TaxTMI 
TaxTMI 
1981 (5) TMI 97
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....association and the provisions of the Companies Act, 1956. In order to face the financial crisis of the company it was decided in a meeting of the board of directors on 19th October, 1974, to lease out the mill for a few years which was followed by a resolution passed by the shareholders on October 28, 1974, authorising plaintiff No. 2, the managing director, to finalise the negotiation of the lease with the principal defendants and that the said plaintiff No. 2 and another director of the company would sign and execute the deed consisting of 22 terms with an affixation of the common seal of the company. It is alleged that as per the said terms, the lease would remain in force for two years with an option of renewal for another two years. I....
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.... in the second appeal it is convenient for me to state that the alleged mistake or misrepresentation or fraudulent insertion of term No. 23 into the deed has not been believed by both the courts and, therefore, the finding regarding clause 23 cannot be challenged in the second appeal. Mr. Dipankar Gupta on behalf of the appellant contended that the common seal of the company is not necessary for the validity of the document. Assuming that it is required then according to Mr. Gupta, the affixation of the seal is directory and not mandatory. The seal, according to him, is a method of identification of the person concerned or the company when it is not disputed that it was registered by the proper authority and it cannot invalidate the transa....
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.... common seal is required and not otherwise. Mr. Chowdhury on behalf of the respondent contended that the affixation of the seal is a must in order to bind the company. Under Table A, regulation 84, of the Companies Act, 1956, it has been provided that the seal is to remain in the safe custody of the company and shall not be affixed to any instrument except by the authority of a resolution of the board and except in the presence of at least two directors and of the secretary or such other person as the board may appoint for the purpose. Mr. Gupta in reply contended that there was an extraordinary general meeting of the shareholders by which the managing director of the company was directed to execute the lease and he on the basis thereof e....
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....held, inter alia, that "even a resolution of a numerical majority at a general meeting of the company cannot impose its will upon the directors when the articles have confided to them the control of the company's affairs. The directors are not servants to obey directions given by the shareholders as individuals, they are not agents appointed and bound to serve the shareholders as their principals. They are persons who may by the regulations be entrusted with the control of the business, and if so entrusted, they can be dispossessed from that control only by the statutory majority which can alter the articles. Directors are not, I think, bound to comply with the directions even of all the corporators acting as individuals." I entirely agree ....
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.... A company, it has been held by the learned author, being an artificial person, can act only through agents. A person dealing with the company should, therefore, in addition to examining the powers of the company, ensure that the necessary powers have been given by the company to its agents. The agents will normally be the directors or executive employees of the company. At p. 244 it has been held by the learned author that while an act which is ultra vires the company is incapable of ratification, an act which is ultra vires the company but outside the authority of the directors may be ratified by the company in proper form. In the present case, I think, Mr. Chowdhury rightly argued that the execution of the document by the managing direct....
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....he name of the company. A director of the board of directors or a managing director cannot file a suit, unless it is by the company, in order to avoid any deed which admittedly was executed by one of the directors and admittedly also the company accepted the rent for the whole of the period of lease, that is, four years, but only a particular term of the lease was sought to be challenged on the ground that the said term 23 was fraudulently inserted. The case as made out in the plaint was not made by the company but by some of the directors of the company and the company is not even a plaintiff. If the company is aggrieved, it is the company which is to file the suit and not the directors. In the present case, as I have already said, the com....