Tag Archives: ownership

Corpus Possession & Permissible Possession

Corpus Possession means that there exists such physical contact of the thing by the possessor as to give rise to the reasonable assumption that other person will not interfere with it. Existence of corpus broadly depends on (1) upon the nature of the thing itself, and the probability that others will refrain from interfering with the enjoyment of it; (2) possession of real property, i.e., when a man sets foot over the threshold of a house, or crosses the boundary line of his estate, provided that there exist no factors negativing his control, for example the continuance in occupation of one who denies his right; and (3) acquisition of physical control over the objects it encloses. Corpus, therefore, depends more upon the general expectations that others will not interfere with an individual control over a thing, then upon the physical capacity of an individual to exclude others.

The animus possidendi is the conscious intention of an individual to exclude others from the control of an object.

There is also a concept of “constructive possession” which is depicted by a symbolic act. It has been narrated with an illustration that delivery of keys of a building may give right to constructive possession of all the contents to the transferee of the key.

A person other than the owner, if continued to have possession of immoveable property for a period as prescribed in a Statute providing limitation, openly, without any interruption and interference from the owner, though he has knowledge of such possession, would crystallize in ownership after the expiry of the prescribed period of limitation, if the real owner has not taken any action for reentry and he shall be denuded of his title to the property in law. “Permissible Possession” shall not mature a title since it cannot be treated to be an “adverse possession”. Such possession for however length of time be continued, shall not either be converted into adverse possession or a title. It is only the hostile possession which is one of the condition for adverse possession. Bhikhari v. D.D.C., 2018 (141) RD 130.

 

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Owner of – A Motor Vehicle

As per the definition of the expression “owner” in Section 2(30) of the Motor Vehicles Act, it is the person in whose name the motor vehicle stands registered who, for the purpose of the Act, would be treated as “owner”. However, where a person is a minor, the guardian of the minor would be treated as the owner. Where a motor vehicle is subject to an agreement of hire purchase, lease or hypothecation, the person in possession of the vehicle under that agreement is treated as the owner. In a situation where the registered owner has purportedto transfer the vehicle but continues to be reflected in the records of the Registering Authority as the owner of the vehicle, he would not stand absolved of the liability. Parliament has consciously introduced the definition of the expression “owner” in Section 2(30) of the Motor Vehicles Act, making a departure from the provisions of Section 2(19) in the earlier 1939 Act. The principle underlying the provisions of Section 2(30) is that the victim of a motor accident or, in the case of a death, the legal heirs of the deceased victim should not be left in a state of uncertainty. A claimant for compensation ought not to be burdened with following a trail of successive transfers, which are not registered with the Registering Authority. To hold otherwise would be to defeat the salutary object and purpose of the Act. Hence, the interpretation to be placed must facilitate the fulfillment of the object of the law. Naveen Kumar v. Vijay Kumar, (2018) 3 SCC 1.

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Concept of Ownership

The concept of ownership in a landlord-tenant litigation governed by rent control laws has to be distinguished from the one in a title suit. Indeed, ownership is a relative term, the import whereof depends on the context in which it is used. In rent control legislation, the landlord can be said to be the owner if he is entitled in his own legal right, as distinguished from for and on behalf of someone else to evict the tenant and then to retain control, hold and use the premises for himself. What may suffice and hold good as proof of ownership in Landlord-tenant litigation probably may or may not be enough to successfully sustain a claim for ownership in a title suit. Boorugu Mahadev and Sons v. Sirigiri Narasing Rao, (2016) 3 SCC 343.

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Doctrine of “Piercing the Corporate Veil”

The Companies Act in India and all over the world have statutorily recognised subsidiary company as a separate legal entity. Section 2(47) of the Companies Act, 1956 (for short “the 1956 Act”) defines “subsidiary company” or “subsidiary”, to mean a subsidiary company within the meaning of Section 4 of the 1956 Act. For the purpose of the 1956 Act, a company shall be, subject to the provisions of sub-section (3) of Section 4, of the 1956 Act, deemed to be subsidiary of another. Sub-section (1) of Section 4 of the 1956 Act further imposes certain preconditions for a company to be a subsidiary of another. The other such company must exercise control over the composition of the Board of Directors of the subsidiary company, and have a controlling interest of over 50% of the equity shares and voting rights of the given subsidiary company.
In a concurring judgment by K.S.P. Radhakrishnan, J., in Vodafone International Holdings BV v. Union of India, (2012) 6 SCC 613 the following was observed:
“Holding company and subsidiary company
257. The legal relationship between a holding company and WOS is that they are two distinct legal persons and the holding company does not own the assets of the subsidiary and, in law, the management of the business of the subsidiary also vests in its Board of Directors. …
258. Holding company, of course, if the subsidiary is a WOS, may appoint or remove any Director if it so desires by a resolution in the general body meeting of the subsidiary. Holding companies and subsidiaries can be considered as single economic entity and consolidated balance sheet is the accounting relationship between the holding company and subsidiary company, which shows the status of the entire business enterprises. Shares of stock in the subsidiary company are held as assets on the books of the parent company and can be issued as collateral for additional debt financing. Holding company and subsidiary company are, however, considered as separate legal entities, and subsidiary is allowed decentralised management. Each subsidiary can reform its own management personnel and holding company may also provide expert, efficient and competent services for the benefit of the subsidiaries.”
In Vodafone International Holdings BV v. Union of India, (2012) 6 SCC 613 further made reference to a decision of the US Supreme Court in United States v. Bestfoods ,141 L Ed 2d 43 : 524 US 51 (1998). In that case, the US Supreme Court explained that as a general principle of corporate law a parent corporation is not liable for the acts of its subsidiary. The US Supreme Court went on to explain that corporate veil can be pierced and the parent company can be held liable for the conduct of its subsidiary, only if it is shown that the corporal form is misused to accomplish certain wrongful purposes, and further that the parent company is directly a participant in the wrong complained of. Mere ownership, parental control, management, etc. of a subsidiary was held not to be sufficient to pierce the status of their relationship and, to hold parent company liable.
The doctrine of “piercing the corporate veil” stands as an exception to the principle that a company is a legal entity separate and distinct from its shareholders with its own legal rights and obligations. It seeks to disregard the separate personality of the company and attribute the acts of the company to those who are allegedly in direct control of its operation. The starting point of this doctrine was discussed in the celebrated case of Salomon v. Salomon & Co. Ltd.,1897 AC 22 : (1895-99) All ER Rep 33 (HL). Lord Halsbury LC, negating the applicability of this doctrine to the facts of the case, stated that:
“a company must be treated like any other independent person with its rights and liabilities legally appropriate to itself … whatever may have been the ideas or schemes of those who brought it into existence.”
Most of the cases subsequent to Salomon case,1897 AC 22 : (1895-99) All ER Rep 33 (HL) , attributed the doctrine of piercing the veil to the fact that the company was a “sham” or a “façade”. However, there was yet to be any clarity on applicability of the said doctrine.
In recent times, the law has been crystallised around the six principles formulated by Munby, J. in Ben Hashem v. Ali Shayif, 2008 EWHC 2380 (Fam) . The six principles, are as follows:
(i) Ownership and control of a company were not enough to justify piercing the corporate veil;
(ii) The court cannot pierce the corporate veil, even in the absence of third-party interests in the company, merely because it is thought to be necessary in the interests of justice;
(iii) The corporate veil can be pierced only if there is some impropriety;
(iv) The impropriety in question must be linked to the use of the company structure to avoid or conceal liability;
(v) To justify piercing the corporate veil, there must be both control of the company by the wrongdoer(s) and impropriety, that is use or misuse of the company by them as a device or facade to conceal their wrongdoing; and
(vi) The company may be a “façade” even though it was not originally incorporated with any deceptive intent, provided that it is being used for the purpose of deception at the time of the relevant transactions. The court would, however, pierce the corporate veil only so far as it was necessary in order to provide a remedy for the particular wrong which those controlling the company had done.
The principles laid down by Ben Hashem v. Ali Shayif, 2008 EWHC 2380 (Fam) have been reiterated by the UK Supreme Court by Lord Neuberger in Prest v. Petrodel Resources Ltd. (2013) 2 AC 415 : (2013) 3 WLR 1 : 2013 UKSC 34 , as follows:
“35. I conclude that there is a limited principle of English law which applies when a person is under an existing legal obligation or liability or subject to an existing legal restriction which he deliberately evades or whose enforcement he deliberately frustrates by interposing a company under his control. The court may then pierce the corporate veil for the purpose, and only for the purpose, of depriving the company or its controller of the advantage that they would otherwise have obtained by the company’s separate legal personality. The principle is properly described as a limited one, because in almost every case where the test is satisfied, the facts will in practice disclose a legal relationship between the company and its controller which will make it unnecessary to pierce the corporate veil.”
The position of law regarding this principle in India has been enumerated in various decisions. A Constitution Bench of the Court in LIC v. Escorts Ltd,(1986) 1 SCC 264 , while discussing the doctrine of corporate veil, held that:
“90. … Generally and broadly speaking, we may say that the corporate veil may be lifted where a statute itself contemplates lifting the veil, or fraud or improper conduct is intended to be prevented, or a taxing statute or a beneficent statute is sought to be evaded or where associated companies are inextricably connected as to be, in reality, part of one concern. It is neither necessary nor desirable to enumerate the classes of cases where lifting the veil is permissible, since that must necessarily depend on the relevant statutory or other provisions, the object sought to be achieved, the impugned conduct, the involvement of the element of the public interest, the effect on parties who may be affected, etc.”
Thus, on relying upon the aforesaid decisions, the doctrine of piercing the veil allows the court to disregard the separate legal personality of a company and impose liability upon the persons exercising real control over the said company. However, this principle has been and should be applied in a restrictive manner, that is, only in scenarios wherein it is evident that the company was a mere camouflage or sham deliberately created by the persons exercising control over the said company for the purpose of avoiding liability. The intent of piercing the veil must be such that would seek to remedy a wrong done by the persons controlling the company. The application would thus depend upon the peculiar facts and circumstances of each case. Balwant Rai Saluja v. Air India Ltd., (2014) 9 SCC 407

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Sale and Ownership

The word ‘sale’ has been defined under Section 54 of the Transfer of Property Act. The definition says that sale is a transfer of ownership in exchange for a price paid or promised or part-paid and part-promised.
Ownership is defined as the relation between a person and an object forming the subject matter of his ownership. It consists in a complex of rights, all of which are right in rem, being good against all the world and not merely against specific person. Owner will have a right to possess the thing which he owns. He may not necessarily have possession of the property or he may have been wrongly deprived of it or may have voluntarily divested himself of it. The owner normally has the right to use and enjoy the thing and right to manage it, i.e. the right to decide how it shall be used. Whereas the right to possession is a right in the strict sense. The position of an owner differs from that of a non-owner in possession in that the latter’s interest is subject to be determined at some future set point. Lastly, the ownership has a residuary character. He might have divested his position by creating lease or mortgage, still his ownership would consist of residuary rights, i.e. the right which remains when all these lesser rights have been given away. Shanti Bhushan v. State of U.P., 2013 (3) AWC 2700.

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