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3/25/10

Impleadment of legal representatives - 397/398 - Indian Company Law

The issue of impleading legal representatives of a deceased party to a proceeding under section 397/398 of Companies Act, 1956 stands on a different footing to that of a normal Civil Suit. In a normal Civil Suit before a Civil Court, it is the rule that the legal representatives of a deceased person to be impleaded in the proceeding. When it comes to the liability of the legal representatives, it is settled that it depends upon the nature of liability. If it is purely a personal liability like facing a criminal proceeding for an act omission or commission, then, it goes with the person and it is personal liability. Thus, the liability of the legal representatives for the acts of deceased depends upon the nature of liability.

Though the issue seems to be academic and simple, it has got lot of significance in a proceeding under section 397/398 of Companies Act, 1956. A party to a proceeding under section 397/398 may press for urgent reliefs and may be intolerant to the delay and on the other hand another will be looking as to how to prolong the matter and raise technical objections. The legal position with regard to the impleadment of the legal representatives of the deceased is settled and same both before the Civil Court and also Company Law Board.


The exception to the general rule with regard to the impleadment of legal representatives to a proceeding before the Company Law Board under section 397/398 appears to be that the proceeding continues even in case where the legal representatives of the deceased Petitioner are not impleaded. It is based on the object of the Companies Act, 1956 and especially section 397/398 of the Act. The Company Court or the Company Law Board while entertaining a petition should look at the interests of the parties who not before it and it is the responsibility of the Company Court or the Company Law Board to act in accordance with the object of the provision and the Companies Act, 1956. We have many precedents where the Company Court or the Company Law Board has considered the interests of the persons who not actually before the Court or the Board extensively.


The impleadment of the legal representatives of the deceased Petitioner under section 397/398 of the Companies Act, 1956 is seen on a different footing from that of the impleadment of the legal representatives of the deceased respondents in a proceeding under section 397/398 of the Companies Act, 1956. When it comes to impleading the legal representatives of the Respondents, then, the issue of nature of liability alleged is to be seen and it is settled as is the case under settled Civil Law of liability. But, when it comes to the impleadment of the legal representatives of the deceased Petitioner, the facts are to be carefully seen. Section 399 of the Companies Act, 1956 makes it very clear as to who are all entitled to approach the Board under section 397/398 of the Companies Act, 1956. In some cases, only single shareholder can file a petition under section 397/398 of the Act, 1956 and in such cases, the legal representatives of the deceased Petitioner should get impleaded as somebody has to constructively represent before the Board. But, when there are so many shareholders, then, the impleadment of the legal representatives of a deceased petitioner may not be vital even when the Petition does not qualify under section 399 with the death of one of the deceased Petitioner.


The High Court of Delhi, in Jawahar Singh Bikram Singh Pvt. Ltd. Vs. Smt. Sharda Talwar (1974) 44 Com Cases 552, was pleased to observe “that it was not necessary that the ordinary legal representatives should be brought on record. For the purpose of petitions under sections 397 and 398, it was only necessary that members who were already constructively before the court should continue the proceedings. Since the widow of the petition was already constructively a petitioner in the original proceedings, by virtue of her having given her consent in writing, she was entitled to be transposed as petitioner in place of her dead husband”. On the same issue, stressing the logic and object, the High Court of Madras, in L.RM. K.Narayanan and another Vs. Pudhuthotam Estates Ltd. and others (1992) 74 Com Cases 31, was pleased to observe that “it is not incumbent upon the court to dismiss a petition because a proceeding under section 397 or 398 of the Act is a representative proceeding. Even if the original petitioner does not want to continue the proceedings, the court can not be compelled to dismiss the petition; Even then, it is open to the court to consider the merits of the case without dismissing the petition. Section 399(3) of the Act permits an individual member to make an application “on behalf and for the benefit of all” members of a company entitled to move the court. He acts clearly in representative capacity. Rule 9 of the companies (Court) Rules, 1959, declaring inherent powers of the court gives the court authority to transpose the other party as applicant in the interest of justice”.

The issue and the propositions on the issue makes it very clear that the Company Law Board or the Company Court is different from other adjudicatory forums and the object of the provisions of the Companies Act, 1956 is considered and given effect always by the Company Law Board and the Company Court.

1 comment:

  1. Dear sir,

    Five year ago my father helped his friend to get business prps loan from govt bank and in this loan my father is a guaranter and also mortgaged property papers of our house, now the loan declred NPA. From the same bank my father friend (borrower) is having one more loan some vehicle loan in which my father is not gauranter.now borrower is not willing to pay for both the accounts and bank is saying they will auction the property if the loan amount will not be paid.

    Now my question is if we(guaranter) settle the loan in which my fother is guaranter and our property papers are mortgaged in that case bank will close the case or bank can attach guaranter property for the some loan of the borrower where we are not even the guaranter.

    My father is ready to settle the loan but please suggest the way

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