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Section 393: Company's failure to comply with provisions of this Chapter not to affect validity of contracts, etc

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Act 2013
Section 392 All 470 Sections of Companies Act Section 394
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Legal Commentary & Landmark Judgments: Section 393

Section 393 preserves the validity of contracts, dealings, and transactions entered into by a non-compliant foreign company, but imposes a statutory disability barring the foreign company from instituting or maintaining any suit or legal proceeding until full compliance.

  • Preservation of Contractual Validity: Explicitly provides that the failure of a foreign company to comply with Chapter XXII does not affect the validity of any contract, dealing, or transaction entered into by it.
  • Statutory Disability against Legal Action: Prohibits the foreign company from bringing, continuing, or enforcing any suit, claim, or legal proceeding in any Indian court or tribunal until it has fully complied with Chapter XXII.
  • Counterparty Rights Preserved: Guarantees that contracting counterparties, creditors, and innocent third parties are fully entitled to sue and enforce claims against the foreign company notwithstanding its regulatory default.
Key Landmark Precedents:
  • Neuchatel Asphalte Co. Ltd. v. Merchants' Surveying Co. Ltd., (1958) 28 Comp Cas 405 (Bom): Held that the disability imposed on an unregistered foreign company from suing in Indian courts is procedural and curable; subsequent compliance with registration cures the incapacity and allows the suit to proceed.
  • Middle East Airlines v. V.P. Grewal, 1980 SCC OnLine Del 341: Affirmed that Section 393 does not invalidate substantive transactions or extinguish rights, but merely suspends the foreign company's right to invoke the court's remedial machinery until statutory compliance is achieved.
Courtroom Practice & Strategic Litigation Guidance:

When defending a suit brought by a foreign company, file a preliminary objection under Section 393 alleging lack of RoC registration. If the foreign company has not delivered Form FC-1 or filed accounts under Section 381, pray for an immediate stay or rejection of the plaint under Order VII Rule 11 CPC until compliance is proved.

Section 392 All 470 Sections of Companies Act Section 394