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THE PERSONALITY OF THE PUBLIC CORPORATION

Courtesy/By: Niharika Shukla | 2020-05-21 19:58

THE PERSONALITY OF THE PUBLIC CORPORATION:

The nature of juristic persons has received attention since the days of the Romans, who considered the isolated and independent agencies as much the units of law as natural persons, and, accordingly, attributed personality to the corporations, associations and the state. A person in law is a right and duty bearing unit  and is either a natural or a juristic one. Although the common meaning of the term ‘person’ is a living human being, yet, in law, it includes artificial persons like companies, registered societies and public corporations. But, it does not include God or any super-natural being. Lord Blackkburn in Pharmaceutical Society v. London and Provincial Supply Association Ltd., pertinently observed:

The word ‘person’ may very well include a natural person, a human being, and an artificial person, a corporation. I think that, in an Act of Parliament, unless there be something to the contrary it ought to be held to include both.

Under section 3(42) of the General Clauses Act, 1897 a ‘person’ includes “any company or association or body of individuals whether incorporated or not.” Article 367(1) read with article 372(1) of the Constitution of India declares that the provisions of the General Clauses Act shall apply in interpreting the Constitution and the Acts of Parliament.

The theory of personality has its origin from the corpus juris, where juristic persons were divided into four principal classes, viz., the communes, the voluntary associations, the charitable and religious associations and the treasury. No less than sixteen theories have been advanced regarding the origin and the nature of juristic persons, but four are generally preferred.

Under the first theory, corporations have their origin through fiction. The fiction theory had its evolution since the Roman times when creation of artificial persons was very common. Savigny elaborated this theory by saying that, in the eye of law, certain ideal persons are regarded as existing and, as such, legal consequences can be attached to them. According to him, persons, other than real persons, can be exteriorised and individualised by law. ‘Person’ signifies what the law makes it to signify. The juridical personality is thus a creation of law of the state which endows it with capacity. Into its nostrils, the state must breathe the breath of a fictitious life, for otherwise, it would be no animated body but individualistic dust. The theory of state creation of corporations dates back to fourteenth century when English kings made efforts to make them powerful against the existing feudal system which threatened the power of the state. By the sixteenth century, incorporation came to be understood as always requiring the sovereign assent.

State recognition may be cither through a general law or a specific one. Under the former, for example, come the Indian Companies Act and the Societies Registration Act, under which various government undertakings and societies have been respectively established; and under the latter, come, for example, the Air Corporations Act, the Life Insurance Corporation Act, and the Food Corporations Act, under which the two air corporations, the Life Insurance Corporation and the Food Corporation, respectively have been established. The state recognition is, therefore, the summum bonum of this theory.

The second theory is associated with Brinz, Bekker, Demelius and Duguit who believe that there is a mass of rights and duties which belong not to any particular individual but are related to certain aims for which corporation, temples, churches, hospitals, etc. are created. The state, according to this theory, is the master of all situations. The hollowness of this theory of subject less rights is apparent from the situation that the state can do whatever it likes, and so long as it does not find a formidable force in the corporate device, the latter is safe; but no sooner the latter gathers dimensions, it is doomed.

The third theory put forth by thering, looks at the members of the corporations and beneficiaries as the true subjects for vesting rights; and, therefore, considers the corporations to have the capacity of being treated as persons. This theory has been criticised on the ground that neither all the members of a corporation are the masters of the undertaking nor they are owners of it.

The fourth theory, commonly called the organism theory, considers that the subjects of rights need not be the human beings only. Every being possessing a will and a life of its own is the subject of rights and, in this sense, states and corporations are being just as alive and as capable of having a will as the human beings. They are, so the theory says, social organism just as human beings are physical organism. This theory is of immense importance in determining the tortious and criminal liability of corporate persons. Lord Haldane in Lennard's case amply explained it thus:

A corporation is an abstraction. It has no mind of its own any more than it has a body of its own; its active and directing will must consequently be sought in the person of somebody who for some purposes may be called an agent, but who is really the directing mind and will of the corporation, the very ego and centre of the personality of the corporation.

Conclusion:

Besides, the enabling statutes almost always grant immunity to the directors and servants of public corporations from acts which subsequently involve the corporation into liability. Anything done in good faith by such persons absolves them from any liability but not a public corporation itself. If, after granting immunity to the directors and servants and thereafter disregarding the fictitious personality of the corporation, a liability for fraud has to be fixed, it would be nothing short of the proverbial situation of searching a black cat in a dark room. Even in cases of private corporations with shareholders, the fictitious personality cannot be disregarded.

 

Courtesy/By: Niharika Shukla | 2020-05-21 19:58