Company Law Case: Pursottam Acharya Vs. Boris and Restaurant Pvt. Ltd., NKP,2044, No. 9, P. 934.
Case: Separation of land and delivery of possession
Plaintiff: Purushottam Acharya, residing at Battisputali, Ward No. 9, Kathmandu.
Defendant: Boris and Restaurant Pvt. Ltd., Mrs. Inger Lisane Bich.
Decision Number: 3206
This case is related to disputes of personal or joint property of its directors.
Facts of the Case:
Purushottam Acharya and defendants were founders of a company which was established on 2034/10/16 BS. According to Purushottam, one of the defendant was the chairman of the company and had appointed him as a director and administrator with a monthly salary of Rs. 6,000/- The company’s authorized capital was Rs. 8,00,000/-, and its shares were divided at Rs. 1,000/- each. Out of Rs. 7,10,000/- capital divided into 710 shares, defendant side had 685 shares and Purushottam had 25 shares. Purushottam later transferred his 25 shares to Alexander Lisane Bich on 2037/04/05 BS. and had resigned from the position of manager from 2037/03/18 BS, but he claimed that he had not given up any other rights. He stated that he and defendants had jointly purchased different plots of land within Thecho Panchayat of Lalitpur, measuring 40 ropanis in total. According to him, Rs. 2,80,000/- was paid for the land Rs. 14,000/- was spent on registration expenses, and Rs. 7,50,000/- was spent on constructing a wall. He claimed that he had contributed half of the expenses and therefore requested that half of the land be separated for him and that he be given possession of it. Defendants, however, claimed that the land belonged to the company and that Purushottam had signed the documents only as a director of the company. They stated that the company itself had been using the land and that the wall had been constructed using the company’s money. The Kathmandu District Court dismissed Purushottam’s case. The Madhyamanchal Regional Court also upheld the dismissal. The matter was then brought before the Supreme Court.
Plaintiff’s Claim:
Purushottam claimed that the disputed land had been purchased jointly by him and defendants. He argued that he had contributed half of the money spent for purchasing and developing the land. Therefore, he requested the court to remove the company’s claim over the property, separate half of the land as his share, and give him possession of that portion. He also argued that since the directors had signed the purchase document, the property should not automatically be considered the company’s property.
Defendant’s Arguments:
Defendants argued that Purushottam had already transferred his 25 shares to Alexander Lisane Bich and had also resigned from his managerial position. Therefore, they argued that he had no remaining right as a shareholder or manager to claim the company’s property. They further argued that company property belongs to the company and not to individual directors or shareholders. According to them, Purushottam had signed the documents only in his capacity as a director of the company and not in his personal capacity. They also stated that the company had been using the land and that the wall had been constructed with company money. Therefore, they argued that Purushottam had no personal right over the land and that his case should be dismissed.
Legal Issue:
- Whether land purchased in the name of a company, with the purchase deed signed by its directors, could be treated as the personal or jointly owned property of those directors?
- Whether purushottum could claim half of the land merely because he was one of the directors who signed the purchase document?
Decision of Courts:
Kathmandu District Court: Court dismissed the case, holding that while the company continued to exist and its property could not be separated and given to an individual as personal property.
Madhyamanchal Regional Court: Regional court upheld this decision because the original purchase deed clearly showed that the land had been purchased in the name of Boris Bar and Restaurant, and Purushottam could not produce evidence proving that he had personally invested the amount claimed by him.
Supreme Court: Supreme court also upheld the decisions of lower courts. It found that the purchase deed clearly stated that the property had been transferred to Boris Bar and Restaurant Pvt. Ltd. The Court observed that if the land had been purchased jointly by the individuals personally, their three-generation identification details should have been mentioned in the deed. Since the deed mentioned the company as the purchaser and the directors had signed on behalf of the company, the property was considered to be the company’s property. The Court also held that because all the members of the Board of Directors had signed on behalf of the company, separate authorization was not necessary. Therefore, Purushottam’s claim for half of the land could not succeed, and the decision of the Madhyamanchal Regional Court was held to be reasonable.
Established Principles:
1. Property purchased in the name of a company is not the personal property of its directors: When the company is clearly mentioned as the purchaser in the sale deed, the property belongs to the company. The directors cannot claim personal ownership over such property.
2. A director’s signature on behalf of the company does not prove personal ownership: When directors sign a property document on behalf of the company, their signatures represent the company. Their signatures alone cannot make the property their personal property.
3. Separate authorization is not necessary when all directors sign on behalf of the company: When all members of the Board of Directors sign the purchase document on behalf of the company, there is no need for separate delegation of authority to any individual.
4. A director does not automatically acquire a personal share in company property: Company property is separate from the personal property of its directors. A director cannot claim that property purchased in the company’s name is his or her personal or jointly owned property.
