Ultra Vires purchases of a company's own shares invalidate transfers; vendors remain owners and liable, estoppel unavailable.

Purchases by a limited liability company of its own shares that contravene its memorandum and articles are ultra vires and void, so purported transfers to the company do not divest vendors or permit alteration of the share register; vendors therefore remain legal owners and liable as contributories. A corporation cannot be estopped to validate an act beyond its powers, and representations by brokers or officers cannot create corporate capacity; any remedy for misrepresentation by officers or brokers lies in a private suit against them, not by estopping the company.

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Issues: (i) Whether purchases by the Travancore National and Quilon Bank Ltd. of its own shares operated to extinguish the vendor's liability and entitled the transferees to be entered on the register; (ii) Whether the Bank is estopped from denying that the purchases were made on behalf of constituents such that vendors who sold to the Bank can be relieved from liability.

Issue (i): Whether purchases by the Bank of its own shares were legally effective to divest the vendors and permit alteration of the share register.

Analysis: The capacity of a limited liability company to purchase its own shares is governed by its constitution and the governing company law; purchases beyond the scope of the memorandum and articles are ultra vires and void. Authorities establish that a company cannot validly become a member of itself or reduce its capital by purchasing its own shares; such acts are inconsistent with the company's constitution and the corporate form. The Bank's memorandum and articles prohibited expenditure of its funds in purchase of its own shares, and therefore any purported purchase by the Bank of its own shares is beyond its corporate capacity and invalid. As a result, a vendor who purportedly sold to the company does not cease to be the legal owner and remains on the register and liable as a contributory.

Conclusion: The purchases by the Bank of its own shares were ultra vires and void; the applicants who purported to transfer shares to the Bank remain legal owners and cannot be removed from the share register. This conclusion is against the applicants and in favour of the Official Liquidators/Respondent.

Issue (ii): Whether the Bank is estopped from asserting that the purchases were for itself because brokers or officers represented that purchases were for constituents.

Analysis: A corporate body cannot be estopped to do something beyond its legal powers; representations cannot create capacity the corporation lacks. Even where a corporation is foreign, purchases of its own shares are ultra vires and cannot be validated by estoppel. Factual examination of the evidence concerning brokers' knowledge and documentary material (including letters and circulars) showed that the brokers were aware the Bank was purchasing for itself; there was no reliable specific representation by Bank officers that purchases were for constituents to ground an estoppel against the Bank. Any remedy for misrepresentation by officers lies against those officers, not by estopping the corporation from alleging ultra vires.

Conclusion: There is no estoppel binding the Bank; the plea of estoppel on behalf of the applicants fails. This conclusion is against the applicants and in favour of the Official Liquidators/Respondent.

Final Conclusion: The legal effect of the decision is that purported transfers of the Bank's shares to the Bank are void and do not alter ownership or relieve vendors of contributory liability; issues of private remedy between vendor and broker may be pursued in a regular suit as referred by the Court.

Ratio Decidendi: Purchases by a limited liability company of its own shares which are beyond the powers conferred by its memorandum and articles are ultra vires and void; a corporation cannot be estopped so as to validate an act which it has no power to perform.

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