1. DOCTRINE OF
ULTRA VIRES
{ S. N. LAVANYA
(121202064)

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.
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 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.  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 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
shareholders’ 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 can’t 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.

10. THANK YOU