Grant vs. United Kingdom Switchback Railway

). If,

however, the company does not ratify such contract then the company will not be bound by the contract. Consequently, the directors will remain liable to

the other party to the contract for the breach of an implied warranty of their authority [Weeks vs. Propert, Starkey vs. Bank of England).

Indemnity Against Liability. In the ordinary course of things, directors being agents are entitled to an indemnity under Section 223 of the Indian Contract Act

in respect of all liabilities incurred in managing the business of the company in good faith. In addition to the indemnity which arises by implication in the

agency relationship, a more extensive indemnity can be provided under the Articles or by an express contract. But Section 201 prohibits a company from

exempting any officer of the company or indemnifying him against any liability, which, by virtue of any rule of law, would otherwise attach to him in respect

of any negligence, default, misfeasance, breach of duty or breach of trust of which he may be guilty in relation to the company. If there is any such

agreement, it shall be void. However, a company may indemnify any officer against any liability incurred by him in defending any proceedings, whether civil

or criminal in which judgement is given in his favour or in which he is acquitted or discharged or in connection with an application under Section 633 in

which relief is granted to him by the court.