Knowledge of Irregularity
The Doctrine of Indoor Management is not applicable in cases where the parties to the agreement have the knowledge of irregularity and still choose to enter into the agreement. In this case, the parties can choose not to enter into any type of relationship with the company, still, they choose the same and cannot take the benefit of this doctrine. In the case, Devi Ditta Mal vs Standard Bank of India, two directors were involved in the transfer of a share, and one of the directors knew that the transfer was not valid. One of the directors in this case was not appointed as per the laws of the company and the other director was involved in the transfer of shares directly. The articles of the company restrict that the director choose to move forward with the transaction hence he cannot take the defence of the Doctrine of Indoor Management in this case.
Doctrine of Indoor Management: Meaning, Exceptions and FAQs
The Doctrine of Indoor Management comes under the ambit of the Companies Act, 2013 and it protects the rights of any person who is performing any kind of transaction or business with the company. Section 2(20) of the Act explains the meaning of the Company as the association of persons according to the laws of the Companies Act, 2013. The Doctrine of Indoor Management protects outsiders against the actions done by the company. Any person entering into a contract must ensure that the transaction is authorized by the articles and memorandum of the company.
Key Takeaways:
- The act provides the company the status of an artificial person who can perform all the transactions in their name.
- The Memorandum of Association and Article of Association are the two important documents of a company that provide the scope of services of the company and the functioning of its internal team.
- These documents are essential for the smooth functioning of a company. When the company gets registered with the registrar, these documents become publicly available to the general public.
Table of Content
- What is Doctrine of Constructive Notice?
- What is Doctrine of Indoor Management?
- Exceptions to Doctrine of Indoor Management
- 1. Knowledge of Irregularity
- 2. Suspicion of Irregularity
- 3. Forgery
- 4. Acts outside Apparent Authority
- 5. Representation through Articles
- Conclusion
- Doctrine of Indoor Management- FAQs