Understanding settled principles of law is very very important while presenting or pursuing a case before a Court of law, Board or any Tribunal. Keeping into mind the object of the enactment, the subject, the societal scenario etc. our Courts settled certain principles and the same are to be followed by all Courts or Tribunals unless overruled by the Competent Court or by a larger bench. There is a principle in Criminal Law that an offence should be proved beyond reasonable doubt and an innocent should not be punished. It is an example and the Courts had laid down many principles and certain principles are inherent in the enactment itself.

Though, it did not invite much attention, the application of principles of Civil Law and the Criminal Law occupies greater significance while interpreting the provisions of Companies Act, 1956 or dealing with company matters. It can be found with the in-depth consideration into various principles laid down by the Constitutional Courts while interpreting the provisions of the Act or disposing the company matters.  There exist certain settled principles based on sound logic. For example, the principle of Res subjudice is supported by the sound logic that the same issue can not be agitated before two competent forums simultaneously which if allowed there will simultaneous findings on the same issue.  If that principle is applied mechanically while entertaining the company matters, then, the powers of the Company Law Board earlier and now the Tribunal under section 397/398 of the Act would become meaningless.  The same will be the position while the company court dealing with a winding-up matter.

Again, if the principle of Res Judicata is applied to the company matters, then, the Company Law Board earlier and the Tribunal now would do nothing when a minority shareholder approaches the Board or the Tribunal seeking such preventive and remedial measures under section 397/398 of the Act.  Normally, when a statute refers to certain procedure to be followed in respect of a particular matter, then, the same is to be followed. The summary suit will never get dismissed on the ground that it is not possible to decide the issues referred to in the summary suit. But, there is a proposition under the Company Law that the disputed facts can not be decided in a company application by the Board which follows the summary procedure.  Again, if the criminal law principles are applied intact to an offence under the provisions of the companies Act, then, it can be extremely difficult to punish a person for the committal of various offences under the provisions of the Act.  Thus, many issues under the provisions of the companies act warrant in-depth consideration and a general rule can’t be laid down.  It is due to its nature, sensitivity and vastness of the subject, the study of the company law and doing company matters will always remain complicated warranting comprehensive understanding of the principles of company law. The law may get simplified and incorporation of company may become as simple as it can. Even then, the basic features of a company and the right of the members may not change and the litigation before courts or the Tribunal in future in respect of companies may be inevitable.  Though, the list of principles laid down by the courts can’t be put in nutshell and can’t be effectively concluded, the broader issue of “application of civil and criminal law principles to the company matters” is to be carefully understood.  Again, not only the principles, certain issues/provisions/aspects under the company law are very significant. For example, the issue of deciding the disputed facts, looking at the intention aspect while dealing with the offences under the Act, the debt recovery proceedings and the provisions of company law, the nature of proceedings under section 542, the scope of section 633 etc. needs to be understood and concentrated as the same will give an understanding about the significance and complication of company law.

Thus, I personally feel that the general principles of law backed by sound logic may not have application while interpreting the provisions of Company Law or while adjudicating a company dispute. This is a simple example to know the inevitable complications of Company Law.

Author:

V.DURGA RAO, Advocate, Madras High Court –

Email: vdrao_attorney@yahoo.co.in

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Tags : Companies Act (2278)

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