Bombay High Court has dismissed a ₹5 billion (US$75 million) defamation suit filed against Wipro chief Azim Premji by the now defunct Subhiksha Trading Services on the ground that R Subramanian, who was a promoter and the managing director of Subhiksha, did not have proper authorization for the company to file the case against Premji.
Premji, in an interview after Subhiksha suspended business operations, said there were financial malpractices in the company and he rued investing in it.
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Subhiksha and Subramanian filed a civil suit for defamation against Premji. Premji challenged the maintainability of the suit, contending that Subramanian had no authority to file the suit on behalf of Subhiksha; the consent required under Subhiksha’s articles of association to launch litigation had not been obtained; and there was no board resolution authorizing Subramanian to file the suit on behalf of Subhiksha.
The court after a detailed analysis dismissed the suit against Premji for want of authority of Subramanian to file suit on behalf of Subhiksha, holding that a defect in the verification and presentation of the plaint goes to the root of jurisdiction. Besides failing to fulfil a procedural requirement, the suit was void due to non-compliance with the precondition in the articles of association and could not be legitimized even if an official liquidator was appointed and later removed the infirmity.
The judgment emphasized that a company acts through its board of directors, except where express provision is made that powers in respect of a particular matter are to be exercised by the company in general meeting. The memorandum and articles may vest such powers in an individual director but, unless the board passes a resolution to confer the power to institute a suit on a particular director, the director has no authority to institute a suit on behalf of the company.
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