Sole Corporation and Corporation aggregate -Study via judgment

Submitted By:
Kashish Chhabra
Division B
PRN: 18010224080
Class- BBA LLB
Of
Symbiosis Law School, Noida
Symbiosis International (Deemed University), Pune
In
August, 2018
Under the guidance of
Ms. Meera Mathew
Assistant Professor
Symbiosis Law School, Noida
 CERTIFICATE

The project entitled “Sole Corporation and Corporation Aggregate: Study via judgement”
submitted to the Symbiosis Law School, NOIDA for Jurisprudence Legal Theory as part of
internal assessment is based on my original work carried out under the guidance of Ms.
Meera Mathew from July to August. The research work has not been submitted elsewhere for
award of any degree.

The material borrowed from other sources and incorporated in the research has been duly
acknowledged.

I understand that I myself could be held responsible and accountable for plagiarism, if any,
detected later on.

Signature of the Candidate

Date
 ACKNOWLEDGEMENT

I would like to express my thanks of gratitude to my teacher Ms. Meera Mathew as well as
Director sir, Dr. Prof. C.J. Rawandale who gave me this golden opportunity to do this
wonderful project on the topic “:Sole Corporation and Corporate Aggregate: study via
judgment”, which also helped me in doing a lot of research and I came to know more about
so many new things I am really grateful for.

Secondly, I would also like to say thanks to my friends who helped me in this research
project within a limited time frame.
 Index

Page No.
 Jurisprudential Theory 5-6
1. Fiction theory 5-6
 Case study 6-7
1. Saloman v. Saloman And Co. Ltd. 6
2. S.Govinda Menon V. Union of India 7
 Analysis of the case with the theory 7
 Conclusion 8
 Bibliography 8
 Jurisprudential theory

Corporate personality is a making of law. Legitimate identity of law is perceived both in English
and Indian law. A company is a counterfeit individual getting a charge out of in law ability to have
rights and obligations and holding property. An enterprise is recognized by reference to various
types of things which the law chooses for exemplification.
There are many theories related to Corporate personality that are Fiction theory, bracket theory,
realistic theory and concession theory. But in brief, we will talk about Fiction theory.
The fiction theory was given by Savigny, Holland, Kelson and Salmond. As indicated by this
hypothesis a company is dressed with a lawful identity. The identity of a company is not quite the
same as its individuals. Savigny viewed organizations as a selective formation of law having no
presence separated from its individual individuals who frame the corporate gathering and whose
demonstrations by fiction are ascribed to the corporate element .because of this adjustment in the
participation does not influence the presence of the enterprise or its solidarity . savigny additionally
called attention to that there is twofold fiction if there should arise an occurrence of an enterprise.
By one fiction the partnership is given a lawful element, by another it is dressed with the will of a
person. In this way, invented identity of a company has likewise its very own will which is not quite
the same as that of its individuals.
Kelson additionally respects lawful identity a fiction. To cite his words "it is advantageous peg
whereupon to hang legitimate rights and obligations. Along these lines a gathering of people or a
progressive arrangement of individual is a lawful individual since it has a nonexistent identity by
fiction of law".

Salmond additionally underpins the view that a company has an imaginary presence. It is particular
from its individuals and equipped for surviving even after every one of the individuals have stopped
to exist. Dim legitimizes fiction hypothesis on the ground that the fundamental question of
consolidation is to secure the enthusiasm of people having regular goals. Like invented identity, the
will of the organization is likewise a fanciful formation of law.1

The fiction hypothesis in this way trusts fuse is an imaginary augmentation of identity depended on
to facilitate dealings with property possessed by an extensive assortment of characteristic people.
The fiction hypothesis, in any case answer palatably the common and criminal risk of enterprises.
In the event that it is expected that the will of the partnership is ascribed to it by the fiction of law
then it prompts deduce that it should dependably be legitimate as the will presented by law can
never be for unlawful and illicit closures.

Anyway this hypothesis has been censured by Sir Fredrick Pollock in light of the fact that under
English law neither aggregate liabilities nor aggregate power can be appreciated by the collection of
people except if they are appropriately fused under the current laws. In this manner unincorporated
bodies are not regarded as lawful individual

1
V.N. Paranjape,”studies in jurisprudence legal theory”, central law agency.p 330
 But the corporate personality is divided into two class i.e. Sole corporation and Corporation
aggregate. Corporate aggregate is a group of persons which is a combination of persons who are
together to do business and to promote the interest level.
Sole Corporation is a business which runs by a single individual and the corporation sole which
remains existing even when the persons are changing.

Case Study

Saloman v. Saloman and Co. Ltd.2

Facts
Saloman was doing business of leather boots and shoes and sold them to Whitechapel High Street
and then the time flees his five sons and his wife wanted to become business partners, so he turned
his business into a limited company. His wife and five elder children; two younger children became
subscribers and directors respectively. The sole proprietorship turned into a company. On June 1,
1872 Saloman had taken the shares 20,001 from the company’s 20,007 shares. The company gave
10,000 euros in debentures to Saloman. Saloman received 5,000 euros from Edmund Broderip
because on his security debentures. But later on, the business failed due to strike led by the
Government defaulting on its interests payments on the debentures. Edmund sued him to enforce
the security in 1983. The company was put into liquidation. Saloman had repaid the security to
Edmund. The remaining company assets which Saloman was claimed under his retained debentures.
The liquidator claimed that the company is a fraud and only Saloman was the essential agent and so
he was only responsible for the debentures. So he was being alleged that he was the only sole trader
earlier and then he was the only principal of his company. But Saloman sued a case against his
company.
Issue
Whether the controllers were liable for Saloman and his company’s debt since Saloman was the
majority controller?
Judgement
Initially, Edmund’s claim was valid in the High court and said that Mr. Saloman was liable to detain
its debentures as 200 shares were fully paid as the case was named as Edmund Broderip v. Saloman
but after the court of appeal, Saloman abused the privileges of incorporation and limited liability
and won the case as Lindley LJ stated that it was the trustee for Saloman and he was not only liable
to pay its debentures.
Conclusion
With everything taken into account, the Salomon administering stays dominating and keeps on
supporting English organization law. While sham, façade and extortion basically trigger the
conjuring of the cover puncturing exemption in restricted conditions, these grounds are not
thorough, and much is left to the attentiveness and understanding of the courts on case-to-case
premise.

2
 [1896] UKHL 1, [1897] AC 22 
 S. Govinda Menon V. Union Of India3
Facts
Sri. Govinda Menon is a member of the Indian Administrative Service. He was the First. Member
of the Board of Revenue, Kerala State and was holding the post of Commissioner of Hindu
Religious and Charitable Endowments. He was being alleged on the basis of misconduct in the
duties as Commissioner. Government inquired of the same. And he was being placed under rule 7
of the All India Services, 1955 and thereafter called “Rules”. There after he filed a case in defence
and signed a writ petition of Mandamus before the High court of Kerala and Writ of Certiorari to
squash the initial charges which was against him. He was being charged by his lawyer and found
guilty under rule 1-4 and 9. And then he filed a writ petition to amend before the high court of
Kerala.
Issues
Whether he was liable under the writ petition and allegations?
Judgments
Quasi-judicial decisions cannot form the subject-matter of charges in disciplinary proceedings
against the appellant. Velu Pillai, J. held that the Union Government had therefore no jurisdiction to
proceed with the inquiry on the first part of charge 1, charge 2, the first part of charge 3 and charge
4, but the Union Government had jurisdiction to proceed with the inquiry with regard to the second
part of charge No. 1, the second part of charge No. 3 and charge No. 9. In view of this difference of
opinion the matter was placed before Govinda Menon, J. who agreed with the view taken by
Mathew, J. and in the result the writ petition of the appellant was dismissed.
After so many completions before the court, Appellant’s request of writ petition of Prohibition was
dismissed.

Analysis
In Saloman and Saloman and Co. Ltd case, the fiction theory was applicable. In this case, a
company is an independent and legal personality which is distinct from its members. It has since
been held that the corporate cover might be lifted, the corporate identity might be overlooked and
the individual individuals perceived for their identity in certain outstanding conditions. By and
large, and extensively the corporate cover might be lifted where the statute itself examines lifting
the cloak or misrepresentation, or inappropriate lead is proposed to be anticipated. It is neither
fundamental nor attractive to identify classes of situations where lifting the cover is passable, since
that must essentially rely upon significant statutory or different arrangements, the protest tried to be
accomplished, the denounced lead, the inclusion of component of open intrigue, the impact on
parties who might be affected, and so forth. It is additionally noticed that a significant number of
the ongoing advancements in shroud lifting have included cases of tortious obligation. Without a
doubt tortious obligation is one of the blame lines made by constrained risk. Ordinary loan bosses
when managing the restricted obligation organization have a chance to get to the danger of working
together. They can pick to anchor their loaning, charge a premium for that hazard or do both.
In Govind Menon v. Union of India, the theory of fiction is applicable regarding sole corporation.
The Supreme court pointed out the main characteristic of corporation sole. The court observed the
Corporation sole is not endowed with a separate legal entity. The same person has a dual character,
one as a person and one as a corporation sole, the later being created by Statute.

Conclusion

3
1967 AIR 1274, 1967 SCR (2) 566
After making a lot of research, we can conclude that legal personality is nothing but a fiction. If it
wishes to do so, it can personify institutions, things or groups. but Salmond criticizes the theory of
fiction and replaced it by realistic theory.

Bibliography
 https://www.lawteacher.net/cases/salomon-v-salomon.php
 http://essayandreportwriting.com/academics/report-writing-samples/solomon-v-solomon-co-
ltd-case-study-analysis/#Judicial_Interpretations
 https://blog.lrrc.com/churchstate/constitutions-statutes/state-statutes/corporation-sole-
statutes/common-law-corporation-sole/
 https://www.lawctopus.com/academike/concept-separate-legal-entity-light-corporations/
 http://www.legalcorpsole.com/corporation_sole_history.html
 https://indiankanoon.org/docfragment/1345052/?formInput=corporation%20sole
 http://www.legalserviceindia.com/legal/article-20-theories-of-corporate-personalities.html