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M.N. Clubwala v. Fida Hussain Saheb, 1964

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M.N. Clubwala v. Fida Hussain Saheb, (1964) 6 SCR 642, 651 This case interpretation/case summary is written by Ms. Swati Sharma a student at the Faculty of Law (Delhi University). If you also want to publish your articles or case interpretations/summaries, send your work to  niyamskanoon09@gmail.com . Case Details PETITIONER:  MRS. M. N. CLUBWALA AND ANR. Vs. RESPONDENT: FIDA HUSSAIN SAHEB AND ORS. DATE OF JUDGMENT: 03/02/1964 BENCH: MUDHOLKAR, J.R. SUBBARAO, K. CITATION: 1965 AIR 610 1964 SCR (6) 642 Introduction   The case of M.N. Clubwala v. Fida Hussain Saheb (1964) under the Delhi Rent Control Act is a landmark judgment that clarifies the distinction between a lease and a license and the jurisdiction of the Rent Controller. The primary issue in this case was whether the agreements between the landlord (M.N. Clubwala) and the shopkeepers (Fida Hussain Saheb) created a lease or a license.  Facts of the Case M.N. Clubwala (Landlord) used his building as market by
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In re (Jon) Beuforte (London) Ltd. (1953)


Introduction

This case is related to the "Doctrine of Ultra vires" which states that a company cannot perform act beyond the scope of its stated objects in the "Memorandum of Association". 

Facts 

  • A company was authorized by the memorandum to carry on the business of costumiers, gown making, and other activities ejusdem generis (of the same kind). The company decided to undertake the business of making veneered panels and for this purpose, the company made three contracts with 

    1. Grainger Smith & Co. (Builders) Ld. to construct a factory.
    2. John Wright & Sons (Veneers) Ld. to supply veneers
    3. Lowell Baldwin Ld. to supply coke

  • The three creditors filed a suit in court when their demand for respective payments failed. The company consented, in court, to pay them in different installments. But again the company failed to pay.
  • Later when the company went on to liquidation, all three creditors filed their proof to recover their respective payments. The liquidator rejected their applications on the grounds that

    1. no judgment founded on an ultra vires contract could be sustained unless it embodied a decision of the court on the issue of ultra vires, or a compromise of that issue; Great North-West Central Railway Co. v. Charlebois [(1899) A.C. 114],  
    2. that the suppliers of the coke were fixed with clear notice of the purposes of the factory;
  • Then the creditors appealed to the higher court 

Issue

  1. Whether the consent decree or judgment makes an 'Ultra Vires' act intra vires?
  2. Whether the company be held liable for debt taken for the ultra vires act? 

Ratio Decidendi

  • We can not convert ultra vires act into intra vires by ratification or by consent decree.
  • "Great North -West Central Railway Co. V Charlebois, 1889, Court observed: we cannot remove invalidity of the act if it is beyond the power of the company by consent decree. 
  • King J:- The company cannot validly give consent to treat as valid an ultra vires act.
  • Russell J. said in the New York Corp. V Henry Ceetham and Sons Ltd.: "An ultra vires agreement cannot become intra vires because of estoppel, lapse of time, ratification or delay.
  • It is considered that the builder who contracts with the company has constructive knowledge of the company's memorandum. 
  • Hence the consent decree and judgment cannot make an ultra vires act intra vires and the company cannot be held liable for debt taken for the ultra vires act. 

Judgment 

  • Fuel merchant - The correspondence shows that they had notice of that, and as they had constructive notice of the contents of the memorandum of association, they had noticed that the transaction was ultra vires the company. Their proof was rightly rejected
  • Appeal Dismissed
  • It is quite clear that a company cannot do what is beyond its legal power by simply going into court and consenting. 

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Workmen of Dimakuchi Tea Estate v. Dimakuchi Tea Estate, AIR 1958 SC 353

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