# Doctrine of Ultra Vires

## Meaning

Ultra Vires = Latin term where 'Ultra' means 'beyond' and 'Vires' means 'powers'.

Any purported act or contract by a company that goes beyond the powers conferred by its MOA is ultra vires.

## Effect of Ultra Vires Acts

When an act is ultra vires the MOA, the following consequences follow:

#	Consequence	Explanation
1	Void ab initio	Treated as never existing — no legal effect from the beginning
2	Injunction	Court can issue an injunction restraining performance
3	Personal liability of directors	Directors who authorised the act are personally liable to indemnify the company
4	Criminal action	For deliberate misapplication of company funds

## Exceptions to the Doctrine

Not all 'ultra vires' situations are fatal. Four important exceptions:

### (a) Ultra Vires Directors but Intra Vires AOA & MOA

The act is within the company's overall powers but the directors exceeded their internal authority. ➜ Shareholders can ratify by ordinary procedure.

### (b) Ultra Vires AOA but Intra Vires MOA

The act exceeds AOA but is within the broader MOA. ➜ Shareholders can ratify by amending the AOA (SR).

### (c) Ultra Vires the Statute (Companies Act itself)

Cannot be ratified. The act is null and void. No amount of consent can validate an act that violates the Act.

### (d) Property Acquired with Ultra Vires Funds

If company funds (even though raised/spent ultra vires) are used to acquire property, the property still belongs to the company and is secured.

## Summary Table

Type of Ultra Vires	Ratifiable?
Beyond directors' powers (within AOA & MOA)	Yes - SH can ratify
Beyond AOA but within MOA	Yes - via AOA amendment
Beyond MOA but within Statute	Not ratifiable - need MOA amendment first
Beyond Statute	NEVER ratifiable

## Quick Recall

Ultra Vires + Statute = Dead. Forever.
Ultra Vires Directors = Easiest to fix (SH ratification).
Property bought with ultra vires money still belongs to company.

Worked example

### Example 1

Example: ABC Ltd's MOA limits objects to manufacturing textiles. The directors enter into a contract to buy a chain of restaurants. This is ultra vires the MOA → void ab initio. The directors are personally liable, and shareholders cannot ratify because the act exceeds the MOA itself.

### Example 2

Example - Exception (a): Directors of XYZ Ltd borrow ₹100 crore even though AOA restricts borrowing beyond ₹50 crore without member approval. The act exceeds directors' powers but is within MOA. Shareholders can ratify it by passing the required resolution.

### Example 3

Example - Exception (d): A company unlawfully (ultra vires) uses funds to buy land for an unauthorised business. The land is later sold at profit. Even though the original purchase was ultra vires, the property/sale proceeds belong to the company and are recoverable.

⚠️ Common exam mistakes

Believing shareholders can ratify any ultra vires act — they cannot ratify acts ultra vires the Companies Act itself.
Confusing 'Void' with 'Voidable' — ultra vires acts are void ab initio, not voidable.
Missing the property exception — students often think ultra vires use of funds means lost rights to the property bought.

Reference: — Doctrine derived from common law and Section 4(1)(c) of the Companies Act, 2013 (object clause)

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