A ‘company’ is a legal person. It is incorporated in accordance with the law governing such entities in the country where such a company is formed. The affairs of the company are managed in accordance with its constitution adopted by its members at the time of its formation. Under no circumstances, a company can do anything that is in violation of its constitution. Any act done by a company in violation of its constitution is ultra vires and hence null and void.
In the Indian context, the Memorandum and Articles of Association of the company, prepared in accordance with the Schedule I of Companies Act 2013, read with section 4 and section 5 of the Act, become the constitution of the companies incorporated in India.
Section 4 of the Companies Act 2013, inter alia states that "The memorandum of a company shall state the objects for which the company is proposed to be incorporated". A company cannot do anything that is not stated in the "object clause" of the Memorandum of Association.
Similarly, the Articles of Association, framed as per Schedule I of the Act, read with Section 5, lay down the rules that shall govern the management and operations of the company. In legal parlance, the Articles of Association of a company is a contract between all the members of the company, where the members agree as to how the affairs of the company will be conducted to achieve the objectives as outlined in the "object clause" of the Memorandum of Association of the company.
If a company is formed in India, with the sole object of "producing and selling cement in India", such a company cannot (a) do any other business except producing and selling cement; and (b) sell cement produced by it anywhere outside India. If the company wants to provide advisory services to other cement manufacturers or it wants to sell cement outside India, it must first amend the "object clause" of its Memorandum of Association to provide for such activities.
Similarly, if the Article of Association of a company provides that the company shall appoint a managing director who will be less than 60 years of age and the term of such managing director shall not be more than 5 years under any circumstances; then the company cannot appoint a person who is 61 years old as its managing director, unless the Articles of Association are not amended in accordance with provisions of the Companies Act.
Constitution reigns supreme
Now consider a situation where a company formed with the objective of providing banking services in India incurs huge losses due to default by its borrowers. The shareholders of the company decide to change the management of the company and appoint new managing directors and other directors. Can the new management decide that to revive the fortunes of the company they will no longer provide the banking service and instead provide IT-enabled services (ITeS)? The answer is "No". The new management of the company cannot violate the constitution of the company, unless the shareholders, regulators and all other agencies concerned approve the change in the "object clause" of the Memorandum of Association of the company, in accordance with the prevalent law, rules and regulations.
Applying this maxim to our country, we get that the Constitution of India as adopted by her people, clearly defines the contours of the public policy. Any government, regardless of the stated ideological preference of the political party (or parties) managing the government, cannot do anything that ultra vires the Constitution of India.
The preamble of the Constitution of India, inter alia, mandates all governments in India to be "socialist" and "secular". Any public policy, whether social, economic or political, must adhere to the principles of socialism and secularism.
This must make the following two things clear to everyone:
(a) Unlike most other countries, the political ideology of the governments in India is defined by the constitution of India. Regardless of the political rhetoric, jingoism and shenanigans prior to elections, any party (or alliance of parties) that wins the elections and forms the government, must strictly adhere to the principles of "socialism" and "secularism", unless and until the Constitution of India is amended to provide for otherwise.
Any discussion regarding socio-economic ideology and principles of political parties in India may, therefore, be meaningless and redundant.
(b) The solution to any social and/or economic crisis must be found within the principles of "socialism" and "secularism".
The experts who are suggesting solutions to the government for tackling the current episode of economic slowdown must remember that "laissez-faire" is not an option in India. Any solution to the economic problem must adhere to the principle of socialism, i.e., how the policy will benefit the last man standing of the street. Any policy suggestion to the contrary would be like telling a banking company to sell onions.
Also, the commentators wasting their time discussing the disparateness of the latest Maharashtra alliance must realise that once inside the Mantralaya (seat of Maharashtra government), all parties must be "secular" and "socialist" and bow to the Tricolor and no other ensign.
Vijay Kumar Gaba explores the treasure you know as India, and shares his experiences and observations about social, economic and cultural events and conditions. He contributes his pennies to the society as Director, Equal India Foundation.
Read his columns here.