1. What Is A Corporate Seal?

Common Seal = physical signature of an artificial person. Since a company cannot sign like a human, the seal was its signature.

In Pancharan Dhara v. Monmatha Nath Maity [2006] 69 SCL 401, Supreme Court observed:

So far as the question of putting up of the seal of the company was concerned, it is a relic of the days when mediaeval barons, who could not read or write, used their rings to make a characteristic impress.

Types:

• Common Seal - for general contracts, share certificates
• Official Seal for outside India
• Statutory Corporation Seal - for Municipal Corporations, under special statutes

2. When Was It Mandatory?

A. Under Companies Act, 2013 - Old Position:
Before 2015, Section 9, 12, 22, 46, 223 required common seal for:

1. Power of Attorney to execute deeds on behalf of company
2. Share Certificates - certificate issued under common seal shall be prima facie evidence of title
3. Deeds where company is party

B. Under Statutory Corporation Acts - Still Mandatory:
This is where failure is still fatal today.

Under Delhi Municipal Corporation Act, Sections 201 and 203 + Bye-law 3(1)(a):

Every contract entered into by the Commissioner, the common seal of the Corporation has to be affixed. It has to be signed... The common seal has to be affixed in presence of a member.

The provisions are mandatory.

3. Legal Position After Amendment

The Companies (Amendment) Act, 2015 made common seals optional, allowing documents to be signed by two directors or one director and a company secretary instead.

Now Section 12(3)(b), 22(2), 46(1), 223 allow alternative: Signature of 2 directors OR 1 director + CS.

But:

1. If Articles of Association (AoA) still requires seal, you must affix. AoA overrides optional law.
2. For Government / Municipal Corporations, State Acts still require seal - Amendment does NOT apply to them.
3. Share certificates: If company has seal, still compulsory.

4. Consequences Of Failure

5. Detailed Case Laws

CASE 1: Municipal Corporation of Delhi vs Shail Agencies - 9 Sept 1981 - Delhi High Court - Leading Case in India

Citation: ILR 1981 Delhi 607, 1982(3) DRJ 80

Facts: MCD Commissioner entered into a contract for supply of goods without affixing common seal.

Issue: Is Section 203 mandatory?

Judgment: Court held after referring to Sections 201 and 203, every contract entered into by the Commissioner, the common seal has to be affixed. The provisions of Section 203 are mandatory. Therefore the contract is void.

Further elaborated:

A disobedience of the mandatory provisions must result in nullification. A contract which does not strictly conform to formalities is unenforceable and invalid. It does not bind the Corporation. Nor the other party.

Principle: For statutory corporations, seal is not directory, it is mandatory.

CASE 2: Municipal Corporation of Greater Bombay vs Associated Engineers - 29 April 1993 - Bombay High Court

Facts: Contract involving expenditure in excess of Rs. 10,000 required to be in writing and sealed by common seal in presence of two members of Standing Committee.

Holding: Contract without seal = void. Corporation can repudiate even after work done. Contractor cannot claim on basis of implied contract; can only claim quantum meruit if at all.

CASE 3: Dodsal Pvt. Ltd. Vs Delhi Electric Supply Undertaking of MCD - Supreme Court

High Court accepted contention that contract was void inasmuch as Sections 201 and 203 read with bye-law 3(1)(a) were violated.
Supreme Court upheld that non-affixation = void.

CASE 4: S.A. Builders Ltd. vs Municipal Corporation of Delhi - 20 May 2000

Court reiterated 4 conditions:

1. Contract must be in writing
2. Must be by Commissioner
3. Common seal should be affixed
4. Common seal shall be affixed in presence of a member of Standing Committee
   And Section 203(2) specifically mandates that contract not made in accordance with Act shall not be binding on Corporation.

CASE 5: Lendlease Construction (Europe) Ltd v Aecom Ltd [2023] EWHC 2620 (TCC) - UK - Most Recent on Seal Failure

Facts: Consultancy agreement for major hospital in Leeds drafted as deed. Execution block required common seal or two directors. Two individuals signed in execution block for affixing common seal (albeit seal not affixed) and not in deed execution block.

Legal Requirement: Under Companies Act 1985/2006, for a deed to be validly executed by a company, unless common seal is affixed, deed must be signed by two directors or director in presence of witness. The Consultancy Agreement was not executed as a deed by affixing Aecom's common seal because the seal was not affixed.

Judgment: Eyre J held - Even though seal not affixed, parties held themselves out as having authority, other party relied, so estopped from denying valid execution. Document treated as deed. But Court warned: The effect of section 1(2)(b) of 1989 Act and section 36AA is that valid execution is necessary for document to take effect as deed. If formalities not met, it's only a simple contract with 6-year limitation, not 12-year for deed.

This case is now cited for "When Is A Deed Not A Deed?"

CASE 6: Pancharan Dhara v Monmatha Nath Maity - Supreme Court 2006

Court clarified modern position: Even in absence of seal, company may still be bound if authorized directors signed and transaction is intra vires, unless statute specifically mandates seal. Seal is relic.

CASE 7: Praga Tools Corporation Ltd. vs M.R. Patny - 1966

Section 29: Certificate issued under common seal specifying shares held shall be prima facie evidence of title. Failure to affix seal = certificate not valid evidence, company not estopped.

6. Practical Implications For Companies Today

Where failure still kills you in Delhi:

1. MCD / NDMC / DDA contracts: Must still have seal. Many contractors lose arbitration because of this.
2. If your AoA says "All contracts shall bear common seal": Amendment 2015 does NOT automatically amend your AoA. You must amend AoA by special resolution to make seal optional. Till then, contracts without seal are in breach of AoA and can be challenged by shareholders as ultra vires AoA.

How to avoid:

1. Check statute governing your counterparty. If it's a Municipal Corporation, insist on seal + resolution.
2. Check your own AoA. If Article says seal mandatory, either affix or amend AoA.
3. After 2015, best practice: Use two directors + CS signing, and add clause: "Common seal is optional as per AoA as amended, execution by directors as per Section 22(2) Companies Act, 2013"
4. Maintain Seal Register - who authorized, Board Resolution No., date, witness.