Order 7 Rule 11

Querist : Anonymous (Querist) 01 October 2010 This query is : Resolved
My Company (Pvt Ltd) have filed a suit for recovery against a company arised from a bilateral agreement signed for services with the respondent company.

The Suit is at the stage of framing of Issues.

The Respondent till now were denying the services but for which we have ample proof.
The contract was signed with the respondent before the incorporation of the Company or even before the company name was approved. This was obviously done with consent of the Respondent as the company name didn't exsist on the date of signing & it was later filled in by hand on mutual consent and in good faith.
But suddenly they have come up with O 7 R11 stating contract is not valid before incorporation and this stand was not taken in their WS infact they have admitted the contract and subsequent amendment done after incorporation.

Since the Suit was filed nearly after three years of non payment. This fact of filling in the name of company after incorporation was almost forgotten by us thus was not mentioned in our suit too. These are legitmate payment due to us. Could you pleas provide cases or laws in favor of such contract.

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s.subramanian (Expert) 01 October 2010
Their stand is unsustainable. Order 7 Rule 11 cannot and does not apply to your case. When they have admitted the contract,they cannot take any plea against the validity of the same.They cannot approbate and reprobate. The suit will be tried on merits.

Querist : Anonymous (Querist) 01 October 2010
But the main problem is as to how a company could have entered into an agreement before it was formally incorporated. the company is said to be incorporated from the date it receives certificate of incorporation.

niranjan (Expert) 01 October 2010
The Board of Directors can rectify and can post sanction to the contract carried out by the proposed directors and adopt the contract by unanimous resolution.

Querist : Anonymous (Querist) 02 October 2010

The issue is not between the Promoter (Myself) and the company. The company has already adopted the contract by its action by pursuing for the payment and filing the suit. It is the sanity of the contract for which I need supporting material.
Is it possible for the other party to challenge it on such grounds? Where infact It is evident by record that on the date of signing the name of the company couldn't have been approved. It was intentionally left blank with mutual consent so the opportunity was not lost. But our fault is that we didn’t mention the fact in the suit. Is this contract be claimed to be void after performance?
Pre incorporation contracts
Under the provisions of S.19(e) of the specific Relief Act,1963,specific performance may be enforced against a company where its promoters have before incorporation entered into contract for the company. It is possible only if the company have accepted the contract after its incorporation and communicated such acceptance to the other party to the contract.
In our case the dispute is not between the promoter and the company. The Party which has acknowledged the contract is challenging it to be void.
I am not a legal person but only thing which comes to my mind is when a pre incorporation contract can be enforced for specific performance, how can it be void (It is not illegal for sure).
Please understand the promoter has no tussle with the company as he hols 99 % of the share and balance are owned by his mother. So basically it’s a one man show. What needs to be addressed is the Contract under such circumstances.
Please provide concrete case matters or law in our favor.

Order 7 Rule 11

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