NISHANT
When Resolution Professional under the Insolvency & Bankruptcy Code is in control of the Corporate Debtor, it is obvious that it cannot be pleaded that the company is in the hands of a wrongdoer.
NISHANT MEHROTRA 31 Aug 2019

When Resolution Professional under the Insolvency & Bankruptcy Code is in control of the Corporate Debtor, it is obvious that it cannot be pleaded that the company is in the hands of a wrongdoer.

Madras High Court :: When Resolution Professional under the Insolvency & Bankruptcy Code is in control of the Corporate Debtor, it is obvious that it cannot be pleaded that the company is in the hands of a wrongdoer.


Held :: Pith and substance of Foss vs. Harbottle principle is viewed as majority is the hallmark of a corporate entity and the minority shareholders should always yield to the will of the majority shareholders. This Foss vs. Harbottle principle was followed in several English decisions subsequently. To be noted, Foss vs. Harbottle principle was propounded in 1843 and thereafter there have been several elucidations and expositions of Foss vs. Harbottle principle. As the law evolved and developed, it got crystallized that there can at best be only three exceptions to Foss vs. Harbottle principle.


The three exceptions are:


a) when an Act is ultravires the company or it is illegal;


b) when an act constitutes a flaw against the minority and the wrongdoers themselves are in control of the company; or


c) when a resolution that requires to be passed by a qualified majority, but has been passed by a simple majority.


This has been set out in Palmer’s Company Law.


When two plaintiffs constitute the entire set of shareholders in the second defendant company and therefore, there is no scope for construing minority vs. majority and Resolution Professional under the Insolvency & Bankruptcy Code is in control of the Corporate Debtor, it is obvious that it cannot be pleaded that the company is in the hands of a wrongdoer.


Case:

Mrs. Jai Rajkumar and Ors. vs. Stanbic Bank Ghana Limited and Ors.

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