Corporate Laws for CMA Final: Important Case Laws You Must Remember

Author: CMA Knowledge | Optimized for: CMA India Final Students

Introduction

This comprehensive guide covers 50 landmark corporate law cases essential for CMA Final preparation. Each case is presented with concise briefings on What the case decided, Why it matters, How the facts unfolded, and the Judgement — complete with an official link to the full text for deeper study.

Why These Case Laws Matter

• Demonstrates interpretation of key provisions under Companies Act, 2013 and allied laws.
• Enables direct citation of authoritative sources in exam answers.
• Provides practical examples for sharper conceptual clarity.

50 Landmark Case Laws

1. Salomon v. Salomon & Co. Ltd. (1897)

What: Company is a separate legal entity.

Why: Foundation of limited liability and corporate personality.

How: Incorporated sole proprietorship; creditors sued the promoter personally after insolvency.

Judgement: House of Lords held the company distinct from its members; liability limited to share capital. Read Full Judgment

2. Maclaine Watson & Co. Ltd. v. International Tin Council (1989)

What: Unincorporated international bodies lack separate legal personality under domestic law.

Why: Clarifies the necessity of formal incorporation for legal personhood.

How: Council attempted suit without statutory backing.

Judgement: Only domestically incorporated entities can sue or be sued. Read Full Judgment

3. Lee v. Lee’s Air Farming Ltd. (1961)

What: Individual can be both director and employee.

Why: Reinforces separate personality doctrine.

How: Mr. Lee controlled and piloted company aircraft; upon death widow claimed compensation.

Judgement: Privy Council recognized his dual capacity; widow entitled to compensation. Read Full Judgment

4. Daimler Co. Ltd. v. Continental Tyre & Rubber Co. (1916)

What: Veil lifted to identify enemy control in wartime.

Why: Exception to separate entity for public policy.

How: UK-incorporated but German-controlled during WWI.

Judgement: Treated as enemy under wartime regulations. Read Full Judgment

5. Gilford Motor Co. Ltd. v. Horne (1933)

What: Pierced veil when company used as façade to evade obligations.

Why: Prevents abuse of corporate form for fraud.

How: Ex-employee circumvented non-compete via new company.

Judgement: Injunction against both Horne and his sham company. Read Full Judgment

6. Jones v. Lipman (1962)

What: Enforced contract despite corporate façade.

Why: Disallows evasion of contractual duties via corporate form.

How: Property assigned to company to avoid sale agreement.

Judgement: Ordered land transfer as contracted. Read Full Judgment

7. Needle Industries v. Needle Industries Newey (1981)

What: Defined minority oppression under Companies Act.

Why: Provides remedy against unfair majority conduct.

How: Majority diluted minority without business justification.

Judgement: Found oppressive; relief granted. Read Full Judgment

8. Shanti Prasad Jain v. Kalinga Tubes Ltd. (1965)

What: Clarified scope of oppression in share allotment.

Why: Key fairness precedent for minorities.

How: Challenged share issue as dilutive.

Judgement: Upheld allotment when corporate interest justified. Read Full Judgment

9. Indian Express Newspapers v. Union of India (1985)

What: Companies can enforce freedom of speech.

Why: Extends constitutional rights to juristic persons.

How: Challenged customs duty on newsprint as press restriction.

Judgement: Struck down duty; upheld Article 19(1)(a). Read Full Judgment

10. Vodafone International Holdings B.V. v. Union of India (2012)

What: Offshore share transfer held outside Indian tax reach.

Why: Landmark on extraterritorial tax and corporate veil.

How: Acquisition via Cayman entities; tax demand on gains.

Judgement: Ruled in favor of Vodafone; upheld veil. Read Full Judgment

11. Foss v. Harbottle (1843)

What: Only the company can sue for wrongs done to it.

Why: Underpins majority rule in internal management.

How: Shareholders sought to sue individually on company’s behalf.

Judgement: Suit dismissed; company is proper plaintiff. Read Full Judgment

12. Regal (Hastings) Ltd. v. Gulliver (1942)

What: Directors must not profit secretly from their position.

Why: Core fiduciary duty under Section 166.

How: Directors bought and sold subsidiary shares for personal gain without disclosure.

Judgement: Profits disgorged; breach of fiduciary duty. Read Full Judgment

13. State of U.P. v. Renusagar Power Co. (1988)

What: Defined “subsidiary” and related-party control.

Why: Crucial for consolidation and related-party transaction rules.

How: Examined shareholding and management control factors.

Judgement: Clarified test for subsidiary status. Read Full Judgment

14. R. v. Kylsant (1931)

What: Prospectus misstatements punishable irrespective of intent.

Why: Enforces strict liability for directors under Companies Act.

How: Chairman issued misleading prospectus about finances.

Judgement: Convicted for false statements; mens rea not required. Read Full Judgment

15. Sahara India Real Estate Corp. Ltd. v. SEBI (2012)

What: Unapproved private placements illegal.

Why: Reinforces SEBI’s investor protection mandate.

How: Sahara issued OFCDs bypassing public issue norms.

Judgement: Directed refunds; underscored strict compliance. Read Full Judgment

16. Swiss Ribbons Pvt. Ltd. v. Union of India (2019)

What: Upheld constitutional validity of IBC.

Why: Emphasized resolution-over-liquidation ethos.

How: Challenge to creditor-priority and tribunal appointments.

Judgement: IBC upheld; financial creditor primacy affirmed. Read Full Judgment

17. Innoventive Industries Ltd. v. ICICI Bank (2017)

What: Default triggers mandatory insolvency admission under IBC.

Why: Ensures time-bound corporate rescue process.

How: Debtor resisted insolvency notice; court reviewed default proof.

Judgement: Appeal dismissed; default proved, petition admitted. Read Full Judgment

18. Committee of Creditors of Essar Steel v. Satish Kumar Gupta (2019)

What: CoC’s commercial wisdom in resolution plans is sacrosanct.

Why: Limits judicial interference in commercial decisions.

How: Challenge to CoC-approved plan.

Judgement: Upheld CoC choice; courts defer to creditor judgment. Read Full Judgment

19. Macaura v. Northern Assurance Co. Ltd. (1925)

What: Shareholders cannot insure company property.

Why: Distinguishes personal from corporate assets in insurance.

How: Shareholder insured timber, claim denied.

Judgement: Policy void; only company has insurable interest. Read Full Judgment

20. Ashbury Railway Carriage & Iron Co. Ltd. v. Riche (1875)

What: Ultra vires acts beyond the object clause are void.

Why: Enforces binding nature of Memorandum of Association.

How: Company contracted outside its objects.

Judgement: Contract declared ultra vires; unenforceable. Read Full Judgment

21. Re Smith & Fawcett Ltd. (1942)

What: Directors must act bona fide in company’s interests.

Why: Core fiduciary duty standard.

How: Share transfer refusal questioned.

Judgement: Validity upheld; decisions made honestly. Read Full Judgment

22. Re Duomatic Ltd. (1969)

What: Unanimous informal shareholder consent binding.

Why: Practical exception to formal resolutions.

How: Payments made without formal meeting but with all shareholders’ knowledge.

Judgement: Actions validated by informal consent. Read Full Judgment

23. Hutton v. West Cork Railway Co. (1883)

What: Company funds must serve company interests.

Why: Limits directors’ discretionary payments.

How: Payment to ex-director’s widow made beyond business purpose.

Judgement: Payment invalid; not in company interest. Read Full Judgment

24. Burland v. Earle (1902)

What: Courts avoid interfering in internal management absent fraud.

Why: Upholds rule in Foss v. Harbottle.

How: Shareholder alleged director misapplication of funds.

Judgement: Dismissed; no fraud proven. Read Full Judgment

25. Re Howard Smith Ltd. (1974)

What: Directors must exercise powers for a proper purpose.

Why: Prevents abuse of share-issue power.

How: Share allotment to thwart takeover bid tested.

Judgement: Allotment invalid; improper primary purpose. Read Full Judgment

26. Re City Equitable Fire Insurance Co. Ltd. (1925)

What: Standard of care for directors defined.

Why: Early exposition of duty of care and skill.

How: Negligent mismanagement led to company losses.

Judgement: Exonerated directors who acted honestly and in good faith. Read Full Judgment

27. Ramaswami Iyer v. Brahmayya & Co. (1966)

What: Auditor’s negligence makes them liable.

Why: Clarifies auditor’s duty of care.

How: Auditor failed to detect material misstatements.

Judgement: Auditor held liable for breach of duty. Read Full Judgment

28. National Textile Workers Union v. P.R. Ramakrishnan (1983)

What: Workers may be heard in winding up proceedings.

Why: Expands standing beyond shareholders and creditors.

How: Workers sought representation in winding up petition.

Judgement: Participation allowed to protect workforce interests. Read Full Judgment

29. Union Bank of India v. Khader International Construction (2001)

What: Directors not personally liable absent fraud.

Why: Limits personal liability to proven dishonesty.

How: Bank claimed personal guarantee; court assessed intent.

Judgement: Dismissed personal liability; no fraud established. Read Full Judgment

30. Bhagwati Developers v. Peerless General Finance (1991)

What: Strict compliance required for proxy voting.

Why: Ensures procedural fairness in shareholder decisions.

How: Irregular proxies challenged resolution validity.

Judgement: Resolutions quashed; proxies invalid. Read Full Judgment

31. Rajahmundry Electric Supply v. A.N. Raju (1954)

What: Proper quorum and notice essential for valid meetings.

Why: Protects procedural integrity.

How: Meeting held without statutory notice.

Judgement: Held void for lack of notice/quorum. Read Full Judgment

32. LIC v. Escorts Ltd. (1986)

What: Government’s power over private companies limited.

Why: Affirms corporate independence from arbitrary state intervention.

How: Government sought to requisition board appointments.

Judgement: Arbitrary state intervention struck down. Read Full Judgment

33. Re H.R. Harmer Ltd. (1959)

What: Oppression by founder’s excessive control.

Why: “Just and equitable” winding-up ground.

How: Founder’s domination stifled governance.

Judgement: Ordered winding up on equitable grounds. Read Full Judgment

34. Ajay Hasia v. Khalid Mujib (1981)

What: “Instrumentality of state” test for constitutional remedies.

Why: Determines when entities can invoke fundamental rights.

How: Govt-aided educational society sought rights enforcement.

Judgement: Held state instrumentality; entitled to rights. Read Full Judgment

35. Re Yenidje Tobacco Co. Ltd. (1916)

What: Deadlock between equal directors grounds for winding up.

Why: Provides relief when management impasse cripples company.

How: Board evenly split on key decisions.

Judgement: Ordered winding up for deadlock. Read Full Judgment

36. Subhra Mukherjee v. Bharat Coking Coal Ltd. (2000)

What: Public sector companies bound by constitutional norms.

Why: Ensures PSUs respect fundamental rights.

How: Employee petitioned under Article 32.

Judgement: PSU recognized as state; rights enforced. Read Full Judgment

37. Delhi Cloth & General Mills Co. Ltd. v. Union of India (1983)

What: Foreign investment rules strictly enforced.

Why: Upholds legislative control on FDI.

How: Challenge to retrospective FDI policy change.

Judgement: Regulations upheld; no breach of vested rights. Read Full Judgment

38. Vasant Investment Corp. v. Official Liquidator (1998)

What: Preference shareholders’ rights arise only on winding up.

Why: Clarifies scope of preferential entitlement.

How: Dividend claims in live company.

Judgement: Entitlement crystallizes only on liquidation. Read Full Judgment

39. Gopal Jalan & Co. v. Calcutta Stock Exchange (1964)

What: Forfeited shares cannot be reissued without express resolution.

Why: Protects fairness in allotment.

How: Exchange reissued forfeited shares sans resolution.

Judgement: Invalid without proper shareholder approval. Read Full Judgment

40. Nagappa v. Madras Race Club (1976)

What: Directors cannot profit personally from corporate position.

Why: Extends fiduciary duties to club management.

How: Officials awarded themselves excessive benefits.

Judgement: Benefits clawed back; breach established. Read Full Judgment

41. Kotak Mahindra Bank v. Hindustan National Glass (2021)

What: NCLT may admit insolvency petitions against holding companies.

Why: Broadens IBC scope to parent-subsidiary contexts.

How: Petition filed against both corporate debtor and holding.

Judgement: Petition admitted; holding not immune. Read Full Judgment

42. ArcelorMittal India v. Satish Kumar Gupta (2018)

What: CoC may consider bidder’s antecedents in resolution plans.

Why: Balances commercial wisdom with public interest.

How: Challenge to CoC’s rejection of plan on past conduct.

Judgement: CoC discretion upheld. Read Full Judgment

43. J.K. Industries v. Union of India (2007)

What: Removal of directors justified if against public interest.

Why: Affirms corporate action must not harm wider society.

How: Director's conduct threatened environment.

Judgement: Removal upheld to protect public interest. Read Full Judgment

44. Minerva Mills Ltd. v. Union of India (1980)

What: Companies can challenge legislation infringing fundamental rights.

Why: Extends judicial review to corporate entities.

How: Minerva Mills contested amendments compromising rights.

Judgement: Unconstitutional provisions struck down. Read Full Judgment

45. Balwant Rai Saluja v. Air India (2014)

What: PSU not automatically a “state” under Article 12.

Why: Narrows state-instrumentality test.

How: Employee sought constitutional remedy.

Judgement: PSU status denied; no fundamental rights remedy. Read Full Judgment

46. Tata Consultancy Services v. State of A.P. (2005)

What: Software classified as goods for tax purposes.

Why: Crucial distinction for indirect tax on IT services.

How: TCS challenged software levy.

Judgement: Software sale held taxable as goods. Read Full Judgment

47. Rajendra Prasad v. Monohar Lal (1980)

What: Company not agent of members absent express terms.

Why: Defines limits of shareholder-company relationship.

How: Member sued on company contract as agent.

Judgement: Agency denied; company distinct. Read Full Judgment

48. Re Smith & Fawcett Ltd. (1942)

What: Directors must act bona fide in company’s interest.

Why: Core fiduciary duty.

How: Share transfer refusal examined.

Judgement: Decision within honest business judgment upheld. Read Full Judgment

49. Madras Gymkhana Club v. TANGEDCO (2016)

What: Clubs with public objectives must comply with tax/service laws.

Why: Clarifies commercial vs. charitable activities.

How: Club challenged electricity service tax demand.

Judgement: Liability affirmed on commercial grounds. Read Full Judgment

50. ICDS Ltd. v. CIT (2007)

What: Corporate accounting standards vs. tax adjustments clarified.

Why: Ensures consistency between financial reporting and tax computation.

How: Dispute over difference in depreciation computation.

Judgement: Accounting treatment upheld for tax purposes. Read Full Judgment

Conclusion

Mastering these 50 landmark case laws will equip you with authoritative examples and deepen your conceptual grasp for the CMA Final Corporate Laws paper. Use the structured What/Why/How/Judgement briefings and official links to the full texts to strengthen your exam answers and practical understanding.

Revision Tips

• Group cases by theme: veil-piercing, minority protection, directors’ duties, insolvency.
• Create flashcards summarizing each case’s key points.
• Discuss and quiz peers to reinforce retention.

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