Doctrine of Constructive Notice & Indoor Management

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Doctrine of Constructive Notice

Constructive notice is the legal fiction hat signifies that a person or entity should have known, as a reasonable person would have, of a legal action taken or to be taken, even if they have no actual knowledge of it. In companies law the doctrine of constructive notice is a doctrine where all persons dealing with a company are deemed (or "construed") to have knowledge of the company's articles of association and memorandum of association.

Section 399 of the Companies Act, 2013 provides that any person can inspect by electronic means any document kept by the Registrar, or make a record of the same, or get a company or extracts of any documents including the certificate of incorporation of any company by payment of prescribed fees. This section confers the right to inspection to all documents of companies. 

Office of the Registrar is a public office

The memorandum and article are open and accessible to all. It is the duty of every person dealing with a company to inspect these documents and see that it is within the powers of the company to enter into the proposed contract. So all documents submitted to registrar assumes the character of public document. Whenever a notice is issued to a person it can be a group notice signifying all person belonging to that dispute, so the person is considered as he has received notice even if they haven’t actually aware of it.

Doctrine of Indoor Management

The doctrine of indoor management, also known as Turquand rule is a 150-year old concept, which protects the outsiders against the actions done by the company. Any person who enters into a contract with the company shall ensure that the transaction is authorised by the articles and memorandum of the company. There is no requirement to look into the internal irregularities, and even if there are any irregularities, the company shall be held liable since the person has acted on the grounds of good faith. Outsiders can assume that all is being done regularly as per the Memorandum and Articles of the Company. This limitation of the doctrine of constructive notice is known as the “Doctrine of Indoor Management”.

Doctrine of Constructive Notice protects the company against the outsiders, whereas, the Doctrine of Indoor Management seeks to protect outsiders against the company. This rule is based on public convenience and justice.

Exceptions to the Doctrine of Indoor Management

1. Knowledge of irregularity 

This rule does not apply to circumstances where the person affected has actual or constructive notice of the irregularity. If a person has constructive notice of irregularity, he cannot claim the Doctrine of Indoor Management.

2. Negligence

In case any person dealing with the company is suspicious about the circumstances revolving around a contract and could discover the irregularity, then he shall enquire into it. If he fails to enquire, he cannot claim the Doctrine of Indoor Management.

3. Forgery

A company can never be held bound for forgeries committed by its officers. Transactions involving forgery are void ab initio (null and void) since it is not the case of absence of free consent; it is a situation of no consent at all. 

4. Acts outside the scope of apparent authority

If an officer of a company enters into a contract with a third party and if the act of the officer is beyond the scope of his authority, the company is not bound.

5. No knowledge of articles

The doctrine or rule does not apply when the person seeking protection under indoor management not aware of the contents of the articles. This is based on the principle that "ignorance of law is no excuse"





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Redrafted for Educational Purpose.



Deekshith Kumar,
Assistant Professor of Commerce



Book Reference:

1. Elements of Mercantile Law by N. D. Kapoor
2. Principles of Mercantile Law by Avtar Singh
3. A Textbook of Business Law by Dr. Umesh Maiya
4. Business Law by B.S. Raman

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