A STUDY ON THE CONCEPT OF

LEGAL PERSONS
Sr no. Topic Page no.
1. Introduction 3
2. Salient Features 5
3. 6

Human beings as individuals

4. 7

Corporation sole

5. 8

Corporation aggregate
6. 10

Interpretation of the term “Legal Person” by the Indian

Judiciary

7. Bibliography 12

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INTRODUCTION:

The Judicial system categorises persons as follows :

 Natural persons – A person who has his own legal personality is considered a
natural person.
 A Natural Person can be best defined as a living human being.
Therefore, legally speaking, a natural person is the one who gets most
of the rights and privileges guaranteed by law (Constitutional) along
with duties and responsibilities (social wellbeing).

 A natural person can sue and be sued under the law. This does not
need any special provisions in the law. 

 Fundamental rights and human rights are largely for the benefit of

natural persons.

 All the civil rights are available to a natural person . A person who is
declared as insolvent in law will continue to enjoy his fundamental
rights as a human being . However, his civil rights are limited or nil.

 It is still unsettled in many places as to whether an unborn child is a

natural person. A harmonious reading of the definition of Natural
persons suggests that the same cannot be extended to unborn child
since he is yet to come to life. However, Indian statutes namely The
Transfer of Property Act, 1882, The Indian Succession Act, 1925 etc.
deal with the rights of unborn child on property. This gives an image
of a natural person to the foetus living inside the womb of the
mother.

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  A natural person can exercise various rights namely – right to own
property; right to education; right to vote; right to marry; right to
life; right to privacy; right to travel etc. Each of such rights are
available for being availed by living humans and hence, these are
given to humans alone. These rights are not available to an unborn
(except right property). Some rights can be exercised only on attaining
majority.

 A natural person is a human being while animals are not. He has all
the rights as that of any person residing in that place and in existence.
On the other hand, a dead person cannot be defamed to harm the
reputation of the family or to hurt the feelings of the family members.
Also, his property cannot be destroyed or deemed destroyed with his
death.

 Thus, the natural persons enjoy utmost privileges and also shoulders
responsibilities under the law.

 Legal person - A person or an entity is said to be a legal person, when he/she

is eligible to sue or to be sued in a court of law.
 A legal person can be either of the following : A State ; A Company :
an association of persons etc. The law embodies and make something
as a legal person. These are called legal persons because the purpose of
them getting personified is for the ease in the process of administration
of justice.
 The law gives the capacity to become a legal person for the purpose of
legal process in a court of law. The law thereafter treats them as duty
bearing persons. They might also acquire some rights as well and
entitled to due protection in law.
 A person is required to be a legal person to be able to present himself
before law. In law, All natural persons are considered as legal persons.
However, all legal persons are not natural persons. A person living will

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 be considered as a legal person as well as a natural person, but a
company or corporation in existence in India is not a natural person. It
merely has a legal existence.
 It is also possible to form A legal personality the virtue of position.
The Chairman of Company or a Company Secretary are legal positions
given. It does not matter who holds the position as the official
responsibilities are always the same. They are also liable to be sued for
the position.
 Legally even a unborn may be considered as a legal person just like a
dead man. This is only for the purpose of meeting the ends of law and
not considered as a valid in the course of life. Thus, legal interpretation
is different from reality.
 A corporate personality is also a creation of law. Unlike other legal
persons, a corporate personality has far more rights and duties to
perform. Its existence pre-supposes a group of natural persons
associated behind its operation and purpose being in existence to
perform corporate functions.

 SALIENT FEATURES OF NATURAL PERSON VIS – A – VIS LEGAL

PERSON

Natural Person Legal person

Natural person is a human being, a real Legal person is the one being either real or
living person. imaginary and who the law regards as
capable of exercising rights or performing
duties.

He has qualities of the power of thinking, Legal persons are also termed as fictitious/
speech and choice. juristic/artificial/ moral.

Child in the womb namely unborn child, Corporations, companies, LLP’s,

person dead and lower animals are not Association of persons etc. are treated as
considered as being natural persons. legal persons.

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Natural persons perform their duties by Legal persons perform their functions
themselves. essentially through natural persons /
individuals.

Natural person can live upto the time they Legal person can live till such time they
are alive and thus will remain in existence exist under law unless closed , wound up.
till such time they die.

o It has always been a matter of debate amongst the Legal scholars, particularly the legal
expert, have always explored the issue on the recognition of corporation as a legal
person. In the study of law, the separate legal personality of corporation is based upon
theories, which are focused upon the rational explanation of the existence of
personality in beings other than human individuals.

o Even though there are many theories which attempted to explain the nature of
corporate personality, none of them is said to be assertive. It is claimed that while each
theory contains elements of reality, none can by itself sufficiently construe the trend of
juristic person. Nonetheless, there are five principal theories, which are used to explain
corporate personality, namely, the fiction theory, realist theory, the purpose theory, the
bracket theory and the concession theory.

o Persons as an entity, or a legal entity can be broadly categorized and considered as

human beings, corporations private, corporations combined and public corporations.

HUMAN BEINGS AS INDIVIDUALS

Individual Human beings are the social units and pre-existed even before the
laws and the society. Since laws are made by humans and for inter alia humans,
and since jural relations are relations between individuals, it is not a surprise
element that the jural relations of each individual came to be one of the first
and most important unities for the legal purposes. The entire legal concept of a
human being as a person/individual is simply a variety of claims, duties,

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 liberties, etc treated as a unit and as such there is no difference in law between
the natural and the legal persons.

CORPORATION SOLE

 Since early times, it was found essential to continue the official capacity of an
individual beyond his lifetime or tenure of the office . This prompted the Law
makers to create a second ‘person’ who , though passing under the same name
as real human individual, enjoys legal presence in perpetuity. This is the
corporation sole, which is a embodiment of official capacity. Unity of jural
relations is thus assured a permanency which it would not otherwise have at all.
‘The living official comes and goes’, said Salmond in passage which has
become classic, ‘but this offspring of the law remains same for ever’. The idea
originated, according to Maitland, with a piece of land , known as the parson’s
glebe, which was vested in a parson in his official capacity. Difficulties arose
over the conveyance of the seisin to a parson for the benefit of the Church. The
corporation sole was thus invented so that the seisin could be vested in it
without any hurdles. Maitland went on to show that lawyers nonetheless did
not avail themselves of the services of this child of their imagination since
certain old rules stood in the way.

 The most important purpose of the corporation sole is to ensure continuousness

of an office. The persons in charge may acquire property for the benefit of his
successors, he may contract to bind or benefit them, and he can sue for injuries
to the property while it was in the hands of his predecessor. Today there are
many corporations sole such as Ministers, President, Bishop, Judges etc.

CORPORATION AGGREGATE

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 Ever since there have been companies, there has been debate on how the
companies should be operated and who should be in control of its affairs. For
a very long period, the business landscape consisted mainly of individual
traders who both owned their business and exercised control over it. All this
underwent a transformation with the dawn of the Industrial Revolution, an
unparalleled period of social disruption and economic change, most notably
the emergence of the modern capitalist economy. At this time, there was a
huge increase in the wealth of the middle classes as well as many
technological improvements, such as rail travel, that required mass amounts
of investment to function the corporation. This was mostly done through
unincorporated associations, though it was possible for a joint stock company
to become incorporated (i.e. obtain a separate legal personality from its
owners) this was rarely extended to many corporations as the protections and
privileges they granted were well protected by the state. The result of this was
that these companies had many shareholders, often spread over most of the
country, which would have made any attempts at litigation extremely
difficult, so the Joint Stock Companies Act 1844 introduced incorporation for
joint stock companies, though shareholders could still be liable for the debts
of the corporation until the Limited Liability Act 1855 which gave the option
of limited liability for corporations. This encouraged further investment and
increased both the number and the geographical distance between
shareholders and their companies. It was at the time of the stock market crash
of 1929 in the USA and the subsequent Great Depression that academic
commentators started to discuss the separation of ownership, which was
vested in the shareholders, and control, which lay in the hands of the
managers. A modern advent is the establishment of Limited Liability
partnership.

 Combined theory stipulates that corporations are established when groups of

people with a common concern come together for a common objective, and
these private individuals are the basis for all of the acts perpetrated by the
corporation, it has no independent existence separate from its owners. This
way it can justify placing the interests of its shareholders as the most

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 important objective for the company to obtain, known as shareholder primacy,
namely profit enlargement with no regard for social needs. This theory waned
when shares became more freely transferrable, as shareholders became
unconcerned in exercising control over the company and instead acted more
like bystanders.

 Corporate practicality, on the other hand, considered the company to have a

separate existence from its shareholders with its objectives being defined
instead by the managers, though this theory failed when faced with the issue
of management accountability, as it assumed a neutral management.

Interpretation of the term “Legal Person” by the Indian Judiciary

From times memorial, the concept of “legal person” has been

interpreted by various legal expert in various contexts. The US and UK
Courts have interpreted the term in matters related to corporate,
international, domestic and social importance on numerous occasions.

The Indian Judiciary too faced a similar challenge in the case of Mohd.
Salim v. State of Uttarakhand & Ors which was decided by the Bench
comprising of  Hon’ble Mr. Justice Rajiv Sharma , Hon’ble Mr. Justice
Alok Singh.

The Facts of the Case : The petitioner, a resident, challenges the failure
of the Governments of Uttar Pradesh and Uttarakhand in constituting
the Ganga Management Board as stated in the Section 80 of the Uttar
Pradesh Reorganisation Act, 2000. The Court specifies that Ganga and
Yamuna. have a particular significance for Hindus.

The Issue Raised and considered : The extraordinary situation has

arisen since Rivers Ganga and Yamuna are losing their very existence.
This situation requires extraordinary measures to be taken to preserve
and conserve Rivers Ganga and Yamuna.

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The finding and the Reasoning: “The consecrated idol in a Hindu
temple is a juridical person has been expressly laid down in Manohar
Ganesh’s case, I.L.R. 12 Bom. 247 which Mr. Prannath Saraswati, the
author of the ‘Tagore Lectures on Endowments’ rightly enough speaks
of as one ranking as the leading case on the subject, and in which West
J., discusses the whole matter with much erudition.” The court also
recognises the fact that the rivers are of utmost significance to the
Hindus by stating, “Rivers Ganges and Yamuna are worshipped by
Hindus. These rivers are very sacred and revered. The Hindus have a
deep spiritual connection with Rivers Ganges & Yamuna. According to
Hindu beliefs, a dip in River Ganga can wash away all the sins. The
Ganga is also called ‘Ganga Maa’. It finds mentioned in ancient Hindu
scriptures including ‘Rigveda’. The river Ganga originates from
Gaumukh Glacier and River Yamuna originates from Yamnotri
Glacier.” The bench further stated “ All the Hindus have deep ‘Astha’
in rivers Ganga and Yamuna and they collectively connect with these
rivers. Rivers Ganga and Yamuna are central to the existence of half of
Indian population and their health and well-being. The rivers have
provided both physical and spiritual sustenance to all of us from time
immemorial. Rivers Ganga and Yamuna have spiritual and physical
sustenance. They support and assist both the life and natural resources
and health and well-being of the entire community. Rivers Ganga and
Yamuna are breathing, living and sustaining the communities from
mountains to sea.”

Judgement delivered: Finally the rivers Ganga and Yamuna were given

status of a legal person by the Court. The order set out was “…while
exercising the parens patrie jurisdiction, the Rivers Ganga and Yamuna,
all their tributaries, streams, every natural water flowing with flow
continuously or intermittently of these rivers, are declared as
juristic/legal persons/living entities having the status of a legal person
with all corresponding rights, duties and liabilities of a living person in
order to preserve and conserve river Ganga and Yamuna.” A further

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judgement directed “The Director NAMAMI Gange, the Chief
Secretary of the State of Uttarakhand and the Advocate General of the
State of Uttarakhand are hereby declared persons in loco parentis as the
human face to protect, conserve and preserve Rivers Ganga and
Yamuna and their tributaries. These Officers are bound to uphold the
status of Rivers Ganges and Yamuna and also to promote the health and
well-being of these rivers.”

In the case of Saloman v. Saloman and Co., a trader sold a solvent

business to a limited company which consisted of the vendor, his wife
and children only. In payment of the purchase money, the company
issued debentures to the vendor. Later on, the company went into
liquidation. The question that felt for decision was whether this
debenture holder was entitled to be paid in preference to the unsecured
creditors. The question was answered in the affirmative. It is thus clear
from this case that a man may become his own preferred creditor by
taking debentures from a company of which he holds practically all the
shares. This is due to the fact that the company has a legal personality
different from that of the shareholders. This case also shows that one
can seek shelter behind this legal person without one’s real connection
with the corporation being unmasked.

In the case Daimler Company Ltd. v. Continental Tyre and Rubber Co.
Ltd., the facts of the case were that the respondent company was
incorporated in England for the purpose of selling in England tyres
made in Germany by a German company. Most of its shareholders
were German citizens. After the outbreak of war in 1914 between
England and Germany, an action was started in the name of the
respondent company for the recovery of a trade debt. The action was
resisted on the ground that the plaintiff was an “alien enemy” at war
with England and hence the suit was not maintainable. The contention
of the plaintiff was that the nationality of the company was distinct
from that of its shareholders and as it was registered in England, the
declaration of war had no effect on it. The decision was given against
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the company by the House of Lords. Lord parker observed: “What is
involved in the decision of the Court of Appeals is that for all purposes
to which the character and not merely the rights and powers of an
artificial person are material, the responsibilities of natural persons
who are its corporators, are to be ignored. An impassable line is drawn
between the one person and the others. When the law is concerned
with the artificial person, it is to know nothing of the natural persons
who constitute and control it.” It was held by the house of Lords that
the enemy character of individual shareholders and their conduct could
be material on the question whether the company’s agents and persons
in de facto control of the company were adhering to the enemy. If the
persons in control of the company were resident in an enemy country
or were adhering to the enemy, that company would assume an enemy
character. In this case, the House of Lords pierced the veil sought to be
drawn over the physiognomy of the company for the purpose of
ascertaining who the corporators behind the company were.

In the case of Wurzel v. Houghton Main Home Delivery Service Ltd.

and in Wurzel v. Atkinson, the difference between an incorporated and
an unincorporated association with regard to legal consequences was
brought out. Under the Road and Rail Traffic Act, 1933, the holder of a
private carrier’s licence known as “C” licence, was forbidden from
using the vehicle for the carnage of goods for hire or reward. A group
of miners incorporated a company to get cheap delivery of coal from
the colliery. A motor goods vehicle in respect of which the company
held “C” licence was used for making delivery of coal at the houses of
its members and charges for delivery were deducted from the wages of
the members. It was held that as the society was an incorporated one, it
was a legal entity distinct from its members and there was a breach-of
condition under which “C” licence was held as the vehicle was used
for carriage of goods for hire or reward. Another group of miners
formed an association without incorporating it. They made use of the
vehicle of the association for delivery of coal at the house of its
members. It was held that each member was a part-owner of the
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 vehicle and as co-owners could not be said to be carrying their own
goods for hire or reward by contributing to the running expenses, there
was no breach of the conditions of “C” licence.

BIBLIOGRAPHY

http://www.legalservicesindia.com/article/2316/Meaning-and-Kind-of-Person.html

https://medium.com/the-thinking-press/concept-of-legal-personality-in-jurisprudence-
532ae30c3952

https://www.srdlawnotes.com/2017/04/definition-and-kinds-of-persons-legal.html

https://lawcorner.in/natural-person-and-legal-person-define-and-their-differences/

https://www.lawnotes4u.in/2019/05/difference-between-natural-person-and-legal-person-
jurisprudence.html

http://www.legalserviceindia.com/legal/article-1904-legal-personality-in-the-light-of-
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%20a%20natural%20person.

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