1960 (1) TMI 8 - HC - Companies Law

Corporations Can Sue as Paupers: Legal Implications

The court held that a corporation, being a person in the eye of the law, is entitled to sue in forma pauperis under Order XXXIII, rule 1 of the Civil ... Company – Incorporation of Issues Involved:1. Whether a corporation can sue in forma pauperis under Order XXXIII, rule 1, of the Civil Procedure Code.2. Interpretation of the term 'person' in the context of Order XXXIII, rule 1.3. Applicability of rules regarding personal appearance and wearing apparel to corporations.4. Impact of section 280 of the old Companies Act on the right of a corporation to sue as a pauper.5. Relevance of rule 292 of the Rules framed under the Companies Act.Issue-wise Detailed Analysis:1. Whether a corporation can sue in forma pauperis under Order XXXIII, rule 1, of the Civil Procedure Code:The court below held that official liquidators of a limited liability company have no right to institute a suit in forma pauperis for obtaining possession of the property belonging to the company. The court relied on decisions from the High Courts of Calcutta, Rangoon, and Punjab, which stated that a corporation cannot be allowed to sue as a pauper. However, the petitioner argued, citing decisions from the High Courts of Madras and Hyderabad, that a corporation, being a person in the eye of the law, is entitled to sue in forma pauperis. The judgment concluded that the view taken by the Madras High Court, which allows corporations to sue in forma pauperis, is correct.2. Interpretation of the term 'person' in the context of Order XXXIII, rule 1:The Calcutta High Court in B.A. Cotton Mills Ltd. v. Kameshwar Singh observed that the word 'person' in Order 33, rule 1, does not include a limited company incorporated under the Companies Act. This view was supported by English decisions and the Rangoon High Court. However, the Madras High Court in Perumal Goundan v. Thirumalaraya-puram Jananukoola Dhanasekhara Sangha Nidhi held that the term 'person' includes both natural and legal persons, allowing a corporation to sue in forma pauperis. The judgment endorsed the Madras High Court's interpretation, emphasizing that the General Clauses Act's definition of 'person' includes companies and associations.3. Applicability of rules regarding personal appearance and wearing apparel to corporations:The Calcutta High Court argued that a corporation cannot comply with the requirement of personal presentation of the application to sue in forma pauperis. However, the Madras High Court countered that where personal appearance is impossible, such as in the case of a company, the law allows representation by someone else, such as an official liquidator. The judgment agreed with the Madras High Court, stating that the impossibility of personal presentation does not preclude a corporation from suing in forma pauperis.4. Impact of section 280 of the old Companies Act on the right of a corporation to sue as a pauper:The respondent argued that section 280, which allows a defendant to require a company to furnish security for costs, implies that a company should not be allowed to sue as a pauper. The judgment dismissed this argument, stating that section 280 does not expressly or implicitly take away the right conferred by Order XXXIII, rule 1, of the Civil Procedure Code. The court emphasized that the provisions of section 280 do not make it obligatory for security to be given in every case.5. Relevance of rule 292 of the Rules framed under the Companies Act:The respondent contended that rule 292 indicates that the Legislature did not intend to allow a corporation to sue as a pauper. The judgment rejected this argument, stating that rule 292 is merely an enabling provision and does not affect the rights of a corporation under the Civil Procedure Code.Conclusion:The judgment concluded that the view taken by the court below was wrong and allowed the application for revision. The matter was remitted to the lower court for determination on merits, with costs to abide by the result of the application by the petitioner for leave to sue as a pauper.