Doctrine of Ultra Vires


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Doctrine of Ultra Vires

  1. 1. DOCTRINE OFULTRA VIRES { S. N. LAVANYA (121202064)
  2. 2.  “Ultra” means beyond  “Vires” means powers  Companies Act mentions Ultra Vires. Its scope wasn’t completely clear until 1875.  Ashbury Railway Carriage & Iron Co. Ltd. Vs. RicheWhat is it?
  3. 3.  MOA stated that the company will only sell and supply carriage construction material.  Contract with Riche was to construct railway carriages.  The contract void ab initio because its ultra vires.Ashbury Railway Carriage &Iron Co. Ltd vs. Riche
  4. 4.  Lakshmanaswami Mudaliar vs. LIC of India  In meeting decided to donate Rs. 2,00,000 from the share holders’ dividend fund in 1955.  In 1956, LIC Act came into force. This kind of donation was not allowed.  Thus it became ultra vires.Indian Ultra Vires Case
  5. 5.  Injunction – If not spent, the lender can stop the spending.  Tracing – If found in its original form, the lender can recover the money from the company.  Subrogation – If money used to pay lawful debts, the lender will get right to recover the money. Least priority given to him.ULTRA VIRESBORROWING
  6. 6.  Ultra vires the directors but intra vires the company can be ratified by shareholders in AGM.  Intra vires the company but not done in prescribed manner, this can be validated by shareholders’ consent.  Investment acquired through ultra vires transaction. The company still has rights.EXCEPTIONS
  7. 7.  Any act which is consequential to the object clause but not mentioned in the MOA unless prohibited by the Companies Act. Some activities not specifically mentioned in the MOA, but deemed impliedly as within authority of the company.Eg: Raising Capital by borrowing. If ultra vires the articles, the Articles may be altered to make it intra vires.
  8. 8.  There is no separate legal provision in the Indian law anywhere for ultra vires transactions.  The ruling of the Ashbury Railway Carriage case is still applied without modifications.  Its still can’t be ratified by the shareholders in the AGM.PRESENT POSITION OFULTRA VIRES ACTS
  9. 9.  The European Communities Act, 1972 has modified it in favour of the affected party in case of ultra vires transactions. Ultra vires has only been modified, not abolished.
  10. 10. THANK YOU
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