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Introduction:

 

Quite often we hear that suits/writs are dismissed on the grounds of jurisdiction and limitation. Rarely suits are dismissed on the grounds of lack of authority. Most of the times either court Registry or Opposite party unmindful of the requirement allow the defect as to authority to remain on record. However authority to institute or defend suits is an important requirement especially in the case of Companies or bodies corporate.  An attempt has been made to examine this aspect in  this article

 

Provisions under CPC/Companies Act:

 

As per Order 6 rule14 every pleading is required to be signed by the party and its pleader if any.

Provided that where a party pleading is, by reason of absence or for other good cause; unable to sign the pleading, it may be signed by any person duly authorized by him to sign the same or to sue or defend on his behalf.

 

Order 29 Rule 1 of the Code of Civil Procedure reads as under:-

           

Subscription and verification of pleading.-

 

In suits by or against a corporation, any pleading maybe signed and verified on behalf of the corporation by the secretary or by any director or other principal      officer of the corporation who is able to depose to the  facts of the case.”

 

It can be inferred from the above that the Secretary, Director or a Principal Officer of a company would be treated as duly authorized to institute suits on behalf of a company. This flows out from a bare reading of Order 29 Rule 1 of the Code of Civil Procedure. Next question that arises for consideration is that who the principal officer is. CPC has not defined the word principal officer. However in the case of a Corporate, only persons specifically authorized can sign on its behalf. Usually such authorization is given either by a Board resolution or by an instrument of power of attorney. It may be useful to refer to the definition of officer under the Companies Act,1956.

Section 2(30)

 

officer” includes any director, manager or secretary, or any person in accordance with whose directions or instructions the Board of directors or     any one or more of the directors is or are accustomed to act;”

 

The aforesaid is an inclusive definition and it covers any other officers who are  authorized  by the Board by a resolution or by a power of attorney. It may also be relevant to examine Section 291 to 293 of the companies Act 1956 which throw light on the general powers of the Board and also the restrictions on the powers of the Board.

 

Section 291 provides that Board of directors shall be entitled to exercise all such powers and to do all such acts  and things as the company is authorized to do. These General powers subject to restrictions imposed under section 292 and 293 or under articles of association of the company.

It is also necessary to verify the clauses in the Memorandum  and Articles  of association of  a company which some times mention about  power of the directors to sub delegate to committee of directors or officers of the company. Some times it also restricts delegation to officers in which case only authorized directors can act on behalf of the company in matters including filing of cases by the company or against the company.

 .

If the Board is authorized to delegate by the Articles of association, it is necessary for the Board to delegate power either by resolution or by a power of attorney duly executed by the authorized director.

 

Normally common seal is affixed on important resolutions which delegate power to execute documents. Section 46  and 48 of the Companies Act,1956 deal with the manner of  execution of deeds and binding nature of the deeds executed by the authorized persons. Common seal is like a signature of the company when affixed in the presence of its authorized person.

 

The authority exercised by the delegatee  whether express or implied  will bind the company. Even ratification is also permissible. When any document  or proceeding which requires authentication may be signed by a Director, Manager, Managing Director, the Secretary of the company.

Thus if an extract of minutes of Board/Shareholders is to be provided to outsiders, the same can be signed by any  of the persons so authorized by Section 54 of the companies Act,1956 (Director, Manager, Managing Director or Secretary.

It is also important to verify the High court’s Rules which provide for the manner of signing of V Namas by corporates and also submission of the evidence i.e either power of attorney or Board resolution. Normally V namas or writs filed by Directors or Secretary or not questioned but if they are signed by any other person, certainly authority for signing must be attached to the V nama to avoid rejection on account of lack of  authority.

  1. Chapter XV, Rule 7  of Orissa High court rules, states  defects if any shall be removed before admission of the writ. Once writ is admitted the presumption is that it is free from defects and ordinarily should not be raised unless the opposite party raises this issue of authority.

 

  1. Chapter XV, Rule 17 is also relevant as it  states that all questions under  Chapter XV shall ordinarily be decided by affidavits but the High court may direct any other mode of evidence  and procedure prescribed under CPC may be followed. Normally objection as to jurisdiction and authority are raised in the first instance as preliminary issues by the court registrar or the opposite party or

 

 

Judicial precedents on order 29 Rule 1:

 

This aspect, with respect to the authority to sign and verify the suit by a principal officer has been dealt with by a Division Bench of Delhi High Court in the case of Kingston Computers (I) P. Ltd. Vs. State Bank of Travancore 153 (2008) DLT 239 (DB) and in which, it has been held that a principal officer is authorized by virtue of Order 29 Rule 1 CPC not only to sign and verify the pleadings, but also therefore to institute the suit.

 

Discussing Order 29 Rule 1 of the Code of Civil Procedure, in the decision in United Bank of India's case in para 10, Hon'ble Supreme Court held as under:-

“Reading Order 6 Rule 14 together with Order 29 Rule1 of the Code of Civil Procedure it would appear that even in the absence of any formal letter of authority or power of attorney having been executed, a person referred to in Rule 1 of Order 29 can, by virtue of the office which he holds, sign and verify the pleadings on behalf of the corporation.

 

 

In addition thereto and dehors Order 29 Rule 1 of the Code of Civil Procedure, as a company is a juristic entity, it can duly authorize any person to sign the plaint or the written statement on its behalf and this would be regarded as sufficient compliance with the provisions of Order 6 Rule 14 of the Code of Civil Procedure.”

 

Similarly the Hon’ble Supreme Court in the  case of United Bank of India Vs. Naresh Kumar & others (1996) 6 SCC 660,  at para 13, it is said that there is a presumption of valid institution of a suit once the same is prosecuted for a number of years.

 

It held  “….In cases like the present where suits are instituted or defended on behalf of a public corporation, public interest should not be permitted to be defeated on a mere technicality. Procedural defects which do not go to the root of the matter should not be permitted to defeat a just cause. There is sufficient power in the Courts, under the Code of Civil Procedure, to ensure that injustice is not done to any party who has a just case. As far as possible a substantive right should not be allowed to be defeated on account of a procedural irregularity which is curable …….”

  

 

Conclusion:  

 

In the end the following conclusions can be drawn from the above

  1. As per order 6 Rule 14 of CPC, pleadings can be signed by a Director, Secretary and principal officer in the case of a company even if no resolution is passed by the company.

 

  1. A conjoint reading of the order 6  Rule 14 and Order 29 Rule 1 reveals that suits by or  against  a Corporation can be filed by a Director or Secretary or  Principal officer .

 

  1. If  the articles of association restricts filing of suits only by Managing Director or Secretary, then the  board of Directors can not authorize any other person as it amounts restricts on the General powers of the Board. In other words, in the absence such restriction, board  u/s 291 (Genereal powers ) can authorize  any officer other than Director  or secretary to file suits or defend legal proceedings

 

  1.  Since Director and Secretary are defined as officers under Section 2(30 ) of the Companies Act,,  no power of attorney or board resolution is required. However if it is any person other than director/secretary, he has to be authorized by a resolution of the board or by a Power of attorney under valid resolution of the Board of directors, provided the Articles do not contain any restriction.

 

  1. Even if the officer signing the plaint /suit is not authorized at the time of institution of Suit, the defect can be removed by ratification of the Board by its subsequent resolution. In suits, this objection as to authority has to be raised.
  2. On technical grounds writs/suits  should not be dismissed denying justice. Supreme court has held in United bank of India Vs Sh Naresh Kumar & Ors that there is sufficient power in the Courts, under the Code of Civil Procedure, to ensure that injustice is not done to any party who has a just case. As far as possible a substantive right should not be allowed to be defeated on account of a procedural irregularity which is curable.  Hence court should give an opportunity to cure the defect .i,e  ratification.

G S Rao

OCL

Author can be contacted at his  E mail- gsrao@ocl.in


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