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 We
had leased some cars to a company, which has now made a reference
to the Board for Industrial and Financial Reconstruction claiming
to be financially sick, and has also refused to give back the possession
of those cars. What course of action should we take to recover our
cars from this company?
The leased cars cannot be considered property
of the sick company and your company can proceed against the sick
company to recover the cars without seeking permission of the Board
for Industrial and Financial Reconstruction (refer Shree Chamundi
Mopeds Limited v. Church of South India Association (1992) 3 SCC
1 and M/s Kotak Mahendra Finance v. M/s. Deve Paints air 1997 Bom.
401). You can immediately terminate the lease agreement and file
a suit for possession of the cars provided: (i) your company is
shown as the owner of the cars in all relevant documents, including
the lease agreement, car registration certificate, and books of
account of your company, and (ii) the cars are shown as leased to
the lessee company. Further, to restrict the sick company from adversely
dealing with the cars pending adjudication of the suit, you should
seek an injunction for interim possession of the cars or for appointment
of your company as receivers of the cars during pendency of the
suit.
Some of our employees have left with proprietary
software of our company and have joined the services of a client
for whom they had performed on-site software development. The appointment
letters of these employees restrict them from joining the services
of a client for three years from the date of their resignation/termination.
Can we take legal action against these former employees and/or the
client?
You can initiate criminal action against your
former employees for theft and criminal breach of trust under provisions
of the Indian Penal Code. You can also file a criminal complaint
against the client for criminal conspiracy if there is evidence
that the client conspired with your former employees to steal your
proprietary software. If the client has utilised your proprietary
software for commercial gains, you can also file a civil suit against
the client and your former employees for account of profits and
damages. However, you may not be able to enforce the stipulation
disallowing your employees from joining services of a client for
three years from the date of their resignation/termination as such
restriction may be held to be in restraint of trade under Section
27 of the Indian Contract Act, 1872, which essentially provides
that any agreement by which a person is restrained from exercising
a lawful profession, trade or business of any kind, is to that extent
void.
I propose to resign from directorship of
a company. Can the company protect me against any future liability
arising in connection with my directorship?
Under the Companies Act, your company can provide
you with a corporate indemnity against any contingent liabilities
incurred by you in defending any legal proceedings in which judgement
is given in your favour, or in which you are acquitted/discharged.
However, this indemnity cannot be taken as a blanket indemnity against
any liability you may face by virtue of any rule of law due to any
negligence, default, misfeasance, breach of duty or breach of trust
of which you may be guilty, as the company cannot spend its funds
or provide financial assistance to any director for defending him
in any civil or criminal proceedings, unless he is found to be innocent
by a competent court. You can only be reimbursed after termination
of the proceedings in your favour. You can, however, obtain directors'
and officers' liability insurance to compensate any loss you may
suffer due to contractual and/or statutory liabilities arising out
of your duties to the company, and the premium for the policy can
be paid by the company. These policies are available from the General
Insurance Corporation of India and other private insurers.
The view expressed here should not be construed
as legal opinion and is for reference only. Business Today and/or
the author will not be responsible for any decision taken by readers
on the basis of these views. Please send in hyour queries to Legal.bt@intoday.com
or Going By The Book, c/o Business Today, F-26, Connaught Place,
New Delhi-110001
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