LIST OF CASE LAWS IN BUSINESS LAW

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Ch no. Law Name Total cases
01 The Indian Contract Act , 1872 37 case laws
02 Sale of Goods Act , 1930 02 case laws
03 Indian partnership Act , 1932 03 case laws
04 The Companies Act , 2013 25 case laws

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 INDIAN CONTRACT ACT , 1872
CASE NAME PARTICULARS
1 State of Gujarat When on dissolution of a partnership, the assets
vs. Ramanlal S of the firm were divided among the partners, the
& Co sales tax officer wanted to tax this transaction. It
was held that it was not a sale. The partners
being joint owner of those assets cannot be both
buyer and seller.
2 Balfour v. A husband agreed to pay to his wife certain
Balfour amount as maintenance every month while he
was abroad. Husband failed to pay the promised
amount. Wife sued him for the recovery of the
amount. Here in this case wife could not recover
as it was a social agreement and the parties did
not intend to create any legal relations.
3 Carlill Vs. In this famous case Carbolic smoke Ball Co.
Carbolic advertised in several newspapers that a reward
Smoke Ball Co. of £100 would be given to any person who
(1893) contracted influenza after using the smoke balls
produced by the Carbolic Smoke Company
according to printed directions. One lady, Mrs.
Carlill, used the smoke balls as per the directions
of company and even then suffered from
influenza. Held, she could recover the amount as
by using the smoke balls she had accepted the
offer.
4 Lalman Shukla G (Gauridutt) sent his servant L (Lalman) to trace
v. Gauri Dutt G his missing nephew. He then announced that
(Gauridutt) anybody who traced his nephew would be
entitled to a certain reward. L, traced the boy in
ignorance of this announcement. Subsequently
when he came to know of the reward, he claimed
it. Held, he was not entitled to the reward, as he
did not know the offer.
5 Boulton v. Boulton bought a business from Brocklehurst.
Jones Jones, who was Broklehurst’s creditor, placed an
order with Brocklehurst for the supply of certain
goods. Boulton supplied the goods even though
the order was not in his name. Jones refused to
pay Boultan for the goods because by entering
into the contract with Blocklehurst, he intended
to set off his debt against Brocklehurst. Held, as
the offer was not made to Boulton, therefore,
there was no contract between Boulton and
Jones. 6 Harvey vs. Facie [1893] AC 552 In this
case, Privy Council succinctly explained the
distinction between an offer and an invitation to
offer. In the given case, the plaintiffs through a
telegram asked the defendants two questions
namely, (i) Will you sell us Bumper Hall Pen?
and (ii) Telegraph lowest cash price. The
defendants replied through telegram that the
“lowest price for Bumper Hall Pen is £ 900”. The
plaintiffs sent another telegram stating “we agree
to buy Bumper Hall
6 Harvey vs. In this case, Privy Council succinctly explained
Facie [1893] the distinction between an offer and an invitation
to offer. In the given case, the plaintiffs through a
telegram asked the defendants two questions
namely, (i) Will you sell us Bumper Hall Pen?
and (ii) Telegraph lowest cash price. The
defendants replied through telegram that the
“lowest price for Bumper Hall Pen is £ 900”. The
plaintiffs sent another telegram stating “we agree
to buy Bumper Hall Pen at £ 900”. However the
defendants refused to sell the property at the
price.
 The plaintiffs sued the defendants contending
that they had made an offer to sell the property at
£ 900 and therefore they are bound by the offer.
However the Privy Council did not agree with
the plaintiffs on the ground that while plaintiffs
had asked two questions, the defendant replied
only to the second question by quoting the price
but did not answer the first question but reserved
their answer with regard to their willingness to
sell. Thus they made no offer at all. Their
Lordships held that the mere statement of the
lowest price at which the vendor would sell
contained no implied contract to sell to the
person who had enquired about the price.
7 Mac Pherson vs Mac Pherson vs Appanna [1951] A.S.C. 184
Appanna [1951] where the owner of the property had said that he
A.S.C. 184 would not accept less than £ 6000/- for it. This
statement did not indicate any offer but indicated
only an invitation to offer
8 Harris vs. The auctioneer does not contract with any one
Nickerson who attends the sale. The auction is only an
(1873) advertisement to sell but the items are not put for
sale though persons who have come to the
auction may have the intention to purchase.
Similar decision was given in the case of Harris
vs. Nickerson (1873).
9 Brogden vs. B a supplier, sent a draft agreement relating to
Metropolitan the supply of coal to the manager of railway Co.
Railway Co. viz, Metropolitian railway for his acceptance. The
(1877) manager wrote the word “Approved” on the
same and put the draft agreement in the drawer
of the table intending to send it to the company’s
solicitors for a formal contract to be drawn up. By
an over sight the draft agreement remained in
 drawer. Held, that there was no contract as the
manager had not communicated his acceptance
to the supplier, B.
10 Neale vs. M offered to sell his land to N for £280. N replied
Merret [1930] purporting to accept the offer but enclosed a
cheque for £ 80 only. He promised to pay the
balance of £ 200 by monthly installments of £ 50
each. It was held that N could not enforce his
acceptance because it was not an unqualified one.
11 Union of India A offers to sell his house to B for ₹ 1,00,000/-. B
v. Bahulal AIR replied that, “I can pay ₹ 80,000 for it. The offer of
1968 Bombay ‘A’ is rejected by ‘B’ as the acceptance is not
294 unqualified. B however changes his mind and is
prepared to pay ₹ 1,00,000/-. This is also treated
as counter offer and it is upto A whether to
accept it or not.
12 Bhagwandas v. Where an offer made by the intended offeree
Girdharilal without the knowledge that an offer has been
made to him cannot be deemed as an acceptance
thereto
13 Heyworth vs. A mere variation in the language not involving
Knight [1864] any difference in substance would not make the
144 ER 120 acceptance ineffective..
14 Felthouse vs. F (Uncle) offered to buy his nephew’s horse for
Bindley (1862) £30 saying “If I hear no more about it I shall
consider the horse mine at £30.” The nephew did
not reply to F at all. He told his auctioneer, B to
keep the particular horse out of sale of his farm
stock as he intended to reserve it for his uncle. By
mistake the auctioneer sold the horse. F sued him
for conversion of his property. Held, F could not
succeed as his nephew had not communicated
the acceptance to him.
15 Central Bank Where a resolution passed by a bank to sell land
Yeotmal vs to ‘A’ remained uncommunicated to ‘A’, it was
Vyan katesh held that there was no communication and hence
(1949) no contract.
16 Entores Ltd. v. When an offer is made of instantaneous
Miles Far East communication like telex, telephone, fax or
Corporation through e-mail, the contract is only complete
when the acceptance is received by the offeree,
and the contract is made at the place where the
acceptance is received. However, in case of a call
drops and disturbances in the line, there may not
be a valid contract
17 Mukul Datta When someone travels from one place to another
vs. Indian by air, it could be seen that special conditions are
Airlines [1962] printed at the back of the air ticket in small letters
[in a non computerized train ticket even these are
not printed] Sometimes these conditions are
found to have been displayed at the notice board
of the Air lines office, which passengers may not
have cared to read. The question here is whether
these conditions can be considered to have been
communicated to the passengers of the Airlines
and can the passengers be treated as having
accepted the conditions. The answer to the
question is in the affirmative and was so held in
Mukul Datta vs. Indian Airlines [1962] AIR cal.
314 where the plaintiff had travelled from Delhi
to Kolkata by air and the ticket bore conditions in
fine print.
18 Lilly White vs. Delivered some clothes to drycleaner for which
Mannuswamy she received a laundry receipt containing a
(1970) condition that in case of loss, customer would be
entitled to claim 15% of the market price of value
of the article, P lost her new saree. Held, the
 terms were unreasonable and P was entitled to
recover full value of the saree from the
drycleaner.
19 Raipur A transport carrier accepted the goods for
transport Co. transport without any conditions. Subsequently,
vs. Ghanshyam he issued a circular to the owners of goods
[1956] limiting his liability for the goods. In such a case,
since the special conditions were not
communicated prior to the date of contract for
transport, these were not binding on the owners
of goods
20 Misa v. Currie “A valuable consideration in the sense of law
may consist either in some right, interest, profit
or benefit accruing to one party (i.e. promisor) or
forbearance, detriment, loss or responsibility
given, suffered or undertaken by the other (i.e.,
the promisee).”
21 Durga Prasad D (defendant) promised to pay to P (plaintiff) a
v. Baldeo certain commission on articles which would be
sold through their agency in a market. Market
was constructed by P at the desire of the C
(Collector), and not at the desire of the D. D was
not bound to pay as it was without consideration
and hence void.
22 Chinnayya vs. An old lady made a gift of her property to her
Ramayya (1882) daughter with a direction to pay a certain sum of
money to the maternal uncle by way of annuity.
On the same day, the daughter executed a
writing in favour of the brother agreeing to pay
annuity. The daughter did not, however, pay the
annuity and the uncle sued to recover it. It was
held that there was sufficient consideration for
the uncle to recover the money from the
daughter.
23 Kadarnath v. If a promisee undertakes the liability on the
Gorie promise of the person to contribute to charity,
Mohammad there the contract shall be valid.
24 Mohori Bibi vs. A, a minor borrowed ₹ 20,000 from B and as a
Dharmo Das security for the same executed a mortgage in his
Ghose (1903) favour. He became a major a few months later
and filed a suit for the declaration that the
mortgage executed by him during his minority
was void and should be cancelled. It was held
that a mortgage by a minor was void and B was
not entitled to repayment of money.
25 Kirpa Ram vs. A youth of 18 years of age, spend thrift and a
Sami-Ud-din drunkard, borrowed ₹ 90,000 on a bond bearing
Ad. Khan compound interest at 2% per mensem (p.m.). It
(1903) was held by the court that the transaction is
unconscionable, the rate of interest charged being
so exorbitant
26 Word vs. H sold to W some pigs which were to his
Hobbs. (1878) knowledge suffering from fever. The pigs were
sold ‘with all faults’ and H did not disclose the
fact of fever to W. Held there was no fraud.
27 Regier V. A broker was asked to buy shares for client. He
Campbell sold his own shares without disclosing this fact.
Staurt The client was entitled to avoid the contract or
affirm it with a right to claim secret profit made
by broker on the transaction since the
relationship between the broker and the client
was relationship of utmost good faith.
28 Hazi Ahmed v. Every material fact must be disclosed by the
Abdul Gassi parties to a contract of marriage
29 State of A crossword puzzle was given in magazine.
Bombay vs. Abovementioned clause was stated in the
R.M.D. magazine. A solved his crossword puzzle and his
Chamarbangwa solution corresponded with previously prepared
la AIR (1957)
 solution kept with the editor. Held, this was a
game of chance and therefore a lottery (wagering
transaction).
30 HADLEY vs. The crankshaft of P’s flour mill had broken. He
BAXENDALE gives it to D, a common carrier who promised to
deliver it to the foundry in 2 days where the new
shaft was to be made. The mill stopped working,
D delayed the delivery of the crankshaft so the
mill remained idle for another 5 days. P received
the repaired crankshaft 7 days later than he
would have otherwise received. Consequently, P
sued D for damages not only for the delay in the
delivering the broken part but also for loss of
profits suffered by the mill for not having been
worked. The count held that P was entitled only
to ordinary damages and D was not liable for the
loss of profits because the only information given
by P to D was that the article to be carried was
the broken shaft of a mill and it was not made
known to them that the delay would result in
loss of profits.
31 Gibbons v A business man whose credit has suffered will
West Minister get exemplary damages even if he has sustained
Bank no pecuniary loss. But a non-trader cannot get
heavy damages in the like circumstances, unless
the damages are alleged and proved as special
damages.
32 ShyamLal vs. where ‘K’ a government servant was
State of U.P. compulsorily retired by the government. He filed
A.I.R (1968) 130 a writ petition and obtained an injunction against
the order. He was reinstated and was paid salary
but was given no work and in the mean time
government went on appeal. The appeal was
decided in favour of the government and ‘K’ was
 directed to return the salary paid to him during
the period of reinstatement.
33 Hollins vs. ‘H’ picked up a diamond on the floor of ‘F’s
Howler L. R. & shop and handed over the same to ‘F’ to keep till
H. L., the owner was found. In spite of the best efforts,
the true owner could not be traced. After the
lapse of some weeks, ‘H’ tendered to ‘F’ the
lawful expenses incurred by him and requested
to return the diamond to him. ‘F’ refused to do
so. Held, ‘F’ must return the diamond to ‘H’ as he
was entitled to retain the goods found against
everybody except the true owner.
34 Shivprasad vs Every kind of payment of money or delivery of
Sirish Chandra goods for every type of ‘mistake’ is recoverable.
A.I.R. 1949 P.C.
297
35 Sales tax A payment of municipal tax made under
officer vs. mistaken belief or because of misunderstanding
Kanhaiyalal A. of the terms of lease can be recovered from
I. R. 1959 S. C. municipal authorities.
835
36 Seth Similarly, any money paid by coercion is also
Khanjelek vs recoverable. The word coercion is not necessarily
National Bank governed by section 15 of the Act. The word is
of India interpreted to mean and include oppression,
extortion, or such other means
37 Trikamdas vs. ‘T’ was traveling without ticket in a tram car and
Bombay on checking he was asked to pay ₹5/as penalty to
Municipal compound transaction. T filed a suit against the
Corporation A. corporation for recovery on the ground that it
I. R.1954 was extorted from him. The suit was decreed in
his favour.
 Sale of Goods Act , 1930
CASE LAWS PARTICULARS
1 Bombay Timber was purchased for the express
Burma Trading purpose of using it as railways sleepers and
Corporation when it was found to be unfit for the
Ltd. vs. Aga purpose, the Court held that the contract
Muhammad could be avoided.

2 Mount D. F. A entered into a contract to sell cartons in

Ltd. vs Jay & possession of a wharfinger to B and agreed
Jay (Provisions) with B that the price will be paid to A from
Co. Ltd the sale proceeds recovered from his
customers. Now B sold goods to C and C
duly paid to B. But anyhow B failed to make
the payment to A. A wanted to exercise his
right of lien and ordered the wharfinger not
to make delivery to C. Held that the seller
had assented to the resale of the goods by the
buyer to the sub-buyers. As a result A’s right
to lien is defeated
Indian partnership Act , 1930
CASE LAWS PARTICULARS
1 KD Kamath The Supreme Court has held that the two
& Co. essential conditions to be satisfied are that:
there should be an agreement to share the
profits as well as the losses of business; and
the business must be carried on by all or any
of them acting for all, within the meaning of
the definition of ‘partnership’ under section
4. The fact that the exclusive power and
control, by agreement of the parties, is vested
in one partner or the further circumstance
that only one partner can operate the bank
accounts or borrow on behalf of the firm are
not destructive of the theory of partnership
provided the two essential conditions,
mentioned earlier, are satisfied.
2 Santiranjan In Santiranjan Das Gupta Vs. Dasyran
Das Gupta Murzamull, following factors weighed upon
Vs. Dasyran the Supreme Court to reach the conclusion
Murzamull that there is no partnership between the
(Supreme parties: Parties have not retained any record
Court) of terms and conditions of partnership.
Partnership business has maintained no
accounts of its own, which would be open to
inspection by both parties No account of the
partnership was opened with any bank No
written intimation was conveyed to the
Deputy Director of Procurement with respect
to the newly created partnership.
3 Vishnu The Supreme Court in Vishnu Chandra Vs.
Chandra Vs. Chandrika Prasad, held that the expression
Chandrika ‘if any partner wants to dissociate from the
 Prasad partnership business’, in a clause of the
[Supreme partnership deed which was being
Court] construed, comprehends a situation where a
partner wants to retire from the partnership.
The expression clearly indicated that in the
event of retirement, the partnership business
will not come to an end

The Companies Act , 2013

CASE LAWS PARTICULARS

1 Macaura v. Macaura (M) was the holder of nearly all

Northern (except one) shares of a timber company. He
Assurance Co. was also a major creditor of the company. M
Limited (1925) Insured the company’s timber in his own name.
The timber was lost in a fire. M claimed
insurance compensation. Held, the insurance
company was not liable to him as no
shareholder has any right to any item of
property owned by the company, for he has no
legal or equitable interest in them.
2 Salomon Vs. In Salomon vs. Salomon & Co. Ltd. the House of
Salomon and Lords laid down that a company is a person
Co Ltd. distinct and separate from its members. In this
case one Salomon incorporated a company
named “Salomon & Co. Ltd.”, with seven
subscribers consisting of him self, his wife, four
sons and one daughter. This company took over
the personal business assets of Salomon for £
38,782 and in turn, Salomon took 20,000 shares
 of £ 1 each, debentures worth £ 10,000 of the
company with charge on the company’s assets
and the balance in cash. His wife, daughter and
four sons took up one £ 1 share each.
Subsequently, the company went into
liquidation due to general trade depression. The
unsecured creditors to the tune of £ 7,000
contended that Salomon could not be treated as
a secured creditor of the company, in respect of
the debentures held by him, as he was the
managing director of one-man company, which
was not different from Salomon and the cloak of
the company was a mere sham and fraud. It was
held by Lord Mac Naughten: “The Company is
at law a different person altogether from the
subscribers to the memorandum, and though it
may be that after incorporation the business is
precisely the same as it was before and the same
persons are managers, and the same hands
receive the profits, the company is not in law
the agent of the subscribers or trustees for them.
Nor are the subscribers, as members, liable, in
any shape or form, except to the extent and in
the manner provided by the Act.” Thus, this
case clearly established that company has its
own existence and as a result, a shareholder
cannot be held liable for the acts of the company
even though he holds virtually the entire share
capital. The whole law of corporation is in fact
based on this theory of separate corporate entity
3 Daimler Co. If the public interest is not likely to be in
Ltd. vs. jeopardy, the Court may not be willing to crack
Continental the corporate shell. But it may rend the veil for
Tyre & Rubber ascertaining whether a company is an enemy
Co., company. It is true that, unlike a natural person,
 a company does not have mind or conscience;
therefore, it cannot be a friend or foe. It may,
however, be characterised as an enemy
company, if its affairs are under the control of
people of an enemy country. For this purpose,
the Court may examine the character of the
persons who are really at the helm of affairs of
the company.
4 S. Berendsen In certain matters concerning the law of taxes,
Ltd. vs. duties and stamps particularly where question
Commissioner of the controlling interest is in issue.
of Inland
Revenue
5 Juggilal vs. Where corporate entity is used to evade or
Commissioner circumvent tax, the Court can disregard the
of Income Tax corporate entity.
AIR (SC)
6 Dinshaw It was held that the company was not a genuine
Maneckjee company at all but merely the assessee himself
Petit disguised under the legal entity of a limited
company. The assessee earned huge income by
way of dividends and interest. So, he opened
some companies and purchased their shares in
exchange of his income by way of dividend and
interest. This income was transferred back to
assessee by way of loan. The Court decided that
the private companies were a sham and the
corporate veil was lifted to decide the real
owner of the income
7 The Workmen The facts of the case are that “A Limited”
Employed in purchased shares of “B Limited” by investing a
Associated sum of ₹ 4,50,000. The dividend in respect of
Rubber these shares was shown in the profit and loss
Industries account of the company, year after year. It was
Limited, taken into account for the purpose of calculating
 Bhavnagar vs. the bonus payable to workmen of the company.
The Sometime in 1968, the company transferred the
Associated shares of B Limited, to C Limited a subsidiary,
Rubber wholly owned by it. Thus, the dividend income
Industries did not find place in the Profit & Loss Account
Ltd., of A Ltd., with the result that the surplus
Bhavnagar and available for the purpose for payment of bonus
another to the workmen got reduced. Here a company
created a subsidiary and transferred to it, its
investment holdings in a bid to reduce its
liability to pay bonus to its workers. Thus, the
Supreme Court brushed aside the separate
existence of the subsidiary company. The new
company so formed had no assets of its own
except those transferred to it by the principal
company, with no business or income of its own
except receiving dividends from shares
transferred to it by the principal company and
serving no purpose except to reduce the gross
profit of the principal company so as to reduce
the amount paid as bonus to workmen.
8 Merchandise A Transport company wanted to obtain licences
Transport for its vehicles, but could not do so if applied in
Limited vs its own name. It, therefore, formed a subsidiary
British company, and the application for licence was
Transport made in the name of the subsidiary. The
Commission vehicles were to be transferred to the subsidiary
(1982) company. Held, the parent and the subsidiary
were one commercial unit and the application
for licences was rejected.
9 Gilford Motor Where the device of incorporation is adopted
Co. vs. Horne for some illegal or improper purpose, e.g., to
defeat or circumvent law, to defraud creditors
or to avoid legal obligations.
10 Narendra , the Supreme court has laid down that the right
Kumar of a guarantee company to refuse to accept the
Agarwal vs. transfer by a member of his interest in the
Saroj Maloo company is on a different footing than that of a
company limited by shares. The membership of
a guarantee company may carry privileges
much different from those of ordinary
shareholders.
11 Hari Nagar From the date of incorporation mentioned in the
Sugar Mills certificate, the company becomes a legal person
Ltd. vs. S.S. separate from the incorporators; and there
Jhunjhunwala comes into existence a binding contract between
the company and its members as evidenced by
the Memorandum and Articles of Association
12 State Trading A company on registration acquires a separate
Corporation of existence and the law recognises it as a legal
India vs. person separate and distinct from its members
Commercial
Tax Officer
13 Spencer & Co. It may be noted that under the provisions of the
Ltd. Madras Act, a company may purchase shares of another
vs. CWT company and thus become a controlling
Madras company. However, merely because a company
purchases all shares of another company it will
not serve as a means of putting an end to the
corporate character of another company and
each company is a separate juristic entity
14 Heavy As has been stated above, the law recognizes
Electrical such a company as a juristic person separate
Union vs. and distinct from its members. The mere fact
State of Bihar that the entire share capital has been
contributed by the Central Government and all
its shares are held by the President of India and
other officers of the Central Government does
 not make any difference in the position of
registered company and it does not make a
company an agent either of the President or the
Central Government
15 Borland Farwell Justice, in Borland Trustees vs. Steel
Trustees vs. Bors. & Co. Ltd. observed that “a share is not a
Steel Bors. & sum of money but is an interest measured by a
Co. Ltd. sum of money and made up of various rights
contained in the contract, including the right to
a sum of money of a more or less amount”.
16 Ashbury The facts of the case are: The main objects of a
Railway company were: To make, sell or lend on hire,
Carriage and railway carriages and wagons; To carry on the
Iron Company business of mechanical engineers and general
Limited v. contractors. To purchase, lease, sell and work
Riche-(1875) mines. To purchase and sell as merchants or
agents, coal, timber, metals etc. The directors of
the company entered into a contract with Riche,
for financing the construction of a railway line
in Belgium, and the company further ratified
this act of the directors by passing a special
resolution. The company however, repudiated
the contract as being ultra-vires. And Riche
brought an action for damages for breach of
contract. His contention was that the contract
was well within the meaning of the word
general contractors and hence within its
powers. Moreover it had been ratified by a
majority of shareholders. However, it was held
by the Court that the contract was null and
void. It said that the terms general contractors
was associated with mechanical engineers, i.e. it
had to be read in connection with the
company’s main business. If, the term general
contractor’s was not so interpreted, it would
 authorize the making of contracts of any kind
and every description, for example, marine and
fire insurance. An ultra vires contract can never
be made binding on the company. It cannot
become “Intravires” by reasons of estoppel,
acquiescence, Iapse of time, delay or ratification.
17 Guiness vs. The articles of association of a company are its
Land rules and regulations, which are framed to
Corporation of manage its internal affairs. Just as the
Ireland memorandum contains the fundamental
conditions upon which the company is allowed
to be incorporated, so also the articles are the
internal regulations of the company
18 Ashbury “The articles play a part subsidiary to
Carriage Co. memorandum of association. They accept the
vs. Riches memorandum as the charter of incorporation,
and so accepting it the articles proceed to define
the duties, the rights and powers of the
governing body as between themselves and the
company and the mode and form in which the
business of the company is to be carried on, and
the mode and form in which changes in the
internal regulation of the company may from
time to time be made.”
19 S.S. Rajkumar The document containing the articles of
vs. Perfect association of a company (the Magna Carta) is a
Castings (P) business document; hence it has to be construed
Ltd strictly. It regulates domestic management of a
company and creates certain rights and
obligations between the members and the
company
20 The Royal Mr. Turquand was the official manager
British Bank (liquidator) of the insolvent Cameron’s
vs. Turquand. Coalbrook Steam, Coal and Swansea and
 Loughor Railway Company. It was
incorporated under the Joint Stock Companies
Act, 1844. The company had given a bond for £
2,000 to the Royal British Bank, which secured
the company’s drawings on its current account.
The bond was under the company’s seal, signed
by two directors and the secretary. When the
company was sued, it alleged that under its
registered deed of settlement (the articles of
association), directors only had power to
borrow up to an amount authorized by a
company resolution. A resolution had been
passed but not specifying how much the
directors could borrow. Held, it was decided
that the bond was valid, so the Royal British
Bank could enforce the terms. He said the bank
was deemed to be aware that the directors could
borrow only up to the amount resolutions
allowed. Articles of association were registered
with Companies House, so there was
constructive notice. But the bank could not be
deemed to know which ordinary resolutions
passed, because these were not registrable. The
bond was valid because there was no
requirement to look into the company’s internal
workings. This is the indoor management rule,
that the company’s indoor affairs are the
company’s problem.
21 21 Howard vs. Where the directors could not defend the issue
Patent Ivory of debentures to themselves because they
Manufacturing should have known that the extent to which
Co. they were lending money to the company
required the assent of the general meeting
which they had not obtained.
22 Morris v A Director could not defend an allotment of
Kansseen shares to him as he participated in the meeting,
which made the allotment. His appointment as
a director also fell through because none of the
directors appointed him was validly in office.
23 23 Anand The plaintiff accepted a transfer of a company’s
Bihari Lal vs. property from its accountant, the transfer was
Dinshaw & held void. The plaintiff could not have
Co. supposed, in absence of a power of attorney that
the accountant had authority to effect transfer of
the company’s property.
24 Haughton & where a person holding directorship in two
Co. v. companies agreed to apply the money of one
Nothard, Lowe company in payment of the debt to other, the
& Wills Ltd. court said that it was something so unusual
“that the plaintiff were put upon inquiry to
ascertain whether the persons making the
contract had any authority in fact to make it.”
Any other rule would “place limited companies
without any sufficient reasons for so doing, at
the mercy of any servant or agent who should
purport to contract on their behalf.”
25 Ruben v Great In this case the plaintiff was the transferee of a
Fingall share certificate issued under the seal of the
Consolidated defendant’s company. The company’s secretary,
who had affixed the seal of the company and
forged the signature of the two directors, issued
the certificate. The plaintiff contended that
whether the signature were genuine or forged
was apart of the internal management, and
therefore, the company should be estopped
from denying genuineness of the document. But
it was held, that the rule has never been
extended to cover such a complete forgery.