Business Law Case Analysis

Running head: BUSINESS LAW
Business Law
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BUSINESS LAW
ASIC v Narain (2008) FCAFC 120
Background of the case
In this case, ASIC won a favourable judgment over the company called Citofresh
international Ltd, where the Managing director and CEO of the company Mr Narain was held
liable to pay a pecuniary penalty. He was also disqualified as a director, thereby attracting
civil proceeding. The court had held that Mr Narain was found to have breached section
1041H of the Corporations Act 2001 which holds a director liable for misleading and
deceptive conduct. It was contented by ASIC that Mr. Narain had misled and deceived as a
director, even though it was not confessed by Mr. Narain himself.
It was found that Mr. Narain had given authority to the company secretary of
Citofresh International to make a public announcement that the share price of the company
had shoot up and thereby the company share saw a raise in the share price, from $0.225 to
$0.70. However, the scenario was reversed that made the share price fall drastically to
$0.295. Such a drastic change attracted the attention of ASX pertaining to eh misleading
conduct of the director.
The court agreed to the investigation of ASIC and held that the director was liable
under section 1041 H of the Corporations Act. The court also held the ma aging director
liable as well, under section 180(1) of CA, thereby attracting a civil proceeding as per section
1317E, a suspension from the post of director under section 206C and a pecuniary penalty as
per section 1317H of CA.
Breaches of director’s duties under Corporations Act 2001
In this case the company’s managing director, Mr. Narain has been alleged to be
contravening section 180 (1) of the Corporations Act by his involvement in a deceptive
conduct. In the provisions of this section a duty of a director is mentioned to be exercising
due care and diligence in discharging his duties as a director of the company. the accusation

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BUSINESS LAW
against him was backed up by the fact that he was in involvement of a misleading and
deceptive conduct. This can be seen as a direct blow towards the reputation of the company
and it is also a failure of the director’s duties to be acting in care and diligence in discharging
his functions in the company.
In furtherance the managing director could also be seen to be allegedly breaching the
provisions of section 1041H of the Corporations Act by incurring personal liability in the way
of indulging in deceptive or misleading activity. This section requires a director to be
refraining from the indulgence in any conduct or service that can likely be misleading and
would amount towards deception.
Any action of the director under the scope of his position in the company that can be
seen as implying to be deceptive or misleading to other people that are affected in the way of
the conduct will be considered as a breach of a director’s duties for acting in care and due
diligence and further considered to be breach of section180 (1) of the Corporations Act 2001.
Analysis of the decision of the Court
The decisions of the court is seen to be based on the decisions on the evidence that
were provided by the company for announcement to ASX and that announcement had been
subsequently withdrawn and replaced by another announcement that contradicted the
previous announcement. Both these announcements public and hence the question of the
evidence to be misleading or deceptive cannot arise.
The first question that arises in the decision of the court is finding the fact if the
nature of the company’s conduct was deceptive or misleading. In the current case the
evidence provided by both the parties led to the fact that the company’s conduct was indeed
deceptive and misleading. After thorough analysis of the evidence present the case was
brought by the court under the purview of the provisions of section 1014H as has been seen
in the case Butcher v Lachlan Elder Realty Pty Ltd (2004) 218 CLR 592 at 605.