20010126105, 20010126185

SYMBIOSIS LAW SCHOOL, PUNE

BEFORE THE HON’BLE

NATIONAL COMPANY LAW TRIBUNAL

IN THE MATTER OF
MR. AKASH
SHAREHOLDERS OF SKYLINE & CO.
AND
LTD.
V. SKYLINE & CO. LTD.
(PETITIONERS) (RESPONDENTS)

UPON SUBMISSION TO THE HON'BLE JUSTICES OF THE NATIONAL COMPANY

LAW TRIBUNAL

THE HUMBLE PETITION OF THE PETITIONERS ABOVENAMED

i
 SYMBIOSIS LAW SCHOOL, PUNE – COMPANY LAW I, INTERNAL I, 2022

TABLE OF CONTENTS

INDEX OF AUTHORITIES___________________________________________III

LIST OF ABBREVIATIONS__________________________________________VII

STATEMENT OF JURISDICTION___________________________________VIII

STATEMENT OF FACTS_____________________________________________IX

ISSUES RAISED____________________________________________________XII

SUMMARY OF ARGUMENTS_______________________________________XIII

ARGUMENTS ADVANCED____________________________________________1

[Issue 1] Whether the amendment to Section 35 of the Unlawful Activities (Prevention)

Act, 1967 violates Article 14 and 21 of the Constitution of Eldorado?________________1

[1.1] The presumption of constitutionality is voided_________________________________1

[1.2] Possibility of misuse imports to invalidity of the statue___________________________1

[1.3] The Amendment contravenes Article 14______________________________________2

[1.3.1] The Amendment is Unjust, Unreasonable and Manifestly Arbitrary___________2

[1.3.2] The Amendment violates principles of Natural Justice_____________________3
[1.4] The Amendment contravenes Article 21______________________________________5

[1.4.1] The Amendment contravenes the right to Presumption of Innocence__________5

[1.4.2] The Amendment contravenes the Right to Reputation______________________6
[Issue 2] Whether Rule 4 (2) of the Information Technology (Intermediary Guidelines

and Digital Media Ethics Code) Rules, 2021 violates the Right to Privacy enshrined

under Article 21 of the Constitution of Eldorado?________________________________6

[2.1] The presumption of Constitutionality is Voided________________________________7

[2.2] The rule fails to satisfy the Triple-Test_______________________________________7

2 MEMORIAL ON BEHALF OF THE RESPONDENTS

 SYMBIOSIS LAW SCHOOL, PUNE – COMPANY LAW I, INTERNAL I, 2022

[2.2.1] The rule does not meet the requirement of Legality________________________7

[2.2.2] The rule does not meet the requirement of Necessity_______________________8
[2.2.3] The rule does not meet the requirement of Proportionality__________________8
[2.3] The rule lacks adequate Provisions for Data Protection__________________________11

PRAYER____________________________________________________________16

3 MEMORIAL ON BEHALF OF THE RESPONDENTS

 SYMBIOSIS LAW SCHOOL, PUNE – COMPANY LAW I, INTERNAL I, 2022

INDEX OF AUTHORITIES

4 MEMORIAL ON BEHALF OF THE RESPONDENTS

 SYMBIOSIS LAW SCHOOL, PUNE – COMPANY LAW I, INTERNAL I, 2022

LIST OF ABBREVIATIONS

SR. NO. ABBREVIATION FULL FORM

1. ¶ Paragraph

2. & And

3. AIR All India Reporter

4. Anr. Another

5. Co. Company

6. ed. Edition

7. HC High court

8. Ltd. Limited

9. NCLT National Company Law Tribunal

10. Ors. Others

11. P&H Punjab and Haryana

12. Pvt. Private

13. SC Supreme Court

14. SCC Supreme Court Cases

15. v. Versus

5 MEMORIAL ON BEHALF OF THE RESPONDENTS

 SYMBIOSIS LAW SCHOOL, PUNE – COMPANY LAW I, INTERNAL I, 2022

STATEMENT OF JURISDICTION

The applicants have invoked the jurisdiction of the Hon’ble National Company Law
Tribunal, under Section 280 of the Companies Act, 2013, which states the following -

“The tribunal shall, notwithstanding anything contained in any other law for the time being
in force, have jurisdiction to entertain, or dispose of-

(A) Any suit or proceeding by or against any company;

(B) Any claim made by or against the company, including claims by or against any of its
branches in india;

(C) Any application made under section 233;

(D) Any question of priorties or any other question whatsoever, whether of law or facts,
including those relating to assets, business, actions, rights, entitlements, privileges, benefits,
duties, responsibilities, obligations, or in any matter arising out of, or in relation to winding
up of the company.”

6 MEMORIAL ON BEHALF OF THE RESPONDENTS

 SYMBIOSIS LAW SCHOOL, PUNE – COMPANY LAW I, INTERNAL I, 2022

STATEMENT OF FACTS

PARTIES TO THE SUIT

PETITIONERS RESPONDENTS

Shareholders of Skyline & Co. Ltd. Mr. Akash, Skyline & Co. Ltd.

BACKGROUND OF THE CASE

1. Mr. Aakash had a successful business as a goods supplier. In 2020, he converted

it into a Public Limited company with Mr. Aakash as Managing Director and
20% of shares.
2. Mr. Aakash, as the promoter, committed after incorporation to invest in Apex
Limited (a software development company) in exchange for their services
building enterprise resource planning software. The 120-crore investment was
planned. The company's board of directors kept this promise following
incorporation.
3. Shareholders were upset by his unilateral investment in Apex Limited. As a
major shareholder and promoter of the company, they planned to sue Mr.
Aakash for utilizing company funds for personal interest. Shareholders say such
investments are ultra vires. They further stated that promoters must disclose any
commitments they entered into before incorporation to the company and its
shareholders.
4. Shareholders requested the board to recover the company's invested funds,
saying they lacked the ability to do so without their approval. Mr. Aakash
sought relief under an exception to the doctrine of ultra vires since he worked in
the interest of the company.

ACTION TAKEN BY PARTIES

The shareholders plan to approach the National Company Law Tribunal (NCLT) on the basis
that the investment in Apex Limited was an Ultra Vires Act and that the Promoter did not use

7 MEMORIAL ON BEHALF OF THE RESPONDENTS

 SYMBIOSIS LAW SCHOOL, PUNE – COMPANY LAW I, INTERNAL I, 2022

his rights in a bona fide manner. The shareholders said the company's actions violated the
Companies Act of 2013.

8 MEMORIAL ON BEHALF OF THE RESPONDENTS

 SYMBIOSIS LAW SCHOOL, PUNE – COMPANY LAW I, INTERNAL I, 2022

ISSUES RAISED

ISSUE 1
WHETHER THE SHAREHOLDERS CAN SUE MR. AKASH FOR BEING THE PROMOTER,

MAJOR SHAREHOLDER AND FOR HAVING ACTED OUT OF PERSONAL INTEREST?

[1.1]

[1.2]

ISSUE 2
WHETHER THE COMPANY HAS ACTED ULTRA VIRES BY INVESTING IN APEX LIMITED?

[2.1] The present investment is not ultra vires in nature

[2.2] The impugned act was within the authority of a promoter

[2.3] The impugned act falls under the exception to the doctrine of ultra vires.

1 MEMORIAL ON BEHALF OF THE RESPONDENTS

 SYMBIOSIS LAW SCHOOL, PUNE – COMPANY LAW I, INTERNAL I, 2022

SUMMARY OF ARGUMENTS

ISSUE 1

WHETHER THE SHAREHOLDERS CAN SUE MR. AKASH FOR BEING THE PROMOTER, MAJOR

SHAREHOLDER AND FOR HAVING ACTED OUT OF PERSONAL INTEREST?

It is humbly contended that the shareholders can sue Mr. Akash, as

ISSUE 2

WHETHER THE COMPANY HAS ACTED ULTRA VIRES BY INVESTING IN APEX LIMITED?

It is humbly contended that the company has not acted ultra vires by investing in Apex
Limited, as [2.1] The present investment is not ultra vires in nature, [2.2] The actions were
within the authority of a promoter, and [2.3] The impugned act falls under the exception to
the doctrine of ultra vires.

2 MEMORIAL ON BEHALF OF THE RESPONDENTS

 SYMBIOSIS LAW SCHOOL, PUNE – COMPANY LAW I, INTERNAL I, 2022

ARGUMENTS ADVANCED

ISSUE 1: WHETHER THE SHAREHOLDERS CAN SUE MR. AKASH FOR BEING THE

PROMOTER, MAJOR SHAREHOLDER AND FOR HAVING ACTED OUT OF PERSONAL

INTEREST?

1. It is contended that the shareholders of

ISSUE 2: WHETHER THE COMPANY HAS ACTED ULTRA VIRES BY INVESTING IN APEX

LIMITED?

2. It is humbly contended that the company has not acted ultra vires by investing in Apex
Limited, as [2.1] The present investment is not ultra vires in nature, [2.2] The actions were
within the authority of a promoter, and [2.3] The impugned act falls under the exception to
the doctrine of ultra vires.

[2.1] THE PRESENT INVESTMENT IS NOT ULTRA VIRES IN NATURE

3. It is humbly contended that the present investment for the benefit of Apex Limited carried out
by the respondent on behalf of Skyline & Co. Ltd. is not ultra vires, because [2.1.1] the
promoter possesses the requisite authority to engage in a pre-incorporation contract, and
[2.1.2] The impugned act does not violate the object of the company.

3 MEMORIAL ON BEHALF OF THE RESPONDENTS

 SYMBIOSIS LAW SCHOOL, PUNE – COMPANY LAW I, INTERNAL I, 2022

2.1.1. The promoter possesses the requisite authority to engage in a pre-incorporation

contract

4. According to S. 4(1) (c) of the Act1, the objects for which the company is proposed to be
incorporated and any matter considered necessary in furtherance thereof. The Act provides
that an object clause must be included in the MoA that justifies the purpose for the
incorporation of the company. An action taken by the company shall be deemed ultra vires
if such action is beyond the scope of said object clause.
5. In the present case, the purpose of incorporation of the company is generate and augment
profits. The investment made in Apex limited was in furtherance of this goal for the
shareholders and was thus made by the respondent within his authority as a promoter, and
therefore is not ultra vires. The conduct not being expressly authorized for in the MoA will
still not be ultra vires as it is in furtherance of the goal of the business.2
2.1.2. The action does not violate the object of the company

6. The act of investing in another company cannot be held ultra vires even if the absence of
communication of the same to the shareholders is proved, as the main object of a company
is profit generation, and as long as the act is in consonance with the same, it cannot be held
ultra vires.3
7. The investment in Apex Limited satisfies the company's goal of generating profits for its
shareholders in the current case, regardless of whether it is a procedural requirement.
Consequently, it is respectfully argued that Skyline & Co. Ltd, with its investment in Apex
Limited, has not engaged in actions that are ultra vires.

[2.2] THE IMPUGNED ACTIONS WERE WITHIN THE AUTHORITY OF A PROMOTER

8. According to S. 15(h) of the Specific Relief Act of 19634, when promoters enter into an
agreement for the benefit of the company before incorporation, it is considered that the
company has accepted and warranted the agreement and has also informed other parties of
this. According to this clause, the company is said to have impliedly accepted the agreement

1
Companies Act, 2013, § 4(1)(c), No. 18, Acts of Parliament, 2013 (India).
2
Evans v. Brunner Mond and Company, (1921) Ch 359.
3
Surajmal Nagarmal v. Shew Bhagvan Jalan., ILR (1973) 1 Cal 207.
4
Specific Relief Act, 1963, § 15(h), No. 47, Acts of Parliament, 1963 (India).

4 MEMORIAL ON BEHALF OF THE RESPONDENTS

 SYMBIOSIS LAW SCHOOL, PUNE – COMPANY LAW I, INTERNAL I, 2022

and will be responsible for all of the contract's obligations when promoters act on the behalf
of the company.5
9. In the present matter, the respondent, in the role of a promoter, entered into a deal with
another business with the intention of augmenting the profits of the company. In this
instance, the promise was duly executed by the board of directors after the incorporation of
the company, indicating that the company and its board of directors had approved of the
investment contract, and went ahead to approve and duly execute the same.

THE IMPUGNED ACT FALLS UNDER THE EXCEPTION TO THE DOCTRINE OF ULTRA VIRES

10. The doctrine of ultra vires must not be taken into account in isolation, and must only be
applied after taking the business' interests into consideration.6 Any act that is outside the
scope of the directors' powers and has not been enumerated in the MoA will not constitute
an act that is ultra vires, unless the Companies Act specifically prohibits it. There will be an
exemption to ultra-vires in cases where the object clause does not directly mention a
particular conduct yet the act is performed to achieve the company's goal.
11. Even if an act is not explicitly specified in the MoA's object clause, any action that supports
the business's core operations will not be regarded as exceeding its authority since it
benefits the company,7 and includes any profit augmenting activities.8

12. In the present matter, the respondent's investment in Skyline & Co. Ltd. was not operating
outside of its legal authority since the respondent qualifies for the theory of ultra-vires
exception because the investment's goal was in furtherance of the goal stated in the MoA
and because the Companies Act does not specifically prohibit the same.

13. Skyline & Co. Ltd. did not violate any law by investing in Apex Limited since the
promoter's action does not fit within the definition of ultra vires, which states that any
conduct that is carried out irregularly but otherwise intra-vires the firm may be approved by
the company's shareholders. After the business was incorporated, the board of directors
executed the contract, validating the act by doing so. As the investment in Apex Limited
was carried out with the intention to assist in reaching the company's goal of increasing

5
Jai Narain Parasurampuria (Dead) v. Pushpa Devi Saraf, (2006) 7 SCC 756.
6
M.C. Bhandari, Guide to Company Law Procedure 167 (20th ed. 2017).
7
Attorney General v. Great Eastern Railway Co. (1880) 5 App Cas 473 HL.
8
Turner Morrison & Co., Ltd v. Hungerford Investment Trust Ltd., 1972 AIR 1311.

5 MEMORIAL ON BEHALF OF THE RESPONDENTS

 SYMBIOSIS LAW SCHOOL, PUNE – COMPANY LAW I, INTERNAL I, 2022

shareholder profits, the act will fall under the exception to the doctrine of ultra-vires under
the reasonable construction principle9 in the current case.
14. Furthermore, the investment in Apex Limited was made at a time when the promoter lacked
the funds to pay for Apex Limited's services.10 As the contract was made for the benefit of
the said company, no mala fide intent is made out in the present case.
15. Therefore, it is submitted that the promoter, Mr. Aakash, possessed the authority to carry
out the impugned act, and therefore, the company has not acted ultra vires by investing in
Apex Limited.

16.

9
Attorney General v. Great Eastern Railway Co. (1880) 5 App Cas 473 HL.
10
Moot Proposition, paragraph 5.

6 MEMORIAL ON BEHALF OF THE RESPONDENTS

 SYMBIOSIS LAW SCHOOL, PUNE – COMPANY LAW I, INTERNAL I, 2022

PRAYER

Wherefore, in light of the facts put forth, arguments advanced and the authorities cited, it is

most humbly prayed by the Petitioners in this matter that the National Company Law

Tribunal may be pleased to:

1. HOLD, that Mr. Akash is not liable for having acted out of self interest
2. HOLD, that the Company’s act of investing in Apex Limited was not ultra vires.

AND/OR

Pass any other order it may deem fit, in the interest of Justice, Equity and Good Conscience

All of which is most humbly and respectfully submitted

Date: ________________, 2022

Counsel on behalf of the Respondents

7 MEMORIAL ON BEHALF OF THE RESPONDENTS