Corporation and Business Law - ASIC v Narain [2008] FCAFC 120

Running head: CORPORATION AND BUSINESS LAW
Corporation and Business Law
Name of the Student
Name of the University
Author Note

1CORPORATION AND BUSINESS LAW
ASIC v Narain [2008] FCAFC 120
Introduction
For the purpose of this assignment, the case of Australian Securities and Investment
Commission v Narain [2008] FCAFC 120 has been chosen. The case had resulted in a
decision in favour of the Australian Securities and Investment Commission incurring a
pecuniary penalty to be paid by Mr. Narain, the Managing Director and CEO of the
company named Citofresh International Limited. This case also resulted in the
disqualification of Mr. Narain. The case was a civil penalty proceeding. The penalties so
awarded was by way of a decision that was delivered by the court, in which the court was
of the opinion that Mr. Narain was in breach of the provisions contained in the
Corporations Act 2001for engaging in conduct considered to be deceptive and misleading
and has violate the provisions contained in section 1041H of the Corporations Act 2001.
The court held Mr. Narain to be liable personally under this section although the
misleading announcement was not sent by him personally to ASX. This has been
contended by the Australian Securities and Investment Commission that Mr. Narain has
involved in a conduct which was misleading and deceptive although the same has not been
personally communicated by him but the same was effected by under his authority.
The company involved in this present case is Citofresh International was a public
company, which was quoted under the Australian Securities Exchange (ASX) and dealt
with the supply of disinfectant product. The issue regarding this case surfaced with the
announcement made by the company to the ASX. The managing director of the company
namely Mr. Narain has authorised the company secretary of that company to release an
announcement in the market through the ASX. The ASX release was prepared by the
Managing Director with the aid of others. The release had an effect of shooting up the

2CORPORATION AND BUSINESS LAW
price of the shares relating to the company. The price of the shares has increased
considerably from $0.225 to 0.70. Subsequent to this, a request was initiated by the
company requiring the trading to be stopped followed by a statement somewhat
contradictory to the previous one. This had downgraded the share price to $0.295. This has
attracted the attention of the ASX regarding the misleading and the deceptive conduct that
has been previously committed by the company owing to its previous announcement.
The court had regarded the announcement of the company to be made to mislead and
create a deception and held the Managing Director of the company, namely Mr. Narain to
be liable personally under section 1041H of the Corporations Act 2001 which incurs a
personal liability upon the directors who are alleged to indulge in misleading and
deceptive activity. The court held that the managing director in this case has also
contravened the provision contained in section 180(1) of the corporation Act and had
attracted an civil proceeding under section 1317E, a suspension under section 206C and a
liability of pecuniary penalty under section 1317H of the Corporation Act.
Duties Contravened under Corporations Act
The managing director of the company, namely Mr. Narain was alleged to have
contravened the provision contained in section 180(1) of the Corporations Act 2001 by
involving in the deceptive conduct. The provisions enumerated under this section requires the
director of a company to exercise care and due diligence while discharging his functions as a
director acting on behalf of the company. The accusation was backed by the fact that the
director was involved in a deceptive and misleading conduct of the company, which was a
direct blow to the reputation of the company and a failure on the part of the director to use
care and due diligence while discharging his functions.