Professional Documents
Culture Documents
OPC
Object Clause is for Protection ?
Check on the misuse of funds by the Co.
(Cotman v Brougham)
Ultra vires - Powers of a director ? v
Ultra vires – Powers of the Co. ?
“To make & sell, / lend on hire, railway carriages & wagons, &
all kinds of railway plant, fittings, machinery & rolling stock; to
carry on the business of mechanical engineers & General
Contractors; to purchase, lease, work & sell mines, minerals,
land & buildings; to purchase & sell as merchants, timber, coal,
metals, / other materials, & to buy any such materials on
commission / as agents.”
Ashbury Railway Carriage & Iron Co. Ltd v Riche, (1875) LR 7
HL 653
Purchase of shares of other JSC - Unless expressly authorized by
MOA - is ultra vires? Jehangir Rustomji Modi v Shamji Lodha (1867-68) 7
Bom HCR 185
Ratification?
Obtaining judgment by consent?
By estoppel?
Lawful purpose (S. 3) v Object of the Co. (S. 4)
Main object - Objects of the Co. are
unobjectionable?
Conduct of a lottery & Some were
philanthropic?
To raise general donation funds to carry out
charitable objects
Will not save Co. from being unlawful
Purpose illegal even where the illegal business is
merely annexed to the real one which is
philanthropic ?
Sec. 294A, IPC - Universal Mutual Aid & Poor Houses
Assn. Ltd. v Thoppa Naidu, (1932) 2 Comp Cas 515 (Mad)
Lawful purpose v Object of the Co.
Object / Purpose of the Co. - Not lawful ?
ROC may refuse to register – COI ?
If issued – will legitimize the business ?
No – remains illegal / unlawful
Performing Rights Society Ltd. v London Theatre of Varieties Ltd.
(1922) 1 KB 539;
R v ROC’s, ex parte Attorney General (1991) BCLC 476 (QBD)
Objects - must not be contrary to Co. Law / provisions
of any other law
Gambling house ?
Scope of its activities - permitted range of enterprise
Egyptian Salt & Soda Co, Ltd. v Port Said Salt Assn. Ltd.
(Shareholder), (1931) A.C. 677 (Export of salt from Egypt)
Acts which are contrary to
Acts beyond the express &
public policy / contrary to a
implied powers of the Corp ?
statute (expressly prohibition)
Ultra Vires Illegal ?
‘Ultra Vires’ is more apt for a transaction which, though
otherwise lawful, is for a purpose outside the objects for which
the Co. was formed as disclosed by the objects
Dalmia Jain Airways Ltd.
Carrying on Air Transport business (Rs. 319 lakhs)
Purchasing surplus motor vehicles & spare parts & machinery let
by U.S.A. & the American forces at the conclusion of the last War,
& reconditioning the vehicles & setting them at a profit.
Omnibus Clause:
Power to the Co. to deal in vehicles of all kinds, including cycles,
carriages & perambulators.
Object Clause Business Carried On
Software Shoe manufacturing
INTRA
AOA
ULTRA
MOA
Doctrine of Ultra Vires
Cohen Committee (1945)
“… Doctrine of ultra vires is an illusory protection for SH’s &
yet may be a pitfall for third parties dealing with the Co…
We consider that as now applied to Co’s the ultra vires doctrine
serves no positive purpose but is, on the other hand, a cause of
unnecessary prolixity & vexation.
Co. Act, 1948 – Did not Abolish
Jenkins Committee – 1959
European Communities Act, 1972 (Sec. 9)
Companies Act, 1985
Dr. Prentice’s
Co. (Amendment) Act, 1989 - Sec. 35
“The validity of an act done by a Co. shall not be called into
question the ground of lack of capacity by reason of anything in
the Co’s MOA.
Companies Act, 2006 (UK) – Abolished
USA - Australia
India & Doctrine of Ultra Vires
Bhabha Committee, 1952
Did not recommend the abolition
A.V. Visvanatha Sastri Committee, 1957
Vivion Bose Commission
Principal - Ancillary objects - All other objects
Daftry – Shastri
Co. (Amendment) Act, 1965
Main objects – incidental & ancillary objects &
other objects thereto
Sachar Committee
Did not recommend but diluted
Co. (Amendment) Bill, 2017
Proposal to – Choice of having object clause for Co.
Sec. 13 (9)
(9) ROC shall register any alteration of MOA with
respect to the objects of the Co. &
Certify the registration within a period of 30 days from
the date of filing of the Spl. Res. in accordance with S
13(6)(a)