Concept of Legal Personality in Jurisprudence

The decision of House of Lords in Salomon v A Salomon & Co. Ltd had a lasting influence in corporation law. It is often credited with the principle of separate legal entity of the corporation distinct from the members.

Though there is no doubt that the Salomon case had play a significant role in company law, the decision in this case was hardly the origin of the separate legal entity principle. The legal entity of beings other than the human has long been recognized prior to 1897, in which the Salomon case was decided.

The jurisprudence theories on juristic person had been established since the early Roman law to justify the existence of legal person other than the human. The State, religious bodies and education institutions had long been recognized as having legal entity distinct from the members.

The acceptance of the corporate personality of a company basically means that another non-human entity is recognized to assume a legal entity. This can be seen from the many theories of jurisprudence on corporate personality. Majority of the principal jurisprudence theories on corporate personality contended that the legal entity of the corporation is artificial. The fiction, concession, symbolist and purpose theories supported the contention that existence of corporation as a legal person is not real. It only exists because the law of the state recognized it as legal person and it is recognized either for certain purpose or objectives. The fiction theory, for example, clearly stated that the existence of corporation as a legal person is purely fiction and that the rights attached to it totally depend on how much the law imputes upon it by fiction.

W. Friedman stated that: “All law exists for the sake of liberty inherent in each individual; therefore the original concept of personality must coincide with the idea of man.”

Even though there are many theories which attempted to explain the nature of corporate personality, none of them is said to be dominant. It is claimed that while each theory contains elements of truth, none can by itself sufficiently interpret the phenomenon 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.

Persons as an entity, or a legal entity can be broadly classified and discussed as human beings, corporations sole, corporations aggregate and public corporations.

Human Beings

Corporations Sole

The main purpose of the corporation sole is to ensure continuity of an office. Moreover, the occupant 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

The Fiction Theory:

The Concession Theory:

The Purpose Theory:

The Bracket Or Symbolist Theory:

The Realist Theory:

Under the realist theory, a corporation exists as an objectively real entity and the law merely recognizes and gives effect to its existence. The realist jurist also contended that the law has no power to create an entity but merely having the right to recognize or not to recognize an entity.

Bench: Hon’ble Mr. Justice Rajiv Sharma , Hon’ble Mr. Justice Alok Singh.

Facts: 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.

Issue Raised: 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.

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: 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 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.”

From the discussion on jurisprudence theories of corporate personality, it is observed that main arguments lie between the fiction and realist theories. The fiction theory claimed that the entity of corporation as a legal person is merely fictitious and only exist with the intendment of the law. On the other hand, from the realist point of view, the entity of the corporation as a legal person is not artificial or fictitious but real and natural. The realist also contended that the law merely has the power to recognize a legal entity or refuse to recognize it but the law has no power to create an entity.

Referring to the English company law case law, it can be seen that in most cases, the court adopted the fiction theory. Salomon v A Salomon Co Ltd is the most obvious example. It is also observed that fiction theory provide the most acceptable reasoning in justifying the circumstances whereby court lifted the corporate veil of corporation. If the entity of the corporation is real, then the court would not have the right to decide the Circumstances where there is separate legal entity of the corporation should be set aside. No human being has the right to decide circumstances whereby the entity of another human being should be set aside. Only law has such privilege.

Nonetheless, the realist contention that the corporation obtain its entity as a legal person not because the law granted it to them but because it is generated through its day to day transaction which are later accepted and recognized by law also seem acceptable.

Books and Journals

RWM Dias, JURISPRUDENCE, 1st .Rep.2014, 5th ed.2013, Lexis Nexis Publication.

G.W. Paton, A TEXTBOOK OF JURISPRUDENCE, 1st Rep.2004, 4th ed.1972, Oxford University Press.

W Friedmann, LEGAL THEORY,1st Ind. Rep.2012, 5th ed.2007,Stevens & Sons Publication.

M.D.A Freeman, LLOYD’S INTRODUCTION TO JURISPRUDENCE, 9th ed.2014, Thomson Reuters Publication.

PJ Fitzgerald, SALMON ON JURISPRUDENCE, Rep.2002, 12th ed.1970, Universal Law Publishing Co.

HLA Hart, THE CONCEPT OF LAW, 2nd ed.1994, Clarendon Law Series.

Hohfeld, Some Fundamental Legal Conceptions as Applied in Judicial Reasoning, 23 YALE L.J.

A. Kocourek, Jural Relations, Indiana L.J.

B.C. Hunt, Development of the Business Corporation in England 1800–1867, YALE L.J.

Books and Online Sources

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