What is the doctrine of indoor management?

For any company, its reputation is extremely important. However, the easiest way a company’s reputation is tarnished is if some elements within the company try to take undue advantage of the customers associated with the company. This is where the doctrine of indoor management comes in. The main goal of this doctrine is to protect any outsiders that are associated with the company from actions that may be done either directly by the company or indirectly by components of the company.

This doctrine otherwise known as the Turquand rule ensures that when a person and a company are tied by a contract then any transaction between these two parties is performed and authorised as per the company articles and rules. Hence it ensures and gives assurance to the customers that when they interact with the company they don’t need to take precautionary measures by looking into the company for any irregularities. This is the responsibility of the company as it is expected of a company to value the good faith of the customer.

How is it related to the doctrine of constructive notice?

The doctrine of constructive notice stems from section 399 of the highly important companies act, 2013. According to this doctrine after the customer completes the payment for the services or products of a company they can at any time go back and inspect the documents associated with this company by electronic means. These documents and electronic versions of them are kept with the registrar of companies. In addition to the documents directly associated with the purchase, the customer can also acquire documents related to the certificates of incorporation of the company. This is because the memorandum of association or the articles of association are regarded as public documents. However, someone is regarded as a customer and is eligible to access these documents only if they have completeda purchase from the company

When does the doctrine of indoor management not apply?

1. Forgery

Any transaction that involves forgery is automatically declared as void ab initio or null and void. For instance, while issuing a share the consent of multiple people from the company is required. However, if the signature of someone within the company was forged then the certificate issued could not be regarded as valid. In such cases, the company would not be held liable for forgery even if it was done by its officers.  Similar rules also apply in the case of government offices. So if you get a document in the name of the ministry of health and family welfare, however at a later date you realize the significance of the community health officer on this document was forged then you cannot invoke this doctrine.

2. Suspicion of irregularity

It is the responsibility of the person dealing with the company to enquire about any suspicions that he or she may have regarding their transactions with the company. However,if they don’t enquire then at a later date they cannot utilise this doctrine.

How is the doctrine of indoor management applied in India?

The Companies act of 2013 is widely regarded as the most important acts when it comes to dealing with businesses, companies and rules, regulations and structures.

The Companies act has no provisions that explicitly states the doctrine of indoor management. However to compensate for this as a customer you should find relief in the fact that the courts have recognised this doctrine through its various judgements.

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