Company law

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Meekha (Querist)
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23 July 2009 Can any one please help me to understand exceptions to the Doctrine of Ultra vires and Indoor management with examples?

CS Mitesh Mehta

CS Mitesh Mehta (Expert)
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24 July 2009 Doctrine of the ultra-vires---
Any transaction which is outside the scope of the powers specified in the objects clause of the Memorandum of Association and are not reasonable incidentally or necessary to the attainment of objects is ultra-vires the company and therefore void. No rights and liabilities on the part of the company arise out of such transactions and it is a nullity even if every member agrees to it.

Consequences of an ultravires transaction :-

1. The company cannot sue any person for enforcement of any of its rights.
2. No person can sue the company for enforcement of its rights.
3. The directors of the company may be held personally liable to outsiders for an ultra vires

The Doctrine of Indoor Management lays down that persons dealing with a company having satisfied themselves that the proposed transaction is not in its nature inconsistent with the memorandum and articles, are not bound to inquire the regularity of any internal proceeding. In other words, while persons contracting with a company are presumed to know the provisions of the contents of the memorandum and articles, they are entitled to assume that the provisions of the articles, they are entitled to assume that the officers of the company have observed the provisions of the articles. It is no part of duty of any outsider to see that the company carries out its own internal regulations.

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