Competence of a suit filed by a company

A company is a juristic person that can sue and be sued in its own name. In order to prosecute or defend a suit, one is required, under order 6 of CPC, to sign the pleadings himself or through his attorney, if any. As a company is a juristic entity so it’s obvious that someone has to sign the pleadings on its behalf. Order 29 of CPC, therefore, provides that the secretary or director or any other principal officer of the corporation may sign; and verify the pleadings in a suit by or against the company, given he is able to depose to the facts of the case. The reading of order 6 rule 14 together with order 29 rule 1 CPC shows that the above said persons by virtue of the office they hold may sign and verify the pleadings on behalf of the company without any formal letter of authority or power of attorney executed in their favour.

Besides, a company can authorize any other person, via resolution passed by the board of directors or through the power of attorney, to sign and verify the pleadings in a suit by or against the corporation. In the absence of such authority or in case the pleadings have been signed by any of its officer, the corporation can ratify said action. Such endorsement may be express or implied. The court can decide from the evidence produced and other circumstances of the case whether the company has ratified the signing of the pleadings by his officer or not.

The above said exercise is considered; a sufficient compliance of the relevant law. However, it is not unusual in civil trials that some parties, in order to delay the proceedings, file applications in the court for framing of additional issue regarding whether the suit has competently been filed by the corporation. The August Supreme Court of Pakistan in her judgment reported as PLD 2020 SC 366, discouraged such practice and declared such objections an abuse of process of the court:

“Experience showed that such objections were, more often than not, frivolous and an abuse of process of the court, intended only to delay, derail or frustrate consideration of the dispute on merits.”

Supreme Court holds that the court should refrain from framing additional issue straight away; and require, if it considers it necessary, memorandum and article of association of the corporation in order to decide the issue. While deciding the matter; the court has to apply the doctrine of indoor management; and examine whether the directors are empowered therein to authorize any person to institute and defend suits on their behalf.

Once it is proved that the directors have executed a power of attorney; and the article of association permits them to do so, the resolution passed by the board of directors is not necessary to file or defend the suit on behalf of the company. Even the resolution by which the directors had resolved to grant power of attorney to the attorney is not needed to prove in this eventuality.

After applying the doctrine of indoor management; and ascertaining that articles of association empower the directors to delegate their power to institute legal proceedings to someone else; the production of the resolution passed is just “ a matter of abundant caution” which can be dispense with being not necessary.

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