Legal Thesaurus

Ratio decidendi:

Reasons for deciding;  ground of decision.

Where more than twenty persons enter into an agreement by which a chitfund is created and it is clear from the agreement that the only proprietors of the fund are the two organisers, and the other persons have entered into no contract with each other, the parties to such agreement do not form an association of which registration is necessary under Section 4, Companies Act. [(1906) 29 Mad 177 FB (followed in (1918) 50 IC 513 L Bur) and in (1932) 142 Ind Cas 92 (Cochin Chief Court)]. In 1880, 15 Ch. D. 247 it was held that an investment trust was not an illegal association although there were more than 20 beneficiaries entitled to the benefit of it, the ratio decidendi being that the business was carried on by the trustees, who were less in number than 20. [(1880) 15 Ch D 247; Encycl. of Laws, Vol (3) 163].

(a)     An Association of less than 20 members is not compulsorily registerable as a company. [AIR 1953 Hyd 142 : AIR 1925 Mad 233].

(b)     A company, association or partnership not compulsorily registerable at its inception under Section 4 would become so if during its continuance its number of members exceeds the minimum prescribed in Section 4. Section governs not only the formation of a company, association or partnership but also rules for its continuance. [AIR 1939 Cal 187]. [Section 11, Companies Act, 1956].

The ratio decidendi in Sillem v. Thornton [(1854) 23L.J.Q.B 362 : 3 E and B 368], was that where there is substitution of one risk for another the policy is avoided, and hence the substitution of a three storied building for a two storied one is fatal for the policy. This case was distinguished by Willes. J., in Thompson v. Hopper [(1856) 24 LJQB 240]. [Insurance Act].


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