doctrine of ultra vires

1. IN THE NAME OF ALLAH ,
THE MOST BENEFICIENT
&
MERCIFUL
I would like to express my heartfelt to ALLAH and my
beloved parents, teachers, classmates, for their
blessing for the completion of my presentation.
As-salaam-o-alekum

2. TOPIC

3. A-DOCTRINE OF ULTRA VIRES
(i) MEANING AND CONCEPT
B- STATUARY PROVISION
C- ORIGIN (EMERGENCE)
D- ACTS AMOUNT TO ULTRA VIRES
E- BINDING EFFECT OF ULTRA VIRES
(i) INJUNCTION
(ii) LIABILITY OF DIRECTOR
(iii) BREACH OF WARRANTY OF AUTHORITY
(iv) ULTRA VIRES ACCQUIRED PROPERTY
(v) ULTRA VIRES CONTRACTS
(vi) LIABLITY FOR ULTRA VIRES ACTS UNDER TORT LAW
F- CONCLUSION
BIBLIOGRAPHY
Synopsis

4. DOCTRINE OF ULTRAVIRES
 Ultra vires is a Latin phrase combination of two words ultra meaning beyond and vires
means power
 acts done beyond the power or authority.
 A company was required by the legislation to include a statement of its objects
in the memorandum of association and from that company did not have legal
capacity to act outside its object
 The object clause of the Memorandum of the company contains,
object for which the company is formed.
-- An act of the company must not be beyond the objects clause,
otherwise it will be ultra vires and, therefore, void and cannot be
ratified even if all the members wish to ratify it. This is called the
doctrine of ultra vires.
MEANING AND CONCEPT

5. STATUARY PROVISION
-- Company and Allied Matters Act (CAMA) 1990 Section 39(1)
"A Company shall not carry on any business (which)not authorized
by its memorandum and shall not exceed the power conferred upon
it by its memorandum on this Act".
--Communities Act 1975 The fact that the company could not only
be restricted from doing an Ultra vires act at the suit of his
member but any contract entered into by the company beyond its
power was void
--Companies Act 1956 Section 13 that the memorandum of
association shall state the objects of the companies. The objects
clause owes its existence to check the misuse of funds by company
--companies act 2013 section 2(56) “memorandum means
memorandum of association..” contain six clause
(name)(registered office)(OBJECT ) (limited liability)(capital)
(association)

6. Emergence in English law:
Ashbury Railway Carriage & Iron co v. Hector Riche 1875
“The Ashbury Railway Carriage and Iron Company,” was
incorporated under the Companies Act, 1862.
Its objects in MoA “to make, and sell, or lend on hire, railway
carriages and waggons , and all kinds of railway plant etc. and to
carry on the business of mechanical engineers and general
contractors ;
 entered into a contact with riche a firm of railway... to finance a
construction of railway line in Belgium...
Riche sue and contended that contract was within the general in
nature...
Lord Crains Lc bserved... the term general contractor must be
taken... to indicate generally.. the contract which are connected
with the business....

7. Continued.......
Attorney General v. Great Eastern Railway Co.(1800)
In this case the House of Lords affirmed the principle
laid down in Ashbury Railway Carriage and Iron
Company Ltd v. Riche but held that the doctrine
of ultra vires “ought to be reasonable, and not
unreasonable understood and applied and whatever
may fairly be regarded as incidental to, or
consequential upon, those things which the legislature
has authorized, ought not to be held, by judicial
construction, to be ultra vires.”

8. Continued......
In Re New British Iron Company, [1898]
It was held that the article is not in itself a contract between
the company and the directors; it is only part of the contract
constituted by the articles of memorandum between the
members of the company inter se, further .... although these
provisions in the articles were only part of the contract
between the shareholders inter se,

9. Continued.....
Evans vs. Brunner & co. Ltd (1921)
Company manufactured chemicals... By a resolution its
director to distribute $ 1,00,000 to universities and scientific
institution... One member challenged it on the ground of
ultra vires
The court held, it was not ultra vires, the distribution was to
progressive act of company

10. EMERGENCE IN INDIA
In India the origin of the doctrine dates back to 1866 when the
Bombay High Court applied it in case.
Jahangir R. Modi v. Shamji Ladha (1867)
This doctrine was applied for the first time in India in the
noted case.
Bombay high court held... Purchase of joint stock by director
was ultra vires .
And then this rule has been applied and acted upon in a
number of cases.

11. Continued......
Parke v. Daily news ltd. (1962)
Company disposed of its newspaper business and
proposed with the sanction of a general meeting to
distribute the purchase price among its ex-employees
by the way of compensation for the loss of their
employment and pension right.
It was held to be Ultra Vires on the ground it was
generous to former employees not for the remaining
business.

12. Continued......
A lakshamanaswami mudaliar v. Life insurance company
(1963)
It was a company having business of life insurance policy.
The director of company were authorised “to make
payment for charitable and benevolent object”.... The
director paid Rs. 2 lakhs, to promoting technical and
business knowledge.
Supreme Court held that “the director could not spend
companies money on any charitable or general object
which they might choose.” Mr. Justice shah : there must
be proximate connection between the gift and the
company business interest.

13. ACTS AMOUNT TO ULTRAVIRES
1. An act which is beyond the M.o.A. (object clause) is ultra vires
2. An act which is beyond the authority of director, general
director, managerial director, secretary, executive director etc.
3. An act which is intra vires but done in an irregular
manner(ratified by shareholders)

14. effect OF ULTRAVIRES
If a company enters into transactions, which are ultra vires, it
will have the following effects...
1. Injunction:
2. Personal Liability of Directors:
3. breach of warranty of authority:
4. Ultra Vires Contracts:
5. Property Acquired Ultra Vires:
6. Ultra Vires Torts:

15. (i) Injunction ::
The members can get an injunction to the
restrain the company where an ultra
vires act has been or is about to be
undertaken.*
(Whenever a company goes beyond the scope of the object
clause, any of its members can get an injunction from the
court to restrain the company from undertaking the ultra
vires act.)
* (Attorney general vs. great Eastern Railway Co 1880 )

16. (ii) LIABILITY OF DIRECTOR::
The funds of a company can only be utilised for carrying out its
authorised object .
Emphasising this point, lord Herschel.. A company can not
employ its funds for the purposes of any transaction which
do not come within the objects specified in the M.o.A . so.. if
a director of a company make an ultra vires payment , he can
be held personally liable and compelled to refund the money*
*Trevor vs. Whitworth

17. (iii) BREACH OF WARRANTY OF
AUTHORITY::
The directors being the agent of the company can do
nothing which the company itself can not do under its
memorandum, and therefore, any contract which is ultra
vires the company will be void and without affect what
so ever if they do not they would be held personally
liable for breach of warranty*
* Weeks vs. Propert (1873)

18. Where company money has been utilised in ultra vires dealings
in order to acquired certain property, the company’s right
over such property shall remain secured*
* Ad sait vs. Bank of mysore
(iV) property acquired ultra
vires dealing::

19. (v) ULTRA VIRES CONTRACTS ::
Ultra vires contract are void ab initio and can not
become valid by ratification or by estoppel.
If a person entered into contract without going
through its memorandum and contract turns
ultra vires... Company can not liable.*
*Re beauforte (london) limited

20. (vi) LIABILITY UNDER TORT LAW::
Liability for ultra vires acts under tort law...
A company is liable in torts if it is shown that -
1. the activity in course of which the alleged tort has been
committed falls within the ambit of memorandum of the
company.
2. the tort was committed by the servant within the scope of his
employment,

21. RECENT CASE LAWS
Anand Prakash And Anr. vs Assistant Registrar,
(27 January, 1966 AIR All 22)
Dr. Rakeshwas Dass Jain filed an arbitration petition before the
Assistant Registrar Co-operative Societies, Muzaffarnagar. He
alleged that the proceedings conducted at the annual general
meeting after it were illegal and ultra vires.
The same view was expressed by the Supreme Court which
was held by Privy Council In International Railway Co. v. N.
P. Commission. (AIR 1937 PC 214)

22. Continued.......
 Miri Piri College Bachao v. Shiromani Gurdwa
(15 May, 2009)
Petition filed in Public Interest, against Shiromani Gurdwara
Prabandhak Committee from transferring any property in the
name of respondent No.4
 under the provisions of the Act transfer for specified for
religious, charitable, or educational purpose and shall be
devoted for the purpose specified.
 The principle referred in above case which was in Attorney
General Vs. Great Eastern Railway (1880) 5 AC 473 in the
following words:-
 " The doctrine of ultra vires ought to be reasonably, and not
unreasonable, understood and applied and whatever may be
fairly regarded as incidental to, or consequential...”

23. APART FROM COMPANY.....
The question is Whether doctrine of ultra vires to be
made applicable to LLP?
LLP ----(stand limited liability partnership)
LLP has combines the advantages of both the Company and
Partnership into a single form of organization.
In an LLP one partner is not responsible another partner's
misconduct or negligence; LLP is not liable for any
unauthorized act done by any partner.
 As per aforesaid principles/judgments, doctrine of ultra vires
should be applicable to LLP
because :
 (a) LLP is an Artificial Person (b) has separate Legal
entity (c) Liability of partners is limited (d)is governed
by LLP agreement (e) not liable for other partner act

24. Continued....
B. Rajagopal v. Jomy Xavier
(3 March, 2010)
The appellant was a workman of a coffee estate in
Nelliampathy, owned by a partnership firm, 0ne
partner sue other (Managing Partner) on the ground
that the act of partner was ultra vires.
The court that the unlimited liability partnership firm
have no character of company... So this doctrine not
imposed in such firm.

25. CONCLUSION
The doctrine of ultra vires activated where the act of
company or director beyond the authority. There is no
specific statutory provision but followed thoroughly in
company law. It is an important rule for member or other
person to secure his money or money’s worth. It firstly
emerged in English law and then regulary followed in
India since 1867 after the decision of Bombay high court
in JAHANGIR R. V. SHAMJI LADHA.

26. BIBLIOGRAPHY
1. Company law – DR. R.K. BANGIA
25th edition (2013)
ALLAHABAD LAW AGENCY
ALLAHABAD (INDIA)
2. Company law – AVTAR SINGH
15th edition (2009)
EASTERN BOOK COMPANY
LUCKNOW (INDIA)
3. Company law – KAILASH RAI
5th edition (2010)
ALLAHABAD LAW AGENCY
ALLAHABAD (INDIA)
4. THE NEW COMPANY LAW- DR. N. V. PARANJAPE
6TH EDITION (2015)
CENTRAL LAW AGENCY
ALLAHABAD (INDIA)

28. PRESENTED BY
BADRUZ ZAMAN
Vth Semester
13BALLB-26
FA7039
SUBMITTED TO,
MS. SHAILA MEHMOOD
ASSISTANT PROFESSOR
A.M.U. CENTRE MURSHDABAD
(faculty of law)