PERSONS

(Project towards partial fulfilment of the internal assessment in the subject of

Jurisprudence)

Submitted by: Submitted to:

Jai Sahai Endlaw (Roll No. 643) Dr. Mononita Das

Manish Parmar (Roll No. 646) Assistant Professor

Riyaz Bhagat (Roll No. 658) Faculty of Law

Siddhant Kant (Roll No. 612)

Semester VIII

National Law University, Jodhpur

Summer Session

(January – May 2012)

TABLE OF CONTENTS

Acknowledgement…………………………………………………………………….……….2

Research Methodology………………………………………………………………………...3

Introduction……………………………………………………………………………………5

Chapter 1: Basic Concepts……………………………………………………………....…….6

Chapter 2: Theories……………………………………………………………………………8

Chapter 3: Corporate Personality…………………………………………………………….18

Conclusion……………………………………………………………………………………22

References……………………………………………………………………………………24

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ACKNOWLEDGEMENT

We would like to thank our Jurisprudence teacher Dr. Mononita Das, for her constant support

and guidance. First of all, we would like to thank her for giving us an opportunity for doing a

project on this topic. Secondly, we would like to thank her for guiding us throughout and

making our path clear when we were in doubt. She not only cleared our doubts but also made

us learn with each further step that we took in this project.

Next, we would like to extend our gratitude towards the engineers of the university for

providing us a round the clock access to the Internet without which this research could not

have taken a concrete form and also the library staff which proves to be the lifeline of any

academic work.

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RESEARCH METHODOLOGY

Subject: Jurisprudence

Topic: Persons

Broader area: Personality

Objective: The objective of this paper is to provide a detailed analysis of the views expressed

by different jurists regarding the concept of ‘persons.’ This endeavour showcases the basic

concepts related to personality and further expounds on various jurists’ theories regarding the

nature of ‘legal persons.’ It also deals with the concept of corporate personality and the

concepts enunciated by Sir John Salmond and Max Weber. Each chapter in this project aims

to study and develop the theory relating to ‘persons’ as considered by the common law jurists

and examples of the same available in Indian jurisprudence. On the whole, the researchers

have tried to show the gradual change in perception of this philosophy and how the Courts in

India have perceived it. The legal concept of personhood is one of the most fundamental

ideas and has been the subject of many discussions and theories. Further, the implications it

has for the evolution of purposeful jurisprudence can only be described as significant. The

analysis in this paper attempts to cover the most important teachings on the topic as well as

examine the surrounding historical, sociological and political facets so as to arrive at an

accurate understanding of the topic.

Research Questions:

1. What are the different kinds of ‘persons’ recognized by Jurists?

2. What are the various theories given by Jurists regarding ‘persons’?

3. How have these theories expressed by Jurists changed with passage of time?

4. What is Corporate Personality?

5. How is Corporate Personality perceived in India?

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Geographical Indications: The scope of this research paper is limited to British and Indian

jurisdictions as the Jurists studied in the course of this paper have restricted their views to

these jurisdictions.

Temporal: Not applicable

Sources:

1. Library, National Law University, Jodhpur

2. World Wide Web

Chapterisation:

Chapter I: Basic Concepts

The difference between natural persons and legal persons is provided. Further, the difference

between the ‘status’ and ‘capacity’ of a person is examined. Status of unborn persons is

differentiated between Common law and Indian jurisprudence. The views of Salmond, Gray

and Dr. Allen are discussed and compared.

Chapter II: Theories

Various theories of Jurists such as Brinz, Barker, Ihering, Duguit, Hohfeld, Savigny,

Salmond, Kelsen and Gierke are examined. Their theories are examined and the gradual

change in perception is noted from a restricted view to a much more liberal view. An analysis

of various concepts having their origin in Roman and English law is carried out in this

section.

Chapter III: Corporate Personality

Salmond and Weber’s views on corporate personality are compared. The Indian perspective

on Corporate Personality is examined through the Supreme Court and High Court decisions

in various cases relating to the nature of Idols and Funds, Coparcenary system and State as a

juristic person.

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INTRODUCTION

The legal use of the word person has attracted an assortment of theories which is probably

second to none in volume. Before turning to them, it is necessary to have an idea of the way

in which various problems that have arisen in this connection are dealt with, and what part

the term person plays in relation to them. The word has undergone many shifts in the

meaning, so two questions have to be asked: how has it been used? And, how does it

function?1

With regard to its uses, it might be noted that originally it meant a mask, then the character

indicated by a mask, the character in a play, someone who represents a character, a

representative in general, representative of the church, a parson.2 In Roman law another shift

of meaning seems to have occurred from a character in a play to any human being. The

development of such capacities and bodies, such as municipium and the collegium, may have

helped to abstract the idea. Despite this it would be wrong to suppose that the word persona

was used in any technical sense in Roman law: there was only a tendency in that direction in

late law.3 Some such idea seems to have been presenting the mind of Tertullian, who brought

the legal ideas to bear on the interpretation of the ‘person’ of Christ, which gave the word

another shift in meaning as connoting the ‘properties’ of divinity and humanity.4 English law

has taken over the popular reference of the word to human beings with all its emotive

overtones, but the legal significance centres on the jural relations that are focused on an

individual. This represents a technical shift in the meaning ‘person’. The law has gone still

further and applied it to corporations, which is yet another a technical shift and does not rest

on any similarity, pretended or real, between human beings and groups. One may

acknowledge that a group is a unit without feeling impelled to call it a person; which indeed

is the case with unincorporated associations. Had the law stopped at human beings in its use

of the word ‘person’ a good deal of needless perplexity would have been avoided. As a unit

of jural relations, however, the term has lent itself to applications other than to human beings

and hence serves different functions.

1 Hart, ‘Definition and theory in Jurisprudence’ (1954) 70 LQR 37

2 Greenough and Kittredge Words and their ways in English speech p 268, quoted by Ogden and Richards The Meaning of Meaning p 129.

3 Duff Personality in Roman private Law ch. 1

4 Bethune-Baker An introduction to the Early history in the Christian doctrine ch. 10

5

CHAPTER 1

BASIC CONCEPTS

Persons, so defined are of two kinds and are distinguishable as natural and legal. Natural

person means a human being. It denotes a person not fictional or legal.5 Legal Persons on the

other hand are beings real or imaginary. They are persons by a figment. For the purposes of

legal reasoning they have been treated in greater or smaller degree in the same way as human

beings.

NATURAL PERSONS

The only natural persons are human beings. But in ancient times, all human beings were not

granted legal personality. The case of the slave is well known that they were treated no more

than the mere chattels. Similarly, a person who takes a religious or holy order or enters a

monastery has in certain systems been treated as civilly dead. In Hindu society too, when a

person becomes a sannyasi his proprietary rights turn off and his property goes to his heirs as

if he were dead. At one time, human beings who had been declared outlaws were not

regarded as persons in the eyes of the law and killing them was not homicide. Lunatics, new

born babies and infants have however been said to have limited and restricted rights. They do

not possess as many civil rights as normal human beings have. Though in modern times it has

been the tendency to grant legal personality to all living within the territory of the State, the

most systems however provide a rule that wheresoever’s legal personality is granted it begins

with birth and ends with death.

L EGAL PERSONS

A legal person is any subject matter other than a human being to which the law attributes

personality. This extension, for good and sufficient reasons of the conception of a personality

beyond the class of human beings is one of the most noteworthy feats of the legal

imagination. The law, in creating legal persons, always does so by personifying some real

thing. There is, indeed, no theoretical necessity for this, since the law might, if it is so

pleased, attribute the quality of personality to a purely imaginary being and yet attain the ends

for which this fictitious extension of personality is devised. Personification, however,

conduces so greatly to simplicity of thought and speech that its aid is invariably accepted.

5 Austin, Lectures on Jurisprudence, 3rd ed, Campbell, London, 1869, pp. 357-358

6

The thing personified may be termed the corpus of the legal person so created. It is the body

into which the law infuses the animus of fictitious personality.

To be a legal person is to be the subject of rights and duties. To confer legal rights or to

impose legal duties, therefore, is to confer legal personality.6 Among definitions to be found

in discussions of the subject, perhaps the most satisfactory is that legal personality is the

capacity for legal relations, but legal philosophers and students of jurisprudence have not

been content with so simple an explanation. They have sought for the "internal nature" of

legal personality, for an abstract essence of some sort which legal personality requires.

Thus Gray thinks there can be no right, and therefore no legal personality, without a will to

exercise the right. "That a right should be given effect," says he, "there must be an exercise of

will by the owner of the right."7 But, after having adopted the premise that a will is of the

essence of a right, he then proceeds to explain how it is that certain human beings without

wills and even inanimate objects do have legal personality, a task which he complains is the

most difficult "in the whole domain of Jurisprudence."8

Salmond, on the other hand, discovers a different quality which, by his definition, is essential

to a right. "No being is capable of rights," says he, "unless also capable of interests which

may be affected by the acts of others," and "no being is capable of duties unless also capable

of acts by which the interests of others may be affected."9 But Salmond's pre- supposition of

an intrinsic essence does not give him as much trouble as did Gray's, for no sooner has he

discovered the necessity of an interest to the existence of a right than he also discovers that

the same act of investiture which attributes the right also attributes the interest. He defines a

legal person, therefore, as "any being to whom the law attributes a capacity of interests and,

therefore, of rights, of acts and, therefore, of duties."10 This is substantially the same

conclusion Mr. Gray reached with respect to the necessity of a will. Where there is no will in

fact the law attributes one. So long as it has unlimited power of attribution, neither theory

need hinder the sovereign in bestowing legal personality upon whomever or whatever it will.

6 Gray, The Nature And Sources Of The Law (2d Ed. 1921) 27

7 Salmond, Jurisprudence (5th Ed. 1916) 272

8 Holland, Jurisprudence (9th Ed. 1900) 88

9 Ibid

10 Pollock, A First Book of Jurisprudence (1923) 114.

7

The first class of legal persons consists of corporations, those which are constituted by teh

personification of groups or series of individuals. The individuals who thus form the corpus

of the legal persons are termed its members.

The second class is that in which the corpus or object selected for personifications not a

group or series of persons but an institution. The law may if it pleases regard a church, or a

hospital, or a university, or a library as a person. That is to say it may attribute personality not

to any group of persons connected with the institution but to the institution itself.

The third class of legal person is that in which the corpus is some fund or estate devoted to

special uses – a charitable fund, for example, or a trust estate or the property of a dead man or

incorporation. If it chooses to personify at alit personifies not the fund or the estate but the

body of persons who administer it. Yet the other way is equally possible, and may be equally

expedient. The choice of the corpus into which the law shall breathe the breath of a legal

personality is a matter of form rather than substance.

HUMAN BEINGS

Individual are the social units and pre-existed both laws and society. Since laws are made by

them and for them, and since jural relations are relations between individuals, it is no wonder

that the jural relations of each individual came to be one of the first and most important

unities for legal purposes.11 The legal concept of a human being as a person is simply a

multitude of claims, duties, liberties etc. treated as a unit; as such there is no distinction in

law between ‘natural’ and ‘legal’ persons12

11 Slavery in England died out before Norman times. The attribution of rights or responsibility to animals has likewise long been obsolete. The responsibility of animals in common in primitive systems: Exodus xxi 28; XII Tables 8.8: Dg.1.1 pr. In English law the responsibility of wrong doing things, deodand, was abolished by statute in 1846. Though the institution had long been obsolete. The Privy Council had occasion to deal with the position of an idol in Hindu Law, Pramatha Nath Mullick v Pradyumna Nath Mullick (1925) LR 52 Ind App 245.

12 Cf Kelsen General theory of Law and State pp 93 et seq; Pure theory of Law (trans M Knight) p 173.

8

STATUS V. CAPACITY

Personality may be distinguished from status and capacity. Status is a word which has no

precise meaning. Salmond13 has however given four meanings of the word.

a) Legal condition of any kind whether personal or proprietary

b) Personal legal condition excluding proprietary relations

c) Personal capacities and incapacities as opposed to other elements of personal status

d) Compulsory as opposed to conventional legal position.

Austin14 agreed that the term cannot be used with exactness but thought that when for ease of

exposition it is useful to separate a complex of rights and duties of capacities and incapacities

which specifically affect a narrow class, it is convenient to designate that complex by the

term status.

Dr. Allen15 says that status may be described as the fact of condition of membership of a

group of which the powers are determined extrinsically by laws status affecting not merely

one particular relationship but being a condition affecting generally though in varying degree

a member’s claims and powers. It is not merely a basis for short, status is a condition which

arises due to the membership of a class or group and affects the rights and duties of the

members of that class.

A person may have a number of status at the same time, for example he might be a husband,

father and an officer. The general principle of status is that when created by the law of one

country it is or ought to be judicially recognized as being the case everywhere, all the world

over.16

Dr. Allen distinguishes between status which is a condition and capacity which is a power to

acquire and exercise rights and the rights themselves which are acquired by the exercise of

that capacity. Capacity in other words means the rights and powers of a person by virtue of

his being in a particular position. Law recognizes different capacities in which a man may

act. Thus if a person is a judge, he has the capacity of a judge as well as the capacity of a

13 Salmond, Jurisprudenec, 12th ed, p. 240

14 Jurisprudence, ii. 687

15 Allen, Legal Duties, 28

16 Re Luck’s Settlement Truses, (1940) 1 Ch. 864 at p. 889, Per Scott., LJ

9

citizen at the same time. But the mere fact that a man has double capacity does not mean

double personality. His legal personality is only one. Therefore a person in one capacity

cannot enter into a contract or any other like transaction with himself in his other capacity.

THE LEGAL STATUS OF UNBORN PERSONS

Thought the dead possess no legal personality, it is otherwise with the unborn. There is

nothing in law to prevent a man from owning property before he is born. His ownership is

necessarily contingent, indeed, for he may never be born at all; but it is none the less a real

and present ownership. A man may settle property upon his wife and the children to be born

of her. Or he may die intestate, and his unborn child will inherit his estate. Yet the law is

careful lest property should be too long withdrawn in this way from the uses of living men in

favour of generations yet to come; and various restrictive rules have been established to this

end. No testator could now direct his fortune to be accumulated for a hundred years and then

distributed among his descendants.

A child in its mother’s womb is for many reasons regarded by a legal fiction as already born,

in accordance with the maxim Nasciturus pro jam nato habetur. In the words of Coke: “The

law in many cases hath consideration of him in respect of the apparent expectation of his

birth.”

Thus, in the law of property, there is a fiction that a child en ventre sa mere is a person in

being for the purposes of

1. The acquisition of property by the child itself

2. Being a life chosen to form part of the period in the rule against perpetuities17

To what extent an unborn person possess personal as well as proprietary rights is a somewhat

unsettled question. Wilful or negligent injury inflicted upon a child in the womb by reason of

which it dies amounts to murder or manslaughter.18

The rights of an unborn person, whether proprietary or personal are all contingent on his birth

as a living human being. The legal personality attributed to him by way of anticipation falls

away ab initio if he never takes his place among the living. Finally, though the law imputes

no rights to persons not yet even conceived, it may protect their interests. If some of the 17 Winfield “The Unborn Child” (1942) 5 Univ. Of Toronto Law Journal 278 at 279

18 R v. Senior (1832) 1 Moody C.c. 344; R v. West (1848) 2 Car. & Kir. 784

10

beneficiaries of a trust are unborn persons, the trust cannot be varies without obtaining the

court’s consent on their behalf.

In India too, the Principle laid down in Tagore v. Tagore19 that a person to be entitled to take

under a will must be in fact or in contemplation of law be in existence at the time of the

testators death, has apparently been alrtered by the three acts viz. The Hindu Transfers and

Bequests Act, 1914; Hindu Disposition of Property Act, 1914; Hindu Transfers and Bequests

(City of Madras) Act, 1921 with the result that bequests can be made t unborn persons

subject to the limitations and provisions contained in Ss.113-116 of the Indian Succession

Act, 1925.

19 (1872) Beng. LR 377

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CHAPTER II

THEORIES ON THE NATURE OF ‘LEGAL PERSONS’

Professor Wollf has observed that on the Continent legal writers may be grouped into two

categories; those who have written on the nature of the Legal persons and those who have not

yet done so.20 In dealing with some of these theories it is as well to bear in mind that the

attitude of the law has not been consistent and also that there is a distinction between

appreciating the unity of a group and the way the word ‘person’ is used.

PURPOSE THEORY

This theory, that of Brinz primarily, and developed in England by Barker21, is based on the

assumption that ‘person’ is applicable only to human beings; they alone can be the subjects of

jural relations. The so-called ‘juristic’ persons are not persons at all. Since they are treated as

distinct from their human sub-stratum, if any, and since jural relations can only vet in human

beings, they should be regarded simply as ‘subjection properties’ designed for certain

purposes. It should be noted that this theory assumes that other people may owe duties

towards these ‘subjection properties’ without there being correlative claims, which is not

impossible, although critics have attacked the theory on this ground. As applied to ownership,

the idea of the theory was designed mainly to explain the foundation, the Stiftung of German

law. And it would also explain the vacant inheritance, the hereditas jacens, of Roman law. It

is not applicable to English law. Judges have repeatedly asserted that corporations, for

instance are ‘persons’, and it is in this use of the word that need explaining. If they say that

these are persons, then to challenge this usage would amount simply to using the word

differently from Judges.

To Duguit ‘purpose’ assumed a different meaning. To him the endeavour of law in its widest

sense is the achievement of social solidarity. The question is always whether a given group is

pursuing a purpose which conforms with social solidarity. If it does, then all activities falling

20 Wolf ‘on the nature of legal persons’ (1938) 54 LQR 494.

21 Brinz Lehrbuch der Pandekten 1. Pp 196-238; III, pp 453-586; Barker in his translation of Gierke Natural Law and the Thoery of Society Ixxiii-Ixxxvii.

12

within that purpose deserve protection. He rejected the idea of collective will as unproven;

but there can be, he said, a collective purpose.22

THEORY OF ENTERPRISE ENTITY

Related, though somewhat removed from the above discussed theory, is the theory of the

enterprise entity. The corporate entity, it is said, is based on the reality of the underlying

enterprise23. Approval by law of the corporate from establishes a prima facie case that the

assets, activities and responsibilities of the corporation are part of the enterprise. Where there

is no formal approval by law, the existence, and extent of responsibility and so forth of the

unit are determined by the underlying enterprise. This way of looking at it does explain the

attitude of the law towards unincorporated associations and also leaves room for the

miscellaneous situations in which corporate unity is ignored. The theory is a utilitarian one.

SYMBOLIST OR BRACKET THEORY

According to Ihering the members of a corporation and the beneficiaries of a foundation are

the only persons. ‘Juristic person’ is but a symbol to help in effectuating the purpose of the

group, it amounts to putting a bracket round the members in order to treat them as a unit. This

theory, too, assumes that the word person is confined to human beings. It does not explain the

foundations for the benefit of mankind generally or for animals. Also- and this is not so much

as an objection as a comment- this theory does not purport to do more than to say what the

facts are that underlie propositions such as, ‘X and Co.’ owe Y certain amount of money. It

takes no account of the policy of the Courts in the varying ways in which they use the phrase.

‘X and Co.’; whether they will, for instance, lift the mask, i.e. remove the bracket, or not.

Closely related to this theory is that of Hohfeld, which may be considered next. .

22 Duguit The progress of continental law in the 19th century. Pp 87-100

23 Berle ‘The theory of enterprise entity’(1947) 47 Columbia Law Review 343; Lord Wilberforce in British Railway Board v Herrington [1972] AC 877 at 911, 922 [1972]1 All ER 749 at 769, 779; DHN Food Distributers ltd. v Tower Hamlets London Borough Council [1976] 3 All ER 462, [1976] 1 WLR 852.

13

HOHFELD’S THEORY

Hohfeld24 drew a distinction between human beings and ‘juristic persons’. The latter, he said,

are the creation of arbitrary rules of procedure. Only human beings have claims, duties,

powers and liabilities; transactions are conducted by them and it is they who ultimately

become entitled and responsible. There are, however, arbitrary rules which limit the extent of

their responsibility in various ways, e.g. to the amount of the shares. The ‘Corporate person’

is merely a procedural form, which is used to work out in a convenient way for immediate

purposes a mass of jural relations of a large number of individuals., and to postpone the

detailed working out of these relations among the individuals inter se for a later a more

appropriate occasion.

This theory is purely analytical and like the preceding one, analyses a corporation out of

existence. Although it is reminiscent of a person who fails to see a wood and sees onlu a

collection of trees, it would be unfair to suggest that Hohfeld was advocating that

corporations should be viewed in this way. He was only seeking to reduce the corporate

concept to ultimate realities. What he said was that the use of the group terminology is the

means of taking account of mass individual relationships. It is to be noted. However, that he

left unexplained the inconsistencies of the law; his theory was not concerned with that aspect

of it. Finally, to say that corporate personality is a procedural form may seem to be rather a

misleading use of the word ‘procedural’. What seems to be meant is that the unity of a

corporation is a convenient way of deciding cases in court.

KELSEN’S THEORY

Kelsen25 began by rejecting, for purposes of law, any contrast between human beings as

'natural persons' and 'juristic persons'. The law is concerned with human beings only in so far

as their conduct is the subject of rules, duties and claims. the concept of 'person' is always a

matter of law; the biological character of human beings is outside its province. Kelsen also

rejected the definition of person as an 'entity' which 'has' claims and duties. The totality of

claims and duties is the person in law; there is no entity distinct from them. Turning to

corporations, he pointed out that it is the conduct of human beings that is the subject matter of

24 Hohfeld Fundamental Legal Conceptions chs 6 and 7.

25 Kelsen General theory of law and State pp 93-109; Pure Theory of Law pp 168-192

14

claims and duties. A corporation is distinct from one of its members when his conduct is

governed not only by claims and duties, but also by a special set of rules which regulates his

actions in relation to the other members of the corporation. It is this set of rules that

constitutes the corporation. For example, whether the contract of an individual affects only

him or the company of which he is a member will depend on whether or not the contract falls

within the special set of rules regulating his actions in relation to his fellow members.

This theory is also purely analytical and accurate as far as it goes. It omits the policy factors

that bring about variations in the attitude of the courts, and it does not explain why the special

set of rules, of which Kelsen spoke, is invoked in the case of corporations, but not in

partnerships. In fairness to Kelsen it must be pointed out that he expressly disclaimed any

desire to bring in the policy aspects of the law. All he was concerned to do was to present a

formal picture of the law, and to that extent he did what he set out to do.

FICTION THEORY

Its principal supporters are Savigny and Salmond.26 Juristic persons are only treated as if

they are persons, ie human beings. It is thought that Sinibald Fieschi, who became Pope

Innocent IV in 1243, was the first to employ the idea of persona ficta; 'cum collegium in

causa universitatis fingatur una persona27'. It is clear that the theory presupposes that only

human beings are 'properly' called 'persons'. Every single man and only the single man is

capable of rights', declared Savigny28; and again, ‘The original concept of personality must

coincide with the idea of man’29. The theory appears to have originated during the Holy

Roman Empire and at the height of Papal authority. Pope Innocent's statement may have

been offered as the reason why ecclesiastical bodies could not be excommunicated or be

capitally punished. All that the fiction theory asserts is that some groups and institutions are

regarded as if they are persons and does not find it necessary to answer why. This gives it

flexibility to enable it to accommodate the cases in English law where the mask is lifted and

those where it is not, cases where groups are treated as persons for some purposes but not for

26 Salmond Jurisprudence 7th edition s 114

27 Gierke Das deutsche Genossenschaftsrecht III, 279 n 102

28 Savigny System des heutiden romischen Rechts II, 2-3

29 Savigny II, 60.

15

others. The popularity of this theory among English writers is explained partly by this very

flexibility, partly by its avoidance of metaphysical notions of ‘mind’ and 'will,' and partly by

its nonpolitical character.

CONCESSION THEORY

This is allied to the fiction theory and, in fact, supporters of the one tend also to support the

other. Its main feature is that it regards the dignity of being a 'juristic person' as having to be

conceded by the state, i.e. the law. The identification of 'law' with 'state' is necessary for this

theory, but not for the fiction theory. It is a product of the era of the power of the national

state, which superseded the Holy Roman Empire and in which the supremacy of the state was

emphasised. It follows, therefore, that the concession theory has been used for political

purposes to strengthen the state and to suppress autonomous bodies within it. No such body

has any claim to recognition as a 'person.' It is a matter of discretion for the state. This is

consistent with the deprivation of legal personality from outlaws; but on the other hand it is

possible to argue that the common law corporations of English law discredit it somewhat

though, even with these, there is a possibility of arguing that they are persons by virtue of a

lost royal grant.

REALIST AND ORGANISM THEORY

The 'realist' theory, of which Gierke is the principal exponent and Maitland a sympathizer30,

asserts that 'juristic persons' enjoy a real existence as a group. A group tends to become a

unit and to function as such. The theory is of German origin. Until the time of Bismarck,

Germany consisted of a large number of separate states. Unification was their ideal, and the

movement towards it assumed almost the character of a crusade. The very idea of unity and

of collective working has never ceased to be something of a marvel, which may be one

reason for the aura of mysticism and emotion which is seldom far from this theory. The

‘realist’ theory opposes the concession theory. Human beings are persons without any

30 Frederic William Maitland, The Collected Papers of Frederic William Maitland, ed. H.A.L. Fisher (Cambridge University Press, 1911). 3 Vols. Vol. 3. Chapter: THE CORPORATION SOLE 1Accessed from <http://oll.libertyfund.org/title/873/70325> on 20-02-2012

16

concession from the state and, so the argument runs, so far as groups are 'real,' they too are

automatically persons.

The 'organism' theory, with which the 'realist' theory is closely associated, asserts that groups

are persons because they are 'organisms' and correspond biologically to human beings. This

is based on a special use of the term 'organism' and the implications of such biological

comparison can lead to absurdity31. It is said that they have a 'real life'. Professor Wolff

points out that if this were true, a contract between two companies whereby one is to go into

voluntary liquidation would be void as an agreement to commit suicide32. It is also said that

they have a 'group will' which is independent of the wills of its component members.

Professor Wolff has pointed out that the 'group will' is only the result of mutually influenced

wills33, which indeed every fictionist would admit. To say, on the other hand, that it is a

single will is as much a fiction as ever the fictionists asserted. As Gray, quoting Windscheid,

said, 'To get rid of the fiction of an attributed will, by saying that a corporation has a real

general will, is to drive out one fiction by another34.

It has also been stated that group entities are 'real' in a different sense from human beings.

The 'reality' is physical, namely the unity of spirit, purpose, interests, and organisation. Even

so, it fails to explain the inconsistencies of the law with regard to corporations. Connected

with the realist theory is the 'Institutional' theory which marks a shift in emphasis from an

individualist to a collectivist outlook. The individual is integrated into the institution and

becomes part of it. The 'pluralist' form of this theory allowed the independent existence of

many institutions within the supreme institution of the state. The 'fascist' form of it, however,

gave it a twist so as to make the state the only institution, which integrated all others and

allowed none to survive in an autonomous condition.

31 Discussed by Wollf pp 498-499. See, however, Denning LJ in HL Bolton (Engineering) co. Ltd. v TJ Graham and Sons Ltd. [1957] I QB 159 at 172, [1956] 3 All ER 624 at 630. A ‘realist’ interpretation can be given to certain aspects of English Law, eg when a corporation is said to act, ‘personally’ through its supreme directorate. Also Riverston Meat Co. Pty Ltd. v Lancashire Shipping Co. Ltd. [1961] AC 807 at 861, [1961] I All ER 495 at 516.

32 M. Wolff, “On the Nature of Legal Persons”, (1938) 54 Law Quarterly Review 494.

33 ibid.

34 Gray pp 54-55.

17

CHAPTER III

CORPORATE PERSONALITY

Classically, a corporation was conceived as an artificial person, coming into existence

through creation by a sovereign power. Its primary business advantage, of course, was

insulation of individual stockholders composing the corporation from liability for the debts of

the corporate enterprise. The legal doctrine of corporate personality was built around the idea

of a sovereign grant of certain attributes of personality to a definable group, engaged in an

enterprise.35

SIR JOHN SALMOND’S VIEWS ON CORPORATE PERSONALITY

Salmond's views on corporate theory appear in Chapter XV of his Jurisprudence, which

deals with Persons. Salmond's basic view was that "persons are the substances of which rights

and duties are the attributes. It is only in this respect that persons possess juridical

significance, and this is the exclusive point of view from which personality received legal

recognition".

He distinguished between natural and legal persons and said that legal persons are beings,

real or imaginary, to whom the law attributes personality by way of fiction when there is

none in fact. Although Salmond adopted the fiction theory he did so with certain reservations.

He said that, although fictitious personality involves personification, the converse is not true.

Personification in itself is a mere metaphor, not a legal fiction.

"Legal personality is a definite legal conception; personification as such is a mere artifice of

speech designed for compendious expression". People talk about a bench of judges or a

partnership as a firm. This is simply metaphorical usage. A corporation is, on the other hand,

a fictitious person representing a group of persons but is not identical with them. It is treated

in law as a separate person. He followed the conventional distinction between corporations

sole and aggregate.

He thought that the chief difficulty in comprehending the true nature of a corporation sole is

that it bears the same name as a natural person who is himself the sole member for the time

being.

35 Adolf A. Berle, Jr, The Theory of Enterprise Entity, Columbia Law Review, Vol. 47, No. 3 (Apr., 1947), pp. 343-358

18

He acknowledged that while he accepted the generally received view that corporations are

fictitious persons the theory has not gone unchallenged. He referred to the views of Gierke36

that the real Verbandspersonlichkeit is a group organism whose parts are human beings. He

seemed to be aware of the problems of what Teubner has called "organicist collectivism".37

He drew attention to the fact that such a theory cannot accommodate the corporation sole and

even in the case of a corporation aggregate "it seems impossible to admit that their

personality is anything more than the outcome of metaphor and fiction".

Salmond thought that although corporations are fictitious persons the acts, interests, rights

and liabilities attributed to them by the law are those of natural persons. Otherwise the law of

corporations would be destitute of any relation to actual fact. His attribution doctrine seems

to have preceded that of Lord Hoffmann delivering the judgment of the Judicial Committee

of the Privy Council in Meridian Global Funds Asia Ltd v Securities Commission.38

MAX WEBER’S VIEWS ON CORPORATE PERSONALITY

In the discussion on forms of creation of rights Weber deals with associational contracts.39

He sets out a useful historical survey of the evolution of juristic personality citing Gierke and

Maitland. He emphasises that the concept of the juristic person from a legal standpoint is a

tautology since the very concept of person is necessarily the juristic one. The determination

of legal personality is just as artificial as the legal definition of "thing". That is, it is decided

exclusively in accordance with selected juristic criteria. "The most rational actualisation of

the idea of legal personality consists in the complete separation of the legal spheres of the

members from the separately constituted legal sphere of the organisation." While certain

persons designated according to rules are regarded from the legal point of view as alone

authorised to assume obligations and acquire rights for the organisation, the legal relations

thus created do not at all affect the members and their property but are imputed to a separate

and distinct body of assets.36 SJ Stoljar Groups and Entities: An Inquiry into Corporate Theory (ANU Press, Canberra, 1973) 183

37 Gunter Teubner "Enterprise Corporatism: New Industrial Policy and the 'Essence' of the Legal Person" in Sally Wheeler (ed) A Reader on the Law of the Business Enterprise (Oxford University Press, Oxford 1994) 51.

38 Meridian Global Funds Asia Ltd v Securities Commission [1995] 2 AC 500. See JH Farrar Corporate Governance: Theories, Principles and Practice (2 ed, Oxford University Press, Melbourne, 2004) ch 5.

39 Max Rheinstein (ed) Max Weber on Law and Economy and Society (Simon and Schuster, New York, 1954) 154.

19

Weber considered the institution of the State and whether this should be treated as a juristic

person of private law. He analysed the position in Roman law and in Europe in the Middle

Ages, drawing comparisons with England. He argued that the rational concept of the

corporation in Roman law was a product of the imperial period, quite particularly the law of

municipal corporations.

It can be seen from the above that Weber's and Salmond's ideas are similar but Weber is

richer in historical and comparative detail. The position with regard to corporations changed

in the nineteenth century with the adoption of a more laissez faire approach to

incorporation.40

CORPORATE PERSONALITY IN INDIA

Coparcenary – As in Rome, so also in India, the concept of juristic personality was quite

unknown, but the coparcenary system has however, been to a certain extent, familiar as a

corporation. In this coparcenary system normally though each member is presumed to have

certain rights, but the karta of the family is supreme in the management of the property and

has control over the income and expenditure. He has absolute discretion in the management

of the property and is entitled to spend the whole income even in spite of the objection of

other members whose only remedy is to seek partition,41 if they are dissatisfied with his

management. The karta of the joint family has not only been allowed to have extensive

powers of alienating for value the joint family property but ,au also enter into a transaction in

his own name where he may in turn have the power to sue and liability to be sued for that

transaction. Other members of the family who are represented by the head are also bound by

the decree.42 The coparcenary system of the Hindu law thus represents the true notion of

corporation.

Idols and Funds – Apart from the coparcenary system Idols and Funds under Hindu law have

also been recognized as having legal personality. A Hindu idol is, according to long

established authority founded upon the religious customs of Hindus and the recognition

thereof by the courts of law is a juristic entity.43 It has juridical status with the power of suing

40 Bouverie Speech on Second Reading of the Limited Liability Bill in the House of Commons (June 1855) 139 Hansard 310.

41 Bhawani v. Juggernath (1866) 3 Mad HC 177

42 Ramanatham v. SRMCTM (1937) Mad 88043 Pramath Nath Mullick v. Praduymna Kumar Mullick 52 IA 245

20

and liability of being sued. Its interests are attended to by the person who has the deity in his

charge and who is in law its manager with all the powers which would in such circumstances

on analogy being given to the manager of the estate of an infant heir. This is why the rules

against perpetuity do not apply to endowments created in favour of an idol.

State as a Juristic Person – Of all forms of Human society the greatest is the State. It owns

wealth in large quantity and performs functions which in number and importance are beyond

all other associations. In modern times, it has been regarded as one of the greatest

corporations ever known to law. It has been endowed with all powers to sue and liability to

be sued.44 This is further strengthened by virtue of Art.300 of the Constitution of India.

Besides this, there are many other provisions which clearly provide that the Union and State

are legal persons. Part III dealing with Fundamental Rights puts numerous duties upon the

state and provides at the same time for their enforcement by the Supreme Court and High

Courts.45 Directive Principles of State Policy impose on State a duty to engraft laws as

contained in those directions.

44 Shyam Sundar v. State of Rajasthan AIR 1974 SC 890

45 Art. 32 and Art. 226 of Constitution of India

21

CONCLUSION

Firstly, no one explanation takes account of all aspects of the problem, and criticism

becomes easy. Two questions should be kept clear: What does any theory set out to explain?

and, What does one want a theory to explain? Those that have been considered are

philosophical, political or analytical: they are not so much concerned with finding solutions

to practical problems as with trying to explain the meaning of the word 'person'. Courts, on

the other hand, faced with the solving of practical problems, have proceeded according to

policy, not logic. The objectives of the law are not uniform. One of its main purposes in the

case of human beings is to regulate behaviour; so there is, on the one hand, constant concern

with the performance or non-performance of duties by individuals. With corporations the

main purpose is to organise concerted activities and to ascribe collective responsibility

therefore; so there is, on the other hand, emphasis on collective powers and liabilities.

Secondly, as has been pointed out by more than one writer, English lawyers have not

committed themselves to any theory. There is undoubtedly a good deal of theoretical

speculation, but it is not easy to say how much of it affects actual decisions. Authority can

sometimes be found in the same case to support different theories46.

Thirdly, two linguistic fallacies appear to lie at the root of much of the theorising. One is that

similarity of language form has masked shifts in meaning and dissimilarities in function.

People speak of corporations in the same language that they use for human beings, but the

word 'person' does not 'mean' the same in the two cases, either in point of what is referred to

or function. The other fallacy is the persistent belief that words stand for things. Because the

differences in function are obscured by the uniform language, this has led to some curious

feats of argumentation to try and find some referent for the word 'person' when used in

relation to corporation which is similar to the referent when the word is used in relation to

human beings47. A glance at the development of the word persona, set out at the beginning of

this chapter, shows progressiveness in the ideas represented by it.

There is no 'essence' underlying the various uses of 'person'. The need to take account of the

unity of a group and also to preserve flexibility are essential, but neither is tied to the word.

46 Pollock A first book of Jurisprudence pp 110-111; ‘Has the Common Law received the Fiction theory of Corporations?’ in Essay in the Law p 151; Duff Personality in Roman Private Law. P 215.

47 Hart pp 49-59. Cf Auerbach ‘On Professor Hart’s Definition and Theory in Jurisprudence’ (1956) 9 Journal of Legal Education 39.

22

The application of it to human beings is something which the law shares with ordinary

linguistic usage, although its connotation is slightly different, namely a unit of jural relations.

Its application to things other than human beings is purely a matter of legal convenience.

Neither the linguistic nor legal usages of 'person' are logical. If corporations aggregate are

'persons', then partnerships and trade unions should be too. The error lies in supposing that

there should always be logic. Unless this has been understood, the varied uses of the word

will only make it a confusing and emotional irritant.

23

REFERENCES

ARTICLES

1. Adolf A. Berle, Jr, “The Theory of Enterprise Entity”, Columbia Law Review, Vol.

47, No. 3 (Apr., 1947), pp. 343-358

2. Bryant Smith, Legal Personality, The Yale Law Journal, Vol. 37, No. 3 (Jan., 1928),

pp. 283-299 

3. Fredrick Maitland, Corporation Sole, Law Quarterly Review, 16 (1900) pp. 335 -354

available at <http://hushmoney.org/corporationsole_maitlandEN.htm>

4. Gunter Teubner "Enterprise Corporatism: New Industrial Policy and the 'Essence' of

the Legal Person" in Sally Wheeler (ed) A Reader on the Law of the Business

Enterprise (Oxford University Press, Oxford 1994) 51.

5. JH Farrar, “Corporate Governance: Theories, Principles and Practice” (2 ed, Oxford

University Press, Melbourne, 2004)

6. John Finnis, The Priority of Persons available at:

<http://www.wya.net/i/WYA_TRACK%20A_John%20Finnis-The%20Priority%20Persons.pdf>

7. M. Wolff, “On the Nature of Legal Persons”, (1938) 54 Law Quarterly Review 494.

8. SJ Stoljar, “Groups and Entities: An Inquiry into Corporate Theory” (ANU Press,

Canberra, 1973) 183

9. Winfield “The Unborn Child” (1942) 5 Univ. Of Toronto Law Journal 278 at 279

BOOKS

1. Frederic William Maitland, The Collected Papers of Frederic William Maitland, ed.

H.A.L. Fisher (Cambridge University Press, 1911).

2. Horace Gray, The Nature and Source of Law, (2nd Ed., 1921) pp. 27.

3. HLA Hart, Essays in jurisprudence and philosophy, Clarendon Press, (Reprint, 1983).

4. John Austin, Lectures on Jurisprudence, Campbell, London, (3rd ed, 1999) pp. 357-

358.

5. John William Salmond and Patrick John Fitzgerald, Salmond on Jurisprudence, Sweet

& Maxwell, 1966 (12th Ed. 1966) pp. 231.

6. RWM Dias, Jurisprudence, Aditya Books Butterworths New Delhi (5th ed. 1994) pp.

250 – 270.

24

JUDICIAL DECISIONS

1. Bhawani v. Juggernath (1866) 3 Mad HC 177.

2. HL Bolton (Engineering) co. Ltd. v TJ Graham and Sons Ltd. [1957] I QB 159 at 172,

[1956] 3 All ER 624 at 630.

3. Meridian Global Funds Asia Ltd v Securities Commission [1995] 2 AC 500.

4. Pramatha Nath Mullick v Pradyumna Nath Mullick (1925) LR 52 Ind App 245.

5. R v. Senior (1832) 1 Moody C.c. 344.

6. R v. West (1848) 2 Car. & Kir. 784.

7. Ramanatham v. SRMCTM (1937) Mad 880.

8. Re Luck’s Settlement Truses, (1940) 1 Ch. 864 at p. 889.

9. Riverston Meat Co. Pty Ltd. v Lancashire Shipping Co. Ltd. [1961] AC 807 at 861,

[1961] I All ER 495 at 516.

10. Shyam Sundar v. State of Rajasthan AIR 1974 SC 890.

11. Tagore v. Tagore (1872) Beng. LR 377.

Shyam Sunder and Ors. v. State of Rajasthan (AIR 1974 SC 890): Where the 

question of sovereign immunity was raised and reliance was placed on the ratio 

laid down in Kasturi Lal’s case (supra), this Court after considering the principle of 

sovereign immunity as understood in English and even applied in America 

observed that there was no ‘logical or practical’ ground for exempting the 

sovereign from the suit for damages.

Meridian Global Funds Management Asia Ltd v Securities Commission

Meridian   was   part   of   a   syndicate   bidding   to   take   over   NZ   company,   Euro 

National Corp Ltd. Mr Koo and Mr Ng, working for Meridian, bought 49% of 

Euro’s shares. But Meridian failed to disclose to theSecurities Commission of 

New Zealand that they had become a ‘substantial security holder’ of over 5% 

because Koo and Ng wanted to hide the transaction from their superiors. The 

Commission imposed fines against Koo, Ng and the Meridian. The company 

argued it was not liable because it had not known about it.

25

Heron J held Meridian knew it was a substantial property holder, because as 

employees the knowledge of Koo and Ng was attributable to the company. The 

NZ Court of Appeal held that Koo’s knowledge should be attributable because 

he was the ‘directing mind and will’ of the company. Meridian argued that was 

only the board, not Koo.

Lord Hoffmann for the Privy Council advised that ‘there would be little sense in 

deeming such a persona ficta to exist unless there were also rules to tell one 

what acts were to count as acts of the company. It is therefore a necessary 

part  of  corporate  personality   that   there  should  be rules  by  which  acts  are 

attributed to the company. These may be called ‘the rules of attribution’. There 

can   be   rules   in   the   constitution   or   rules   implied   (e.g.   shareholders   acting 

unanimously are the company, Multinational Gas). Otherwise, the principles of 

agency apply, and the company acts through its servants and agents.

26