Corporate Laws

Companies Act, 1956

— S. 34 — Unincorporated company — Purchase of immovable property for Company by its Promoters prior to incorporation of Company — Title in relation to said property, held, passed on to the said Company which was subsequently incorporated — Transfer in favour of an unincorporated company, held, is provided under the Transfer of Property Act — Also, under the Specific Relief Act, 1963, the said contract can be warranted by the terms of incorporation of the Company subject to its acceptance by the Company and communication thereof to other party to the contract — In present case, the said requirements of the 1963 Act were fulfilled, (2006) 7 SCC 756-A

Specific Relief Act, 1963

— Ss. 19(e) & 15(h) — Promoters of Company, before incorporation of Company, entering into a contract for purpose of the Company — Acceptance of the contract and its communication to the other party thereto by the Company after its incorporation — Express ratification of contract, held, is no longer warranted as words ``ratified and adopted'' existing in old Act of 1877 have been dropped in S. 19 of the 1963 Act — What is meant by acceptance of the contract by the Company which contract is warranted by the terms of its incorporation, is that it is not ultra vires the purpose for which the Company had been incorporated — Where property was purchased for the Company by promoters prior to its incorporation, contention that acquisition of property for the benefit of the Company must find place in the articles of association of the Company, held, was wholly misplaced, (2006) 7 SCC 756-B

Specific Relief Act, 1963

— Ss. 15(h) & 19(e) — Promoters of Company, before incorporation of Company, entering into a contract for purpose of the Company — Acceptance of the contract and its communication to the other party thereto by the Company after its incorporation — Requirement of, under the aforesaid provisions — Meaning and scope — Property purchased by promoters of Company at the time when Company was unincorporated — Suit filed against seller by Company after its incorporation for declaration that Company was owner of said property — Held, it amounted to acceptance of the contract and communication thereof to the other party thereto, (2006) 7 SCC 756-C

Corporate Laws

Companies Act, 1956

— S. 34 — Lifting the corporate veil — Doctrine of — Applicability of — Furtherance of personal object by Promoters/Directors using personality of the Company — Respondents, Promoters/Directors of Company in question, purchasing property for said Company prior to its incorporation — After incorporation of Company, respondents and their son as Directors of the Company executing an agreement for sale of the said property in favour of appellants — Later, respondents not executing the deed of sale in respect of the said property — They denying title of Company and setting up their own title — Company had no shareholder except the respondents — On these facts, held, doctrine of lifting the corporate veil was applicable as respondents attempted to use the personality of the Company for furthering their own personal object — Respondents being the alter ego of the Company, it was impossible for them to take a different stand vis-à-vis the interest of the Company, (2006) 7 SCC 756-D

Specific Relief Act, 1963

— Ss. 20, 21 & 22(1)(b) — Discretion as to decreeing specific performance — Refusal to exercise — Award of compensation in lieu of decree of specific performance of contract — Both parties guilty of serious misconduct — Respondents, Promoters/Directors of Company in question, purchasing a property for said Company prior to its incorporation — After Company's incorporation, respondents executing an agreement for sale of said property for Rs 11 lakhs in favour of appellants — Later, respondents denying title of Company and setting up their own title over said property — Respondents and appellants initiating several frivolous proceedings against each other and taking recourse to abuse of judicial process against the other — They obtaining orders/decree therein suppressing material facts — Considering blameworthy conduct of both parties, Supreme Court refusing to grant relief of specific performance of contract to which the appellants were otherwise entitled to — Taking into account escalation in value of property, respondents directed to refund to appellants the advance money of Rs 10 lakhs with interest @ 12% per annum — Since respondents responsible for bringing out such a situation, they directed to pay Rs 50 lakhs as compensation to appellants in addition to the aforesaid amount, (2006) 7 SCC 756-E

Estoppel, Acquiescence or Waiver

— Principle of estoppel/ acquiescence — Applicability of — Held, court would consider conduct of party for determination as to whether he can be permitted to take a different stand in a subsequent proceeding, unless there exists a statutory interdict — Respondents, prior to incorporation of Company in question, purchasing a property from S in their capacity of Promoters/Directors of said Company — Thereafter, respondents obtaining a decree by filing suit against S for declaration that Company was owner of said property — In said suit, not only S but also respondents accepted that Company was owner — In present suit for specific performance of contract entered into between respondents and appellants in relation to sale of said property, respondents denying title of Company and setting up their own title over said property — Appellants altered their position acting on representations made by respondents regarding ownership of Company on basis of the aforesaid decree and other documents — No statutory embargo as to vesting of title — Held, principle of estoppel and/or acquiescence would be applicable — In view of their conduct, respondents were estopped and precluded from denying and disputing the title of the Company over the said property, (2006) 7 SCC 756-F

Civil Procedure Code, 1908

— Or. 23 R. 1 and S. 33 — Withdrawal of suit challenging award of arbitrator and consequent decree as fraudulent and collusive one — Withdrawal made by appellants, without obtaining liberty to file a fresh suit, after obtaining decree of trial court in present suit — View taken in impugned judgment of High Court that the said withdrawal disentitled the appellants to raise herein the said plea of fraud — Propriety of — Held, was not proper — By the said withdrawal, the appellants did not and could not have given up their right to contend that the said award and decree were fraudulent — As a plea of fraud can be raised even in a collateral proceeding and the trial court having recorded a specific finding that the decree was obtained by creating jurisdiction of court artificially, the said decree must be held to have been obtained by concealment of material facts and by a collusive and fraudulent exercise, (2006) 7 SCC 756-G

Civil Procedure Code, 1908

— S. 33 & Or. 20 — Any order or decree obtained by practising fraud, held, is a nullity — Decree obtained by creating jurisdiction of a court artificially by including a property in respect whereof there was no dispute — Held, the said decree must be held to have been obtained by concealment of material facts and by a collusive and fraudulent exercise, (2006) 7 SCC 756-H

Specific Relief Act, 1963

— Ss. 20 and 10 — Refusal to grant decree for specific performance of contract — Inadequate consideration, held, is not a ground for, (2006) 7 SCC 756-I

Specific Relief Act, 1963

— S. 10 — Suit for specific performance of agreement for sale of immovable property — Defence plea that it was not an agreement for sale but an agreement for loan — Sustainability of — Considering the facts and the clause of agreement on the basis of which one of the Judges opined that it was an agreement for loan, held, the aforesaid plea not sustainable — It was an afterthought, (2006) 7 SCC 756-J

Transfer of Property Act, 1882

— Ss. 54 and 8 — Agreement for sale of ``house''/``building'' — Subject-matter of such agreement — Meaning and scope of — Whether it also includes appurtenant land/land on which building stands — In present case, view taken by one of the Judges that as the agreement to sell referred to only house/bungalow, the parties did not agree to sell the land, held, not proper — There was nothing in agreement to suggest that the intention of respondent sellers was restricted to the house alone and not the lands, (2006) 7 SCC 756-K

Words and Phrases

— Expressions ``house'' and ``building'' — Meaning and scope of, (2006) 7 SCC 756-L

Transfer of Property Act, 1882

— S. 54 — Said provision, held, does not bar a benami transaction — There is no embargo in getting a property registered in the name of one person; although the real beneficiary thereof would be another, (2006) 7 SCC 756-M