Indoor Management| Legal Education

              Doctrine of indoor management is opposed to the doctrine of constructive notice. It is a check on the management of the company. The persons who come in the sight to deal with the company may presume that the internal affairs of the company are running smoothly.  It means that a person instead of having knowledge may presume the internal affairs of the company are running properly.

It means that the person who deals with the company is deemed to have notice of the powers of company and its directors. Doctrine of indoor management and constructive notice always apply parallel in a same case. To answer the doctrine of constructive notice doctrine of constructive notice doctrine of indoor management was introduced.  Constructive notice it based on the caveat emptor.

                        nemo dal quod not nabet

               “No one can transfer be has title than he himself has”

                 Royal British Bank v/s Turquand

                  1856 119 ER 886

        These are the following brief facts of the case  (a)- The cool mining and Railway Company got loan from royal British Bank. (b)- The amount of loan was 20, 00 pounds. (c)- The debt was obtained by directors on behalf of the company.  “They were bound to read the statute articles of association but they are not bound to do or more”. Duty imposed by the constructive notice on the royal Bank.

 Constructive notice principles imposed a duty on the Bank that the bank is deemed to have notice to have their contents including the powers of company and directors.    Duty imposed by the indoor management on the directors. Doctrine of indoor management imposes a duty on the directors that they are working according to the articles and company is running smoothly. The rule has great practicability it has been use to cover acts done on behalf of company by persons who have never been appointed as directors.

             There are some exceptions to the rule of indoor management. When the person entering into the contract with company has the knowledge of irregularities, the principle of indoor management shall not apply. Where the person entering into contract has the suspension of irregularity before entering into contract.Where the plaintiff has the knowledge when there the doctrine shall not apply.