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The doctrine can be defined in two ways.
DOCTRINE OF ULTRA VIRES: Primarily, as anything transcending the
APPLICATION IN defined power radius of the company and
ADMINISTRATIVE LAW secondarily, as anything that is beyond the
delegated power of the majority to bind the
shareholders and creditors or against
illegality1 with them. The initial meaning
By Oishiki Bansal & Medha Singh protects the public whereas the secondary
From Symbiosis Law School, Noida meaning protects the creditors and
shareholders of the company. The difference
Concept of the Doctrine and Its Origin is clearly on the outside and inside of the
company respectively.
The memorandum of a company defines the
scope and objectives of a company through In the legal literature of “A Treatise on the
an “Object clause”. Any activity or action Doctrine of Ultra Vires by Howard A.
outside the purview of this is considered ultra Street2” Mr Street has showcased himself as
vires and is a void act by the company and it a strong contender against corporations as a
cannot be ratified afterwards. personality and sticks to the idea that a tort
doer or a criminal must possess analogy and
The need for the doctrine originated after the physical features. He believes that
year of 1855 as till then the concept of a corporations should not be punished for the
company merely was of multiple partnerships wrong done by their own agents. However,
and no necessary need came to light in order Mr Street makes an effort to restore the "true
to protect the investors. The law prior to 1855 doctrine" as formulated in the case of
suggested that any decision can be enacted on “Ashbury Railway Carriage Co. v. Riche3”
the consent of all the partners and that with corporate tort responsibility. This
enactment came with a packaged deal of reconciliation, whether it's genuine or not, he
individual liability, liberating other partners says has been brought about by changing the
from the liability of the decisions made by law of agency. He rejects the secondary
one. But, after the introduction of “limited meaning given to the phrase by “Blackburn
liability” (company’s debts are its own and J. in Taylor v. Chichester and Midhurst Rly.
individual assets of the agents won’t be Co.4” in order to achieve this reconciliation
compromised), the need for the doctrine and instead relies on the secondary meaning
arose. of ultra vires, which is defined as "outside the
special privileges of the corporation". Then

1
As defined by Justice Grey, Supreme Court of The
United States 3
Ashbury Railway Carriage Co. v Riche, (1875) L.R.
2 7 H.L. 653.
Stallybrass, W. T. S. (1931). The Doctrine of Ultra
Vires [Review of A Treatise on the Doctrine of Ultra 4
Vires, by H. A. Street]. Journal of Comparative Taylor v Chichester and Midhurst Rly. Co., (I930)
Legislation and International Law, 13(1), 141–144. A.C.
http://www.jstor.org/stable/754091”

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he states the idea as stated - "Provided that doctrine or is the doctrine acting as a
the alleged act falls within the general vessel for justice?
purview of its constating instruments, even if
the harm was incidental, consequential, or a To answer the questions the article has been
result of the way in which the alleged act was divided into four parts. The First Part deals
carried out," Mr Street has taken the doctrine with the distinction between the Ultra Vires
farther than the courts willingness to carry it acts and illegal acts. Secondly, this article
and hence many of the decisions have been discusses the establishment of doctrine of
criticized. He fairly defends the rigorous Ultra Vires in the English and Indian
interpretation of ultra vires on the basis of jurisdiction and clarifies the present stance of
public policy, arguing that governing bodies the doctrine in both the contexts. Thirdly, the
and directors would be more circumspect if article criticizes the doctrine of Ultra vires
they were subject to personal liability. and tries to define the boundary of the
However, we believe “Sir William doctrine. Fourthly, the article discusses the
5
Holdsworth ” is correct when he asserts that application of doctrine of ultra vires in
practical convenience rather than theoretical administrative law and the arguments given
considerations has dictated what activities are by two scholars Christopher Forsyth and Paul
possible and what are not for a corporation. Craig.
Mr Street in his book further propositioned
the argument that a person cannot be said to Distinction between Ultra Vires Acts and
commit a crime which is already prohibited Illegal Acts.
by the law as the commission of such crime
is prevented and hence remains incomplete. Anything which falls outside the purview of
However, we cannot say that law always the object clause is ultra vires and will stay
prevents the crime, there are crimes which are ultra vires even if it is a legal act. In the same
completed even when the law preventing it way if an act is illegal and it still falls inside
exists and such offenders must be punished the purview of the object clause then, the rule
according to such law.Mr Street has focused by the charter would prevail and would be
more on the secondary interpretation to the termed illegal and not ultra vires. This
doctrine rather than the primary distinction was pointed out in the case of
interpretation. However, for the development State v Nebraska Distillery Co6., where the
of the doctrine focus is required on both the judge pointed out that an act done unlawfully
interpretations. need not be mala prohibitum or malum in Se.
What is ultra vires is the use of excess power.
This review raises the following questions
which are needed to be answered - Establishment of The Doctrine:

1) How is one supposed to know when to In the English Context the Cohen Committee
apply the doctrine of ultra vires? and Jenkins Committee set the pioneer pillars
where the doctrine was subject to changes
2) Is Judicial intervention a way of policing and questions. The committee demanded the
through the narrower concept of the abolition of the doctrine as the principle gave
5 6
Supra note 2. State V. Nebraska Distillery Co. et. al., 29 Neb. 700

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nothing good and highlighted the The failure of both the committees did result
shortcomings of the doctrine. in the passing of the European Community
Act 1972. The court also decided to bring
The pioneer of all the reforms ever made in down the rigidity of the doctrine. Through
the doctrine was by the Cohen Committee. this the company was embraced with the
The power to change and amend one’s own power to perform its duties under the ambit
object clause was provided by the Parliament of the company’s act and such activity need
through the passing of Section 5 of the not to mandatorily be under the object clause
Companies Act, 1948. The credibility of such or memorandum of the company. According
transactions by the company was controlled to the established principle in Attorney
and limited by future alterations. This General's Case7, the object clause may also
although could not help so much so into the include any function which is a Necessity,
security of the third party in such transactions Incidental or a combination of Consequential
but, it indeed proved to be very helpful when and Incidental.
the question of future transactions was to be
entertained. However, the recommendations As in the “Evans Case8 “court
of the Cohen Committee included more acknowledged the need of the company for
safeguard from the third party and the time along with it’s problems in hiring
stakeholders by the abolition of the doctrine and acknowledged the liberty of the company
for them. If that would have been followed to do whatever it demands to accomplish its
then questions such as is a company duties embodied in it. The aspect of necessity
responsible for the pension of a widow of the overtook the doctrine.
managing director of the company as in the
case of “Re Lee Bheren” would have Presently, in the English legal system the use
occurred. of the doctrine is controlled by “Section 9(1)
, The European Committees Act 1972”,
The Jenkins Committee in 1962 tried to clear which states that any third party can impose
the water again by asking for the abolition of the liability on the company if acting in good
“Constructive Knowledge” which would faith. But the same cannot be done by the
have allowed the stakeholders and the third- company on a third party. The application of
party members to take in action any Ultra vires is controlled by the given act but
transaction with the Company until it goes the doctrine is still not abolished.
against the object clause of that company.
Full knowledge of the company’s clause In the context of India “Act No. XIX of
would have been provided to the stakeholder, 1857”, repealed the Act of 1850 and replaced
but both the committees could not succeed as it. The members of corporations formed for
they lacked the consideration for the object purposes other than banking or insurance
clause of the company.

7 8
Attorney General v. Mersey Railway Co., (1907) 1 Evans v. Brunner Mond & Company., (1921) Ch
Ch. 81 359.

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were finally permitted to restrict their an external person is lawfully believed to be
responsibility thanks to this Act. aware of the company’s object whereas
practically one may or may not be aware.
The act of 1857 was then repealed and in its
place came the “India Companies Act Presently, even now in the Indian legal
1866”“. In the aforementioned Ashbury case system the doctrine is enforced as per the
the House of Lords noticed the similarities principles established in the Ashbury case
between Sections 6, 8, 11 and 12 of the and there is no legislation to restrict the
“English Companies Act 1862” and Sections application of the doctrine. The Ultra Vires
6, 8, 11, 12 of the “Indian Companies Act acts are still regarded as void and hence,
1866”. neither such acts can be enforced by the
company over the third party nor vice - versa.
The case of Jahangir Ratanji Modi v Shamji
ladha9 was the first ever case of ultra vires A Weapon to Police or towards Justice?
before the Indian judiciary. It was held that a Criticism and Judicial review:
company cannot do anything which is not
authorized by the deed of settlement. And for The doctrine of ultra vires is taken in a
such reason details of authorized transactions narrower way quite many times. It narrowly
were also looked into and the court also went means to stop or put a finger on anything
through the memorandum. The court came to which goes outside the ambit of the powers
a conclusion that the transactions in question of a company or the organization. Any power
were not authorized by the deed of settlement provided by the legislature is also limited by
and hence the parties were found guilty. it. The job of the courts become limited to the
policing of the organizations and as the
In Ashbury Railway Carriage and Iron guardians of the legislature when the
Company Ltd v. Riche10, the validity of the applicability of the doctrine is in question.
Contract was brought into question as it was This doctrine itself invites the purpose for
outside the object clause of the company’s judicial intervention. This also ends up
memorandum. And possibility of future affecting the boundaries to the extent of
ratification was also questioned in this case. whom the judiciary can interfere. One of the
The House of Lords held that if the company limits for example is drawing of a condition
did not have the capacity to enter the contract, that the act must fit under the ambit of this
then it again cannot have the capacity to ratify narrow but conceived definition of the
it too. And the contract was considered void doctrine in order to invite the judiciary for
with no possibility of ratification. The intervention. When discussing the
doctrine was opposed by many people after interference by the judiciary, many times the
the Ashbury Case as the doctrine was made companies act under the ambit of the power
to protect the people. But a company has its assigned to them by the parliament where the
objectives and limits under the objection Parliament has given certain specific areas to
clause in its memorandum. The question that maintain discretion. Maintenance of

9 10
Jahangir Ratanji Modi v Shamji Ladha, (1868) 4 Supra note at 3
Bom. HCR 185.

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discretion should be by the minds of the more devout in nature. The kind of control
company and shall not be taken contrary to Judiciary has put on the maintenance of
the Parliament. But, the Judiciary easily discretion by the agency by the disguise of
disguises their interference behind the idea of the legislative intent can be taken as a clear
legislative intent. The Judiciary then may example. The legislature following its pied
decide if the intentions of the parliament piper personality whenever questioned would
weren’t to provide full discretion and then generally never come up with any more
reasonable grounds and then reasonable guidelines to the judiciary. Moreover, the
restriction would enter in the name of change of the time keeps modifying the need
legislative intent, which blurs the boundaries of controls. Keeping a rigid and following
of the grounds of intervention of Judiciary legislature older than half of the companies
and definition of discretion provided by the and finding their intent is hard and fast
parliament causing the doctrine to be irrational. Evolution of judiciary with the
criticized. society and the need of time is a very
important aspect of law making in which the
The doctrine has also failed to provide any doctrine lacks.
clear justification and image on the correct
and most appropriate way of the re- The doctrine also suffers from internal
examination of the Judiciary. The judiciary friction from itself as it is working as a
itself defines and re-examine itself through vehicle for policing not just for the
various ways of reviews such as the collateral companies or organizations which are Public
fact doctrine where a line of difference is or derive their powers from the legislature of
constructed between the case of a the country. Privately, owned associations
misinterpreted Statue and a case of a and monopoly, have also been exposed to
jurisdictional mistake which is also regarded public boundaries set by the parliament. The
as almost impossible to be drawn by Craig11. courts raise fingers on the basis of ethics and
To overcome this dilemma of choices the sometimes intention of the legislature. This
Judiciary came up with legislative intent as thought can be rectified by making
the foremost ideal to keep a check on the alterations to the doctrine but this will also
judiciary and to help it police the pied piper result in the change or better called
of a legislature. But, again the problem arises transformation of the doctrine as it would
as it grants flexibility or we can say too much then not just become a police of power
flexibility to the judiciary which indeed granted and power performed but Moral and
snatches the rationale out of any formal justice vehicle of the society.
assurance.
Doctrine of Ultra Vires and
The doctrine telling its own story of criticism Administrative law:
does not align with the changing time and
atmosphere. It lacks practical realism and is Christopher Forsyth12 while defending the
doctrine of Ultra Vires provided that without
11
Craig, P. (1998). Ultra Vires and the Foundations
of Judicial Review. The Cambridge Law Journal, 12
57(1), 63–90. http://www.jstor.org/stable/4508421 Id at 11.

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the doctrine it would be difficult for the However, Craig's view on abandonment is
court’s to interpret the errors protected by the contradictory to that of forsyth. He argued
ouster clauses in the legislation and how that evisceration of judicial review cannot be
vague legislations can be challenged if the said to be an inevitable consequence of
legislation explicitly or impliedly provides ignoring the doctrine but it is one of the
powers to the executive to make such consequences. The judiciary can remove the
legislations. Thus, showing that the doctrine error in legislation through the principles of
of Ultra Vires concurs with Administrative common law. The courts need not necessarily
law. On the other hand, Craig argues that stick to the intent of the parliament, the
doctrine of Ultra Vires is not important for legislation can be interpreted according to the
the court to interpret the administrative needs of the society and the current situation
functions. The reasoning of both the scholars in the legal system.
are discussed below.
The second reasoning given by Christopher is
The first reasoning which he gives is if the that how will the court interpret the
doctrine is abandoned, it will be difficult for legislations which are vague and are not
the judiciary to interpret the ouster clause . made according to the power conferred on the
By ouster clause it is meant the clause which ministers. The idea of delegation of power by
bars the judiciary to review certain clauses of the parliament to ease the parliament’s
a legislation. He bases his views on the case burden however, if the executive formulates
of Staatpresident en andere v United the legislation vague how will this ease the
13
Democratic Frint en’nander , where J. working. What the parliament allows the
Rabie, while interpreting an ouster clause, executive has to be expressly mentioned or
which prohibited the judicial review about should be implied by the power conferred.
the information on “unrest” incases of And in certain situations if the legislature
emergency situation, held that the provides power to the executive to make
requirement that a subordinate legislation vague legislation on what grounds can such
should not be vague is a requirement of the legislation be challenged in the courts.
“Roman-Dutch'' legal system and not that of
doctrine of Ultra Vires. Thus, the rejection of Craig reasons that what needs to be seen is
doctrine of Ultra Vires made the clauses the legislative intent while interpreting the
which were protected by the ouster clause delegated powers to the executive. The
still applicable. According to the view of judicial review of vague legislations can be
Christopher if the reasoning given by J. Rabie done on the basis of doctrines of common
is adopted it will deprive the judicial review law. He reiterates the case of Kruse v
from the very essence of it. If the court’s are Johnson14, where it was held that the power
not allowed to interpret the ouster clause, the of the legislature to delegate is limited to
error in the legislation will prevail. formulations of legislations which are not too
vague or inherently unreasonable. Further, he

13 14
Staatpresident en andere v United Kruse V Johnson, (1898) 2 Q. B. 91
Democratic Frint en’nander, 1988(4) S.A.
830A.

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stated the case of R v Secretary of State for to use his power more than with what he is
Home Department15, where the court opined conferred with. And in case of vuse of excess
that the power conferred should be as such as power the right for the judiciary to interfere
it does not infringe the fundamental rights of and challenge such power comes into place.
the citizens. Thus, according to him, what This forms a part of the administrative law
needs to be checked is the “judicial creation” which cannot be ignored.
that is derived from common law. And if the
“judicial creation” is used to challenge the *****
vague legislations, the basic common law
principles can be used to conclude that the
executive cannot have the power to make
vague legislations and also the legislature
cannot delegate the said power.

Conclusion

The doctrine of Ultra vires comes into place

when one exercises his powers more than
what one is conferred to. The doctrine is
considered to be one of the essential
principles for administrative law; however,
some scholars argue that the doctrine does
not make one of the fundamental principles.
The doctrine was established with the
Ashbury case when the company entered into
a contract which was beyond its power to
enter into. Ultra vires is conceived in a very
narrow way and thus the judiciary perceives
it the same. Thus, this becomes the biggest
ground for the judiciary's intervention. The
legislation that governs the company gives
them the power to exercise discretion. The
question that arises here is whether ultra vires
really helps the judiciary to challenge the
legislation. The fourth part answers to this
question in the form of the forsyth and craig’s
debate and reach to the conclusion that
judicial review has been established on the
doctrine of Ultra vires and it remains as an
indisputable fact. No one should be allowed

15
R v Secretary of State for Home
Department, (1993) 4 All E.R. 539
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