Facts of the Case
The directors of a company acted beyond the limits of their lawful authority and committed acts that were illegal in nature. These acts were not authorised by the company’s memorandum or articles of association and were outside the scope of the directors’ powers. A legal question arises as to whether the company can be held responsible for such illegal acts committed by its directors and whether such acts can be legally imputed to the company itself.
Issues in the Case
- Whether a company is liable for illegal acts committed by its directors.
- Whether acts done beyond lawful authority bind the company.
- Whether an illegal act can be imputed to an artificial legal person like a company.
Legal Principles Covered
Under Indian jurisprudence, a company is a juristic person and can act only through its directors and officers. Generally, acts done by directors within the scope of their authority are treated as acts of the company itself.
However, when directors act ultra vires (beyond lawful authority) or commit acts that are illegal or prohibited by law, such acts cannot be imputed to the company. The doctrine of corporate personality does not protect illegal conduct. Directors are personally liable for acts that are criminal, fraudulent, or expressly prohibited, unless the company itself authorised, ratified, or benefited from such acts.
Thus, illegal acts are not automatically attributable to the company merely because they were done by its directors.
Possible Judgement
The court is likely to hold that the company is not responsible for the illegal acts of its directors committed beyond lawful authority. Such acts cannot be imputed to the company, and the directors will be personally liable. However, if it is proved that the company authorised, ratified, or knowingly benefited from the illegal acts, then liability may extend to the company as well.
About Lawgnan
Corporate liability and director responsibility are core topics in jurisprudence and company law, frequently tested in university exams and judicial services. Understanding when a company is liable and when directors are personally accountable is essential for mastering corporate legal principles. If you are a law student, legal aspirant, or professional seeking clear, exam-ready explanations rooted in Indian jurisprudence, explore more expert legal content. Visit lawgana.in for well-structured legal answers, conceptual clarity, and practical illustrations that strengthen your understanding of corporate personality, liability, and governance.
