Ultra vires corporate donation and refund liability affirmed where a charitable payment fell outside the company's objects.

A payment made from a life insurance company's shareholders' dividend account to a charitable trust was held ultra vires because it was not within the company's objects and was neither incidental nor naturally conducive to its business. The fund remained company property until a valid dividend was declared, and a resolution authorising a donation could not be treated as dividend distribution. The ultra vires payment was void and incapable of ratification. Under the statutory relief provision, the Tribunal could order refund where an insurer made an unauthorised payment without consideration or reasonable necessity, and both the directors who authorised it and the trustees who received it were liable to repay the amount.

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Issues: (i) Whether the donation made from the company's Shareholders' Dividend Account to a charitable trust was within the company's objects and powers or was ultra vires and void; (ii) Whether the trustees and directors were personally liable to refund the amount under the Life Insurance Corporation Act, 1956.

Issue (i): Whether the donation made from the company's Shareholders' Dividend Account to a charitable trust was within the company's objects and powers or was ultra vires and void.

Analysis: The fund, though described in the articles as the exclusive property of shareholders, remained a company fund until dividend was validly declared. The resolution did not declare dividend but authorised a donation. A life insurance company's memorandum limited it to carrying on life insurance business and acts incidental or conducive to that business. A charitable donation to a trust, even if one object of the trust was to promote insurance knowledge, had only a remote and indirect connection with the company's business and was not incidental or naturally conducive to its objects. An ultra vires act is void and cannot be ratified.

Conclusion: The donation was ultra vires the company and void.

Issue (ii): Whether the trustees and directors were personally liable to refund the amount under the Life Insurance Corporation Act, 1956.

Analysis: Section 15 empowered the Corporation to seek relief where, within the relevant period, an insurer had made a payment without consideration or without reasonable necessity for the controlled business, and empowered the Tribunal to make such order against responsible parties as it thought just. The directors had participated in passing the unauthorised resolution, and the trustees had received and retained the money on behalf of the trust. Since the amount had not been lawfully payable, the Tribunal could direct refund from those responsible for or benefited by the transaction.

Conclusion: The trustees and the responsible directors were liable to refund the amount.

Final Conclusion: The appeal failed because the impugned donation was beyond the company's powers and the Tribunal was entitled to order repayment from the appellants.

Ratio Decidendi: A payment by a company outside its objects and not incidental or conducive to those objects is ultra vires and void, and where a statutory scheme authorises relief against unauthorised payments without consideration, the Tribunal may order refund from persons responsible for or benefited by the transaction.

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