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Chhajju Ram Vs. Neki Ram & Others

Chhajju Ram Vs. Neki Ram & Others Subject matter of the case - What is the meaning of "Any other sufficient cause" and principle "of Ejusdem Generis" under Order 47 Rule 1 C.P.C. ? Facts of the case -  1. On 22nd October, 1912 one Mr. Chhajju Ram purchased certain lands of villages Kasgar and Jammi Kera from Mrs. Forbes for Rs. 42,000/- Mr. Chhajju Ram also took the possession of the above properties after the execution of the sale deed in his favour. 2. Neki Ram and others filed a suit against Chhajju Ram alleging that the execution of the above sale deed in favour of the defendant is collusive hence the same be declared null and void and the plaintiffs be given the possession of the said land on payment of Rs. 15,000/- on the basis of their preemptions. It was argued by the plaintiffs that :- i. The plaintiffs are Gaur Brahmins by caste and are the occupancy tenants of village Kasgar and were the members of Agriculture Tribes within the meaning

Theory of Corporate Personality - Company Law - Saloman v. Saloman - Lee v. Lee

 Theory of Corporate Personality - Company Law - Saloman v. Saloman - Lee v. Lee


For doing a business, why people make a company? because apart from individual company has its own individual rights and advantages. In this article we will understand about "Corporate Personality" an important topic of Company law look, when ever a company is incorporated, apart from members, company has its own Legal Personality and Independent status means after incorporation, member and company separate from each other, they become a separate entity. This concept of separation is called as Corporate personality.

 How this concept was developed and most importantly what is the usage of this concept, we will get to know about this from this three important case laws. The concept of Corporate Personality or Legal Personality was developed in the case of OAKES V. TURQUAND. But this concept was concreted or fully established in the case of SALOMON V. SALOMON CO LTD. Lets discuss about this. 

But before discussing about case laws, I have a tip for you when we hear that we have to understand about a case study, our mind automatically goes to the alert mode like we have to collect a lot of data, and to note down all details. For ex- In Bhopal Gas Tragedy how many victims were there, and how much compensation they got, In vodafone case law how much the tax settlement was like all this things Being busy in noting all that, we miss the important principles regarding all case laws.
 For example we take the race between a rabbit and a tortoise, if I give you a lot of data about the race like rabbit ran for 2 hours at the speed of 30 kmph and tortoise ran for 7 hours at 10 kmph behind collecting all this data we miss the important principle of consistency like this only our next case law of SALOMON V. SALOMON CO LTD is a leading case law of a Company law but in this also so much data, details and numbers are given without focusing in all that data, we will directly look about the important thing that on the basis of which principles this case was settled. We will concentrate on that, so lets start.

 There was a businessman named ARON SALOMON, who was doing a business of leather and shoe manufacturing. He made a ltd company named SALOMON AND CO. LTD and sold his business to this company at 38000 pounds. Now look at this company, the total share capital of this company was 40000 shares and the value of every share was 1 pound each. Next we look at the memorandum of this company, the memorandum of the company was they had 7 subscribers who were they? SALOMON itself, his wife, his daughter and 4 sons every one had one shares, but SALOMON had 20000 shares and debentures worth 10000. 
Now what happens that after a year the company goes in to a phase of LIQUIDATION when we look at the assets and liabilities of the company, it had assets of total 6000 pounds and it had a liabilities of total 17000, the division of 17000 was like that 10000 was liable to SALOMON and remaining 7000 was for a unsecured creditors. 
Now lets talk about the main issue of this case. As we can see company had a limited fund of 6000 pound only, so whom to pay first? To pay that unsecured creditor or to SALOMON 2nd point is that, if only that family was managing, administrating and controlling the whole business then the identity of that family and the identity of the business would remain same or will it be separate making issue of this point, the unsecured creditor stated that firstly he should get the money why? Because the company doesn't had its own separate or independent existence the company is the agent of SALOMON, that's why I should get the money first. 
Now we will see what Court said about the issue. Court said that, after the incorporation company becomes an independent legal person. And SALOMON (as a debenture holder) will get the priority above the unsecured creditor, And SALOMON will get the money first. 

The next case is LEE V. LEE AIR FARMING CO. LTD. In this case what happens? There was a company named LEE AIR FARMING CO. LTD. whose total share capital was of 3000 shares, from which LEE had total 2999 shares LEE himself become managing director and Chief pilot of the company means he also remains as a salaried employee of the company now what happens next that, while working for the company LEE'S plane crashes in which he also died. 
Now here we will understand this relationship also, their is a relation of master and servant between the Company and their employees means, during course of employment if any servant (employee) get injured or damaged Then Master has to compensate him , based on this principle the widow of LEE demands a compensation amount from the LEE AIR FARMING ltd company. 
In this the main issue arises that, was Lee and LEE FARMING CO. LTD were separate entity or single entity? because almost all of the share capital was with Lee, he was the Managing director also and also the employee. On this issue insurance company said that, when this accident happened then LEE was as Master also because he was Managing director of the company and at the same time was employee also because he was chief pilot of the company. So the question arises that weather LEE and LEE AIR FARMING CO. LTD. were two separate entities or were same entities Insurance agency was saying that both the entities were same and based on this statement only, the widow of LEE will not get any compensation. 
Based on the principle of SALOMON, this case was also decided on that principle Court said that, although he was controlling the whole company, but then also LEE and the company are both Separate and two distinct legal personalities and on the basis of this two distinct personalities Lee had the power and was able to act as a Master and as a servant also but  the compensation was asked by his widow was on the capacity of servant which she will definetly get. 

So this was the concept of Corporate personality or Legal personality which says that after the incorporation, members and company becomes two separate entities. 

In India this concept was recognized in the case of RE KONDOLI TEA CO. LTD. CASE

Now quickly we will look the Advantages of Corporate Personality
1st is Legal Personality, we have already understood this that a company and members have a separate legal personality. 
2nd is PERPEPTUAL SUCCESSION, it means that from the existence of the members it doesn't effect the company means if any member dies or in case of insanity or insolvency, it doesn't effect to the companies existence Companies existence is PERPEPTUAL it remains continuos. 
3rd is, Company can Sue and can be sued by its own name its self explanatory by it self means company can file a case by its name  and some one else directly can also file case on company. 
4th advantage it has of limited liability, the members of the company have limited liabilities.

So this was the advantages of corporate personalities. But some scenarios are also there in which separation is excluded. I hope you have liked this topic, if you have any doubt then do let me know in the comment section.

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