2. ๏ โUltraโ means beyond
๏ โViresโ means powers
๏ Companies Act mentions Ultra Vires. Its scope
wasnโt completely clear until 1875.
๏ Ashbury Railway Carriage & Iron Co. Ltd. Vs.
Riche
What is it?
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. ๏ Lakshmanaswami Mudaliar vs. LIC of India
๏ In meeting decided to donate Rs. 2,00,000 from
the share holdersโ 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. ๏ Injunction โ If not spent, the lender can stop
the spending.
๏ Tracing โ If found in its original form, the
lender can recover the money from the
company.
๏ Subrogation โ If money used to pay lawful
debts, the lender will get right to recover the
money. Least priority given to him.
ULTRA VIRES
BORROWING
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
shareholdersโ consent.
๏ Investment acquired through ultra vires
transaction. The company still has rights.
EXCEPTIONS
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. ๏ 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 canโt be ratified by the shareholders in
the AGM.
PRESENT POSITION OF
ULTRA VIRES ACTS
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.
