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UNIVERSITY INSTITUTE OF LEGAL STUDIES

PANJAB UNIVERSITY, CHANDIGARH

“KANDOLI TEA ESTATE CO. LTD. (1886) ILR 13

CAL. 43”
A Project report submitted as a part of
curriculum of B.Com LL.B. (Hons.) in the subject of
COMPANY LAW
Submitted To : Submitted By :
Dr. Alamdeep Kaur Gagandeep Kaur
B.COM. LL.B. (Hons.)
8th Semester
212/18
2018 – 2023
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ACKNOWLEDGEMENT

I would like to express my sincere thanks of

gratitude to my Company Law Faculty, Dr.
Alamdeep Kaur who gave me the opportunity to
undertake this research project in the case law
Kandoli tea estate co. ltd. 1886, which helped me in
doing a lot of research and I came to know about so
many new things. I am also grateful to her for her
continuous support and guidance and suggestion
throughout the research. I am thankful to her for
encouraging me to carry out this research. I am
thankful to her for encouraging me to carry out this
research. I would also like to convey my thanks to
the librarian and my fellow classmates for helping
me in this project report.
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CERTIFICATE OF ORIGINALITY

This is to certify, that the project submitted by me is

an outcome of my independent and original work. I
have duly acknowledged all the sources from which
the ideas and extracts have been taken. The project
is free from plagiarism and has not been submitted
elsewhere.

Gagandeep kaur
B.COM L.L.B
BATCH: -2018-2023
212/18
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S.NO. CONTENT PAGE NO.

1. Introduction 5

2. Concept 6

3. Facts 6

4. Issue 7

5. Arguments 8

6. Judgement 8

7. Analysis 9

8. Discussion 10

9. Conclusion 11
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INTRODUCTION

A Company is formed by a group of people who come

together to work towards a specific goal and to earn
profit. One of the main features of a company is that it is
has separate legal entity. The term separate legal
entity means that the body is a legal person recognized
by law where it is treated as a separate legal person who
has rights and obligations. It is an artificial person which
is different from the people who are running or
constitute that entity. However, this fundamental
element of Company has had a dynamic history, where it
was gradually evolved .This principle for the first time,
was visited in the case of Salomon v. Salomon, where
Lord Macnaghten held that the company is a legal person
that is created lawfully through observation of all the
rules of the company law and is different from its
shareholders and is not an agent or trustee of the
company. And this concept was for the first time applied
in India in the case of In Kondoli Tea Co. Ltd.
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CONCEPT
The company is a separate legal entity which confers its
own rights and duties. The members of the company have
limited liability in the normal course of business but can
be held liable in extraordinary circumstances where the
court feels that there is a misuse of the Principle. This
given case of Kondoli Tea Co. Ltd. dealt with a concept
which at that time, that is 1886 was new to India and the
idea of separate legal entity was introduced for the first
time in India. This fundamental feature of separate legal
entity of a company was duly required to be introduced in
the Indian Company Law.

FACTS

A certain Tea Estate was transferred to a company

by a group of 8 people who were the sole
shareholders of the company. These eight
gentlemen were also the only shareholders of this
transferee company. The consideration was payable
in shares and debentures of the transferee-
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company. It was contended that this was not really a

conveyance or transfer by way of sale, but a mere
handing over of the property from one name to
one’s own self under another name. The
consideration for this exchange was $43,320, the
said consideration being payable in shares and
debentures of the company taken at par. However,
the shareholders of the company refused to pay the
ad valorem duty payable on every conveyance on
such transfer of the property and hence this case.
They tried to avoid the ad valorem duty stating that
they were themselves the shareholder of the
company. The shareholders’ reason for not paying
the tax was that since they were the only
shareholders of the company, therefore the transfer
of the property was from them to themselves under
another name.

ISSUE
 Whether a document carrying out a particular
transaction is a conveyance within the meaning
of the definition contained in Clause 9 of Section
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3 of the Stamp Act, and within the meaning of

Article 21 of Schedule I of that Act?

ARGUMENTS
It was argued by the Petitioners to claim an
exemption from payment of tax. The ground that
they provided was that as property was transferred
to the Kondoli Tea Company, and they did not have
to pay taxes on that particular property as they
were not the owners of any taxable property.

JUDGEMENT
The Calcutta High Court held that Kondoli Tea
Company Ltd was a legal entity or body separate
from and capable of surviving beyond the lives of its
members. Whoever the shareholders in the Kondoli
Tea Company Ltd were, the company was a separate
person, a separate body, and a conveyance to the
Company of property which was the property of the
sharers in their individual capacity, was just as much
a conveyance, a transfer of the property as if the
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shareholders in the Company had been totally

different persons. The impugned document is a
conveyance and the proper stamp to be put upon
this document is the ad valorem stamp mentioned in
Article 21 of Schedule I of the Stamp Act, and that it
must be calculated on the amount of the
consideration mentioned in the instrument.

ANALYSIS OF THE JUDGEMENT

The Hon’ble judges, Chief Justice William Comer
Petheram, James Quain Pigot and Trevelyan JJ after
full scrutiny of the given facts, evidence and
arguments rightly gave the judgment declaring the
company as a separate legal entity. This
fundamental feature of a company was duly
required to be introduced in the Indian Company
Law. The court correctly answered the issue
presented before it that as we treat the company as
a separate legal entity, therefore the document was
to be considered as a conveyance under Section 3(9)
and Article 21 of Schedule 1 of the Stamp Act 1879.
Article 21 of Schedule 1 of the Indian Stamp Act
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1879 talks about a situation, “where the amount of

the consideration for such conveyance he set forth
therein does not exceed Rs. 50 When it exceeds Rs.
50 but does not exceed Rs100 for every Rs. 100 or
part thereof in excess of Rs. 100 up to Rs. 1,000 and
for every Rs. 500 or part thereof in excess of 1,000.
Therefore, a duty to pay the ad valorem, that is a
tax whose amount is based on the value of
transaction was conferred upon the Petitioners by
the court, as a result declining their request to
exempt them from paying this duty and ordering it
to be calculated on amount of consideration
mentioned in the in-property instrument.

DISCUSSION
According to my perspective this case make it very clear
that company was a separate person, and a separate
body altogether from its shareholders and that the
transfer was a transfer in property, as if the shareholders
had been totally different persons. The duty is to be paid
by the shareholders to the company that itself is a
separate legal entity.
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CONCLUSION
Kondoli Tea Company Limited was a separate person, a
separate body and a conveyance to the Kondoli Tea
Company Limited of Property which was the property of
the shares in their individual capacity was just as much as
a conveyance a transfer of the property as if the
shareholders in the company had been totally different
persons. The Kondoli Tea Company is a separate body
although the conveying parties here were the shareholders
of the company, there was just as much a sale and transfer
of the property and a change of ownership as there would
have been if the shareholders had been different
persons. The Register of Shareholders to ascertain who
the shareholders were and, consequently, although the
conveying parties here were the shareholders of the
Company. That is not what the real transaction is; because
the only shareholders in the Kondoli Tea Company are the
eight gentlemen who conveyed the estate, and that
therefore it was not really a conveyance or transfer by way
of sale, but a mere handing over of the property from them
in one name to themselves under another name.

The Court held that the Kondoli Tea Company was a

separate legal entity and therefore ordered the
shareholders to pay the ad valorem duty on the said
transfer of property from them to the company.