2. Introduction
“Ultra” means beyond
“Vires” means powers
An act of the company which beyond the objects
clause.
An ultra vires act is void and cannot be ratified
even if all the directors wish to ratify it.
3. Origin Of The Doctrine
The doctrine of ultra vires was first introduced in
relation to the statutory companies.
The doctrine was not paid due attention up to
1855.
In 1855 some important developments took
place.
Introduction of the principle of limited liability.
The companies were required to have two
important documents. (MOA, AOA)
4. Ashbury Railway Carriage & Iron Co. Ltd vs.
Riche
• 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.
5. Indian Ultra Vires Case
• 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.
6. Ascertainment Of The Ultra Vires
cases
• Within the main purpose, or
• Within the special powers expressly given by the statute
to effectuate the main purpose, or
• Neither within the main purpose nor the special powers
expressly given by the statute but incidental to or
consequential upon the main purpose and a thing
reasonably done for effectuating the main purpose.
7. In Attorney General v. Mersey Railway Co,
(1907)
• A company was incorporated for carrying on a hotel
business.
• It contract with third party for purchasing furniture, hiring
servants and for maintaining omnibus.
• This deal was challenged and was sought from the court.
• Is this a case of Ultra vires…?
8. EXCEPTIONS TO THE DOCTRINE
OF ULTRA VIRES
• An act, which is intra vires to the company but outside
the authority of the directors may be ratified by the
shareholders in proper form.
• An act which is intra vires to the company but done in an
irregular manner, may be validated by the consent of the
shareholders.
• If an act ultra vires to the articles of association, the
Articles may be altered to make it intra vires.
9. Contd..
• 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.
10. Ultra Vires in England
• In England the doctrine of ultra vires has been restricted
by the European Communities Act, 1972.
• Any transaction decided by its directors shall be deemed
to be within the capacity of the company
• Ultra vires has only been modified, not abolished.
• The European Communities Act, 1972 has modified it in
favour of the affected party in case of ultra vires
transactions.
11. Present position in India
• 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.
