JUDGMENT

Shadi Lal, C J - On 5th October 1917, Diwan Mangal Sen executed a bond in favour of the Khalsa Bank Limited, Gujranwala (hereinafter to be described as the bank) for fifty thousand rupees) which he acknowledged to be due by him to the bank on hundis and a floating account and promised to pay the money with interest by certain instalments. It appears that he was, at that time, the Managing Director of the Hindustan Assurance and Mutual Benefit Society Limited, Gujranwala, (which will be described hereinafter as the Assurance Society), and on the aforesaid date he executed also a deed on behalf of the Assurance Society, by which the society stood surety for the payment of the debt owed by him to the bank, and hypothecated certain properties by way of security for the performance of the promise.

2. The principal debtor paid some of the instalments due under the bond, and upon his failure to discharge the remaining liability the bank brought the present action for the recovery of the amount due to it and sought to make the principal debtor as well as his surety liable for the payment of the debt. The trial Judge has granted a decree against both the defendants, and that decree is not challenged by Mangal Sen. It is the Assurance Society which contests its liability as a surety, and the main question debated in this appeal is whether the Assurance Society is legally bound by the contract of suretyship made on its behalf by the managing director.

3. It may be stated at the outset that, on 23rd September 1917, the directors of the Assurance Society had passed a resolution declaring that

the Board is willing to stand as surety for Diwan Mangal Sen's personal liability with the Khalasa Bank Limited and to give them lien on the company's property if need be

and it was this resolution that was recited in the surety bond by Diwan Mangal Sen, as his authority for executing the document, Mr. Badri Das for the appellant has argued that the resolution expressed only the willingness of the directors to stand surety for the debts of Diwan Mangal Sen but did not convey their final consent to the execution of the surety bond. There can, however, be little doubt that the resolution was intended to give expression, not to a mere pious wish on the part of the directors, but their decision, that the Assurance Society should become surety for the payment of the debt. Nor could the cancellation of the resolution on 20th October 1917, detract from the obligation which had already been accepted under the surety bond executed in pursuance of that resolution. The question, however, remains whether the directors had any authority to make the Assurance Society liable as a surety for the debt of a private person. Neither Article 112, which deals with the general powers of the directors, nor Article 114, which specifies the special powers conferred upon them, makes any mention of such a contract of suretyship It is true that under Clause (1) of Article 114 the directors were competent

to enter into contracts for the society and to contract on behalf of the society, such debts and liabilities as they may in the exercise of their discretion, consider necessary in transacting the business of the society....

but this clause was obviously intended to include such acts as were necessary for the transaction of the ordinary business of 'the society and for purposes incidental thereto. A contract to stand surety for the payment of a debt due by a third person cannot be regarded as an act of the above description and does not come within the ambit of the clause.

4. A transaction, which is ultra vires of the directors but within the powers of the company, can be rendered valid if it is ratified by the company. But a person relying upon a ratification by the shareholders-must satisfy the Court that they had full knowledge of the facts relating to the transaction to be ratified or that the means of knowledge were available to them. The learned Counsel for the respondent a