K.

MEGHANA

What is it?
Ultra means beyond
Vires means powers
Companies Act mentions Ultra Vires. Its scope wasnt

completely clear until 1875.

Ashbury Railway Carriage & Iron Co. Ltd. Vs. Riche

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.

 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.

Indian Ultra Vires Case

Thus it became ultra vires.

ULTRA VIRES BORROWING

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.

EXCEPTIONS
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.

 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.

PRESENT POSITION OF ULTRA

VIRES ACTS
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 cant be ratified by the shareholders in the

AGM.

 The European Communities Act, 1972 has

modified it in favor of the affected party in case

of ultra vires transactions.

Ultra vires has only been modified, not

abolished.

THANK YOU