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Thread: Q. Give a summary of facts and explain fully the doctrine of "indoor management"

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    Word Icon 35px Jpg.ashx Q. Give a summary of facts and explain fully the doctrine of "indoor management"

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    Q. Give a summary of facts and explain fully the doctrine of "indoor management" and discussed in the case of Royal British Bank Vs. Turquand. are there any exception to it? discuss. (2002)(2004)(2005)(2007/A)
    1. Introduction:

    The strangers dealing with the company are entitled to assume that every thing has been regularly done. the persons dealing with the company are bound to read the public documents and to see that the proposed dealing is not inconsistent there with but they are bound to do so. such persons need not enquire into the regularity of the internal proceedings of the company.
    2. Doctrine of indoor management:
    Doctrine of indoor management was first adopted in Turquand case. according to doctrine of indoor management so far as internal proceedings of the company are concerned, strangers dealing with the company are entitled to assume that everything has been regularly done.
    Explanation:
    Every person dealing with the company is deemed to have a constructive notice of the memorandum of association. this is an important document which has to be registered and is open to public inspection. so members and outsiders are deemed to be acquired with all the provisions of the memorandum.
    3. Case law
    The Royal British bank
    Vs.
    Turquand
    1856 BE & B 327

    The directors in this case, gave a bond to T and they had a power under the articles to issue such a bound provided that they were authorized by a proper resolution of the company. in fact no such resolution was passed.
    Held:
    It was held that T could sue on the ground that he was entitled to assume that resolution had been passed.
    4. Exceptions to the rule in Turquand's case:
    Following are the exception to the rule in Turquand's case.
    I. Knowledge of irregularity:
    Where a person dealing with the company has actual notice of the irregularity, the rule does not apply.
    II. Implied or constructive notice:
    The rule in Tuuruand's case does not apply where a person having dealing with the company has an implied notice or constructive notice, a distinct from actual notice, of the irregualrity in the internal proceeding of the company.
    III. Acts void-abinitio:
    Where the acts done in the name of the company are void-initio, the rule in Turquands case does not apply.
    IV. Suspicious of irregularity:
    The rule of Turand's case does not apply where the circumstances surrounding the contracts are suspicious.
    V. Case of forgery:
    The rule of Turquand's case does not apply to the cases of forgery.
    VI. Representation through articles:
    If an outsiders finds an officer of the company openly exercising an authority, he is relived from the duty of further inquiry and are entitled to assume that power has been regularly and duly conferred.
    VII. Acts out side apparent authority:
    Rule of Turqand's case does not apply if the act of an officer of a company is one which would ordinarily be beyond the powers of such officer.
    VIII. Scheme of amalgamation:
    Where a scheme of amalgamation is proposed the matter is not one of indoor management.
    5. Conclusion:
    To conclude I can say that, the persons dealing with the company are not bound to enquire into and satisfy themselves upon the details of the company indoor management. the strangers are not concerned to see that there was a proper quorum of directors present in the meetings of the company.

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