Governors and are officers within the meaning of articles 53 and of the constitution. They are in law, subordinate to the executive head and so are not personally liable for their acts of commission and omission.
They are not directly liable in a court of law for their official acts. They have no legal or constitutional entity. Any person aggrieved by them can bring a suit against the Union of India or the State as the case may be. Consequently they are not corporation sole. Like any other servant of the Government the Ministers are not liable personally. In either case it is the state whether at the centre or in the federated units which is liable in torts28and contracts. AIR Punj.
To conclude, it can be said that when there is an aggregate of persons forming a body corporate we call it a corporation aggregate. But when there is not a body of persons, but a fund or an estate or an officer -bearer by himself, we call it or him a corporation sole. In a corporation aggregate there are two or more members at one time but in corporation sole there is only one member at a time.
Corporation aggregate is endowed with separate legal personality whereas a corporation sole is not endowed with a separate legal personality. Citizenship as defined in Part II of the Constitution of India indicates on ly natural persons and not juristic persons, like corporations. To throw more light on the subject we are examining certain case laws on the topic. In State Trading Corporation of India v Commercial Tax officer 31, in this case Supreme Court held that company or corporation is not citizen of India and cannot, therefore claim such of the fundamental rights as have been conferred upon citizens.
The citizenship conferred on a citizen as per the provisions of the Constitution is concerned only with natural persons and not juristic persons. In this case the State Trading Corporation was sought to be taxed in respect of sales affected by them in the course of their business operation. The corporation contended that its transaction related to inter-state sales and was therefore, exempted from taxation under Article 1.
The impugned tax was therefore, an infringement of its fundamental right under Article 19 1 g of the Constitution. The Supreme Court, however, held that the State Trading Corporation was not a citizen and therefore could not claim the right under Article 19 1 g. V State of Bihar 32, the petition was filed by the company and some shareholders also joined it. They argued that though the company was not a citizen but its shareholders were citizens and if it was shown that all its shareholders were citizens the veil of corporate personality might be lifted to protect their.
The court rejected this argument and held that If this plea is upheld, it would really mean that what the corporations and companies cannot achieve directly can be achieved by them indirectly by relying upon the doctrine of lifting the corporate veil.
In Heavy Engineering Mazdoor Union v State of Bihar33, it was held that the mere fact that the President of India and certain officers of the Central Government, in their official capacity, held the entire share capital of the respondent company does not make the company as an agent either of the President or the Central Government.
The company and its shareholders are distinct entity. In Bank nationalization case34, the court held that A measure executive or legislative may impair the right of the company alone, and not of its shareholders: it may impair the rights of the shareholders and not of company, it may impair the right of the shareholders as well as of the company. Jurisdiction of court to grant relief cannot be denied when by state action, the rights of the individual shareholders are impaired, if that action impairs the rights of the company as well.
The test in determining whether the shareholders right is impaired is not formal; it is essentially qualitative, if the state action impairs the right of the shareholders as well as of the company the court will not, only upon technical ground, deny itself jurisdiction to grant relief. A shareholder is entitled to the protection of Article 19 of the Constitution. The fundamental rights of the shareholders as citizens are not lost when they associate to form a company.
When their fundamental rights as shareholders are impaired by state action their rights as shareholders are protected. The reason is that the shareholders rights are equally and necessarily affected, if the rights of the company are affected.
V Union of India In that case, the question was whether the shareholder, the editor, the printer have right to freedom under Article 19 of the Constitution. Relying on the Bank Nationalization case the court held that the protection of Article was available to a shareholder, editor, printer and publisher of a newspaper. The court said the rights of shareholders with regard to Article 19 1 a were protected and manifested by the.
The individual rights of speech and expression of editors, directors and shareholders are all exercised through their newspapers through which they speak. The press reaches the public through the newspapers.
The shareholders speak through their editor. The locus standi of the shareholders is beyond challenge after the ruling of this Court in the Bank Nationalization case. In Godhra Electric Co. V State of Gujarat36, the court held that though a company was not a citizen under Article 19 but a shareholder, a managing director of a company had right to carry on business through agency of company and if that right was taken away or abridged he was not disabled from challenging the validity of the provisions of any Act, which affected his right.
V Union of India 37, following the decisions of Bank Nationalization and Bennett Colemans case, the Supreme Court in this case held that writ petition filed by a company complaining denial of fundamental rights guaranteed under Article 19 is maintainable. In the matter of fundamental freedom guaranteed by Article 19, Desai, J held, the right of a shareholder and the company which the shareholders have formed are co-extensive and the denial to one of the fundamental freedom would be denial to the other.
The judge pointed out that this is the modern trend and suggested that the controversy on the point should be put to an end by passing appropriate legislation. Law treats a corporation aggregate and a corporation sole as persons. About the nature of their personality different theories have been advanced. These theories have either a political undertone in so far as they attempt to project the nature of relationship between the state and the groups existing within the state or provide a philosophical explanation about the existence of such persons created by law or try to meet the practical implications of 36 In Marshall C.
J defined a corporation as an artificial being, invisible, intangible, and existing only in contemplation of law. These theories are not a mere existence in intellectual acrobatism but lead to important legal and practical consequences. According to some jurists, a corporation has a fictitious personality. This fictitious personality is attributable to the necessity for forming an individual organization existing by itself and managing for its beneficiaries, that is to say, the members of it and its affairs.
In Roman law, we know of the persona ficta. Savigny developed the concept of the persona ficta. He called fictitious persons by the term juridical persons. Juridical persons are those who exist only for juridical purposes.
While in the case of a natural person, he is born with a personality which the law has merely to recognize, it is otherwise in the case of an artificial or juridical person whose personality is created by the law there being no personality apart from this fictitious creation by the law.
If a corporation aggregate be only an imaginary person which exists only in the eye s of the law, how can a non -existing imaginary person hold property? Next it has been argued that a corporation has rights. But rights can only be had by real persons; so a corporation must be real and not an imaginary person. Against these arguments it can be replied that property can be held and rights owned and exercised by a body of persons instead of by each member of such body, for it is that body which is recognized for the purposes of convenience and ownership of property and rights as a separate entity.
Another argument against the fiction theory is that its upholders mistake the part played by the legislator. The legislator makes nothing by itself. He only considers social want, social good and social evil, and gives effect to what society generally considers as good or proper. It is idle, therefore, to suggest that the legislature creates the personality of the corporation. But here again it may be said that this argument of the realists is fallacious.
The legislation of the corporations creates it, in recognition of the economic necessity and business convenience, resulting from such recognition. Even the public opinion demands and is in real need of such recognition which the legislature satisfies. Undoubtedly the legislator, like the judge, can create something new, and something worthy, or give effect to what is a commercial convenience or an economic facility.
Its reality is psychic. Gierke is a leading exponent of realist Theory which refutes the fiction theory. The realistic theory maintains that a corporation has a real psychic personality recognized, and not created, by the law.
The realist theory is also known as the sociological theory of the group personality of the corporation. The upholders of the realist theory are found not only over the continent but also in England. They hold that the collective will is, in psychology, different from the individual.
An individual, all by himself may come to a particular decision; but in association with others he may come to a totally different decision. The will of the many is different from the will of an individual.
So a corporation has a real psychic will, and is, therefore, not a fictitious creature of the law but a psychic personality recognized by the law. The realistic theory, however, is incapable of being applied to a corporation sole, because the theory of the collective psychic will does not come in the case of a corporation sole where there is a single natural person whose will does not stand supported by the will of any one else there being none else.
Moreover, taking the case of an artificial person as a corporation sole, as for example, an universitates bonorum like a public fund or estate , we may say that the question of the collective will cannot arise, because a public fund or estate has no collective will; there is the will of its administrator. The realist theory can have significance only in the case of a corporation aggregate. We may say that it is from the point of view of convenience and a continuing existence despite demise and insolvency of its members , with a limited liability of its members and a separate liability of the incorporation, that the law has thought it fit to give corporations separate fictitious personality.
The groups have a real mind, a real will and a real power of action. It is by grace or concession alone that the legal personality is granted, created or recognized. The grace of the state and its law prevails.
This theory is, to an extent, correct; it is correct, in the sense only that all rights, whether human or corporate, flow from what the law gives, and where the law does not give anything, at least, its recognition is necessary to validate, maintain or perpetuate what already exists or is conferred by nature or what man has taken or created for himself.
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