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Assignment-Doctrine of Indoor Management
Assignment-Doctrine of Indoor Management
Assignment-Doctrine of Indoor Management
DOCTRINE OF INDOOR
MANAGEMENT
For understanding the doctrine of indoor / internal management, the
understading of the concept of doctrine of constructive notice is sine qua
non. So a brief introduction of this concept is given here.
Case Law
This doctrine is the outcome of the need to secure the company form the
outsiders when they look to deceive the company by alleging their
unawareness with the contents of the memorandum and articles and
trying to evade their contractual liabilities or accusing the company of
fraud, as the case may be.
ameergujjar@yahoo.com
By Ameer Ahamad
So, the person dealing with the company is bound to know what he
can know as a public person but, not what is not in his reach and which is
done behind the doors of the company where he cannot access to.
ameergujjar@yahoo.com
By Ameer Ahamad
The business is a field which requires the protection of all the
contracting parties and good business can only make sure the good
development of the economy and commerce. Though, apparently this
doctrine is for the protection of the persons dealing with the company but
its more important purpose it to promote the investments in business in
order to keep the business and the economy going well.
The investors until and unless they are secured in all respects
never show any tendency to invest money and without investments the
business and simultaneously the economy is always affected badly. The
protection given to the investors under this doctrine is a step to promote
the business and the growth of commerce.
1-Knowledge of Irregularity
ameergujjar@yahoo.com
By Ameer Ahamad
The application of the doctrine of indoor management was refused
on the ground that the person dealing with the company had the
knowledge of the irregularity in Howard V.Patent Ivory Manufacturing
Company, (1888) 38 Ch. D. 1561 and the directors were not allowed to
defend the issue of debentures to themsemlves because they
should have known that the extent to which they were lending
money to the company required the assent of the general meeting
they had not acquired.
2-SUSPICION OF IRREGULARITY
As in Anand Bihari Lal V. Dinshaw & Co, Air 1942 Oudh 417 the
plaintiff accepted the transfer of companys property from its
accountant. The transfer was held to be void. The plaintiff could not
have supposed, in the absence of power of attorney, that the
accountant held power to transfer companys property.
3-FORGERY:-
But what if the person had not consulted the articles of the
company and had no knowledge of the contents of the
articles? This question was answered in Houghton & Co v.
Nothard Lowe and Wills Ltd, (1927) 1 KB 246. In this
case as well there was a delegation clause in the articles and
contract was entered into by a person (a director) who could
claim the delegation of the powers to him, but the plaintiff
company had not read the articles of association and had no
knowledge of the delegation clause and hence it was held that
the plaintiff company cannot claim the advantage of the
clause of articles which he had no knowledge of at the date of
entering into the contract.
CONCLUSION
The former one is for the protection of the companies from outside
stakeholders and has always been very helpful for the companies while as
the interests of the investors are also necessary to be protected the
doctrine of indoor management was introduced. These two doctrines
act to balance the protection of company as well as outside stakeholders.
ameergujjar@yahoo.com
By Ameer Ahamad
ameergujjar@yahoo.com