Companies Act_practical problems_4

A public limited Company has only seven shareholders, all the shares being paid in full. All the shares of one such shareholder are sold by the court in an auction and purchased by another shareholder. The Company continues to carry on its business thereafter. Discuss the liabilities of the shareholders of the Company.

The problem in question relates to reduction of membership below the statutory minimum. Section 12 of the Companies Act requires a public Company to have a minimum of seven members. If at any time the membership of a public Company falls below seven and it continues’ for more than six months, then according to Section 45 of the Companies Act, 1956, every such member who was aware of this fact, would be individually (personally) liable for the debts contracted after six months.

Thus, in the above problem the remaining members shall incur personal liability for the debts contracted by the Company:

a. If they continued to carry on the business of the Company with that reduced membership (i.e., 6) beyond six months period.

b. Only those members who knew this fact of reduced membership shall be liable, for instance, one of the members who was abroad and thus not aware of these developments, shall not be liable.

c. The liability shall extend only to the debts contracted after six months from the date of auction of that member’s shares.

Companies Act_Practical Problems_3

The number of members in a public Company became reduced to six on the 10th September, 1988, the Company incurs trade debts on 11th September, 1988, 2nd February, 1989 and 17th March, 1989. How far are the remaining six members liable for the debts?

The remaining six members are liable for the debts incurred after 6 months of the reduction in the number of members below the statutory minimum specified in Sec. 45 of the Companies Act, 1956 i.e., for debt contracted on 17th March, 1989.

Contract Act_Practical Problems_46

'A' applies to a banker for a loan at a time when there is stringency in the money market. The banker declines to make the loan except at an unusually high rate of interest. A accepts the loan on these terms. Whether the contract is induced by undue influence? Decide.

For relief on ground of undue-influence under Section 16, two requirements need to be satisfied, viz.,

(i) the party alleged must be in a position to dominate the will of the other; and
(ii) he must have exercised that domination to obtain an undue advantage.

In the given case, a bank cannot be said to be in a position to dominate the will of the borrower — the borrower having option to borrow from other banks or other sources.

Thus, contract cannot be said to be induced by undue influence.

Contract Act_Practical Problems_45

A offers to B his scooter for Rs. 6,000. B writes back agreeing to buy it for Rs. 5,500. Is there a concluded contract between A and B for sale of the scooter for Rs. 5,500?

No; For conclusion of a contract it is necessary that the offer of the party be accepted in absolute and without any qualifications or conditions. In the present case. B's agreeing to buy the scooter for Rs. 5,500 instead of the proposed amount of Rs. 6,000, only amounts to a fresh proposal or counter-proposal and doesn't constitute acceptance of the proposal or offer of A.

Contract Act_Practical Problems_44

Anil agrees with Gopal to let out the house under construction and obtains an advance for the purpose. The house is, however, requisitioned by Government and, therefore, Anil is unable to honour his promise. What are the rights of Gopal against Anil? Can Gopal recover damages for breach of contract?

No- Gopal cannot recover damages for breach of contract. The problem in question relates to Section 56 of the Indian Contract Act. According to Section 56, a contract becomes void in the event of supervening/subsequent impossibility as to its performance. As the house is requisitioned by the Government (assuming under the legitimate powers). Anil shall be excused of his obligations, the contract becoming void under Section 56. However, Gopal can claim refund of the advance made by him to Anil. Section 65, in this regard, provides that when an agreement becomes void, any person who has received any advantage under such agreement or contract is bound to restore it.

thought of day

"Not everything that can be counted counts, and not everything that counts can be counted."

Companies Act_practical problems_2

In a private Company, after the death of Mr.X entire capital of the company is held by his son Y. Decide, whether Y can continue business of the co. with single shareholder.

In such a situation, Y can continue to carry on the business of the Company but, in accordance with the provisions of Sec.45 of the Act, if the same position continues for more than six months, then y will become personally liable for all the liabilities of the Company contracted after six months from the date he becomes only shareholder.