Assertion (A) : Under the Company Law, though any outsider is presumed to be aware of the documents which are publicly accessable, but not the internal proceedings of which he can not reasonably aware of, because those are not accessible to the public.
Reason (R) : The Doctrine of indoor management evolved as a partial exception to the Doctrine of Constructive Notice and the rule was laid down in Royal British Bank Vs Turquand.
Code :
Company Law Doctrines: Constructive Notice and Indoor Management
This question relates to fundamental principles in Company Law concerning the extent of knowledge imputed to outsiders dealing with a company.
Assertion (A) Analysis
Assertion (A) states that while outsiders are presumed to know a company's publicly accessible documents (per the Doctrine of Constructive Notice), they are not presumed to know internal proceedings inaccessible to the public. This statement is correct.
- The Doctrine of Constructive Notice implies that anyone dealing with a company is aware of its constitutional documents (Memorandum of Association, Articles of Association) and any other documents filed publicly.
- However, this presumption does not extend to the company's internal management and procedural irregularities, which an outsider cannot reasonably be expected to know.
Reason (R) Analysis
Reason (R) explains that the Doctrine of Indoor Management serves as a partial exception to the Doctrine of Constructive Notice and references the landmark case Royal British Bank v. Turquand. This statement is also correct.
- The Doctrine of Indoor Management (or the Turquand Rule) protects outsiders acting in good faith. It presumes that internal company procedures have been duly followed, even if they haven't been.
- This doctrine directly addresses the limitation mentioned in Assertion (A) by providing protection to outsiders regarding internal affairs.
Relationship Between Assertion (A) and Reason (R)
Reason (R) correctly identifies the Doctrine of Indoor Management as an exception to the principle outlined in Assertion (A). The protection offered by the Doctrine of Indoor Management explains why an outsider is not bound by internal irregularities they could not have known about, thereby clarifying the scope of constructive notice.
Therefore, Reason (R) provides a correct explanation for Assertion (A).
Conclusion: Both Assertion (A) and Reason (R) are correct, and Reason (R) is the correct explanation of Assertion (A).
Important Questions from Company law
Arrange the following as per sections of the Companies Act, 2013 in descending order :
A. Execution of Bills of Exchange, etc.
B. Punishment in case of repeated default
C. Annual reports on Government Companies
D. Petition for winding up
E. Functions of Company Secretary
Choose the correct answer from the options given below:
Match List I with List - II.
List - I
List - II
(A)
Producer companies
(I)
Do not necessarily require Memorandum of Association
(B)
Statutory companies
(II)
Association not for profit
(C)
Section 8 company
(III)
Formed to convert cooperative into a company
(D)
Small company
(IV)
Paid up share capital is between 50 lakh-5 crore and turnover is between 2 crore - 20 crore
Choose the correct answer from the options given below:
Red herring prospectus is a prospectus issued:
- The problem of double taxation in international transactions can be reduced by:
i. Market agreement
ii. Multilateral agreement
iii. Bilateral agreement.
iv. Trade agreement - Given below are two statements: one is labelled as Assertion A and the other is labelled as Reason R
Assertion A: Every company having net worth of rupees five hundred crores or more or turnover of rupees one thousand crore or more or a net profit of rupees five crore or more during the immediately preceding financial year shall constitute a Corporate Social Responsibility Committee (CSRC).
Reason R: The CSR Committee monitors CSR policy of the company.
In the light of the above statements, choose the most appropriate answer from the options given below
