Basic query i n law

pranav samant (Querist) 30 November 2013 This query is : Resolved
Whether below statements are correct ?
A)The adoption of the pre-incorporation contract by the company will create a contract between the company and the parties If the option of the contract is made as one of the objects of the company in its Memorandum of Association. Here, If company fails to make payment, Then company shall be held liable alone and not the Promoters.

B)If a company, after incorporation enters into a fresh contract in terms of the pre incorporation contract, the pre-incorporation contract shall stand cancelled, and accordingly, the liabilities of Promoters shall come to an end. Here, If company fails to make payment, Then company shall be held liable alone and not the Promoters.

I will be very much thankful to you.

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V R SHROFF (Expert) 30 November 2013
Academic & commercial Query, advised to hire Local lawyer

Ms.Nirmala P.Rao (Expert) 30 November 2013
The answer for your para 1 of your query are: "Yes"! This is subject to sections 15 and 19 of Specific Relief Act and the company alone is liable if it adopts preincomrporation contracts- if its objects as specified in the Memorandum of Association permit it or if such preincorporation contracts so adopted by the company is: in terms of its incorporation.Section 19 of Specific Relief Act states that if preincorporation contracts are adopted by the company after its incorporation and they are consistent with its terms of incorporation etc or its objects specified in its Memorandum of Association then 3rd parties can also enforce such contracts for their benefit and against the company.The bottomline is that company's objects as specified in its Memorandum of Association or terms of company's incorporation should permit adoption of such preincorporation contract in order to made the company sue or be sued in accordance with the provisions of sections 15 and 19 of Specific Relief Act
etc. The answer to your para 2 query is no unless such preincomporation contracts are adopted or ratified by the company in accordance with its terms of incorporation. If its objects as specified in its Memorandum of Association do not permit such adoption it's ultravires the company and the promoters alone and not the company are liable for such ultravires preincorporation contracts not adopted by the company after its incorporation in terms of its incorporation.

Ms.Nirmala P.Rao (Expert) 30 November 2013
The answer for your para 1 of your query is: "Yes"! This is subject to sections 15 and 19 of Specific Relief Act and the company alone is liable if it adopts preincomrporation contracts- if its objects as specified in the Memorandum of Association permit it or if such preincorporation contracts so adopted by the company are in terms of its incorporation.Section 19 of Specific Relief Act states that if preincorporation contracts are adopted by the company after its incorporation and they are consistent with its terms of incorporation etc or its objects specified in its Memorandum of Association then 3rd parties can also enforce such contracts for their benefit and against the company.The bottomline is that company's objects as specified in its Memorandum of Association or terms of company's incorporation should permit adoption of such preincorporation contract in order to made the company sue or be sued in accordance with the provisions of sections 15 and 19 of Specific Relief Act
etc. The answer to your para 2 query is no unless such preincomporation contracts are adopted or ratified by the company in accordance with its terms of incorporation. If its objects as specified in its Memorandum of Association do not permit such adoption it's ultravires the company and the promoters alone and not the company are liable for such ultravires preincorporation contracts not adopted by the company after its incorporation in terms of its incorporation.