Cotton Corporation of India Ltd v United Industrial Bank Ltd

Facts

• Cotton Corporation of India Ltd was a government company engaged in purchase and sale of cotton
• A dispute arose regarding transactions allegedly outside the company's objects clause
• The question of constructive notice of the memorandum was raised

Issue

1. Whether ultra vires acts are void and whether third parties are bound by constructive notice of the memorandum's contents.

Held

• The Supreme Court held that the doctrine of ultra vires applies in India. Acts beyond the objects clause are void and cannot create legal rights or obligations. Every person dealing with a company is deemed to have constructive notice of the memorandum and articles since they are public documents filed with the Registrar of Companies.

Ratio Decidendi

The memorandum of association is a public document. Any person dealing with a company is presumed to have read and understood its contents, particularly the objects clause. Transactions beyond the objects clause are ultra vires and void ab initio; no rights or obligations flow from them. The doctrine of constructive notice operates to fix outsiders with knowledge of the company's constitutional limitations.