Q. What do you mean by the doctrine of Indoor Management? [2018 - 10 marks]
Q. Short note on Doctrine of constructive Notice [2017 - 4 marks]
Q. What is doctrine of 'Indoor management’? Discuss with the help of decided cases. [2017 - 20 marks]
Q. Discuss the doctrine of Indoor Management with exceptions. [2016 - 20 marks]
Doctrine of Constructive Notice
Memorandum and Articles of Association, two main documents of any registered company, are the public documents. Section 399 of the Companies Act, 2013 makes the documents electronically available to all public for their view, taking note of and referring them for any legal purpose.
Before any deals with a company, one must inspect its documents and verify conformity with the provisions. The law assumes that any person dealing with the company is aware of the contents of the documents, irrespective of whether or not the person actually has read the documents. This is called Constructive Notice.
Doctrine of Indoor Management
The Doctrine of Indoor Management presumes that all the internal procedures as per the Memorandum and Articles of Associations of the company are complied with by the company. As the outsiders will not have access to the internal workings of the company, to protect the interest of the outsiders dealing with the company, this doctrine was introduced in the famous case of The Royal British Bank vs. Tarquand, This is also known as Tarquand rule.
Exception to the Doctrine of Indoor Management
The Doctrine of Indoor Management is not applicable under the following cases:
The outsider has actual or constructive knowledge of the irregularity
In the above situation the Doctrine of Indoor Management cannot be applied to plead protection.
The outsider is negligent in his conduct
The Doctrine of Indoor Management shall not be applicable to protect the outsider if the outsider behaves negligently.
Forgery
In any transaction if there is forgery, the transaction becomes null and void. Hence no protection is available to outsider if there is forgery in the transaction.
Decided Case Law
The Doctrine of Indoor Management was applied in Diwan Singh Hira Singh vs, Minarva Mills Ltd. In this case the director of the company was authorized to allot 5,000 shares only but the director had allotted 13,000 shares. It was held the the allottees had purchased the shares in good faith that the director is working within his specified power conferred to him.
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