Lakshmanaswami Mudaliar v LIC of India
Rule established
Distinguished ultra vires the COMPANY (void) from ultra vires the DIRECTORS (voidable); acts within objects but beyond directors' authority are merely irregular, not void
Facts
- Acts were done by directors that were within the company's objects (intra vires the company) but exceeded the directors' delegated authority under the articles (ultra vires the directors).
- The question was whether such acts were void or merely voidable.
Issue
- Whether an act within the company's objects but carried out by directors exceeding their authority is void (ultra vires) or merely voidable (irregular).
Held
- The Supreme Court distinguished two situations: (1) Ultra vires the company, beyond MOA objects: void, cannot be ratified even by all shareholders. (2) Ultra vires the directors, within objects but beyond directors' delegated authority: merely irregular (voidable). The company can ratify it by shareholder resolution. Third parties may be protected by the doctrine of indoor management.
Ratio Decidendi
Ultra vires the company (beyond MOA) is void ab initio and incurable. Ultra vires the directors (within MOA but beyond articles/board authority) is voidable and curable by ratification. This distinction is critical: void acts create no rights; voidable acts are valid until set aside. Third parties dealing in good faith are protected only in the second case, not the first.
How to use it in an exam
Indian SC authority clarifying the two-level ultra vires analysis. Prevents the harsh consequence of voiding every act done without proper internal procedure: only acts truly beyond the company's capacity are void.
Source
Source: AIR 1963 Supreme Court 1185
This is an educational summary, not the judgment itself. Cite the reported version in professional or academic work.