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
- The problem of double taxation in international transactions can be reduced by:
i. Market agreement
ii. Multilateral agreement
iii. Bilateral agreement.
iv. Trade agreement - Under the Companies Act 2013, which of the following company is required to constitute a Corporate Cocial Responsibility Committee?
(a) company having networth of Rs. 500 crore or more
(b) company having turnover of Rs. 1000 crore or more
(c) company having net profit of 5 crore or more
(d) company having net profit of 2 crore or more during any financial year
Choose the most appropriate option : - Which one statement is correct from the following statements ?
- Which of the following statement (s) is/are incorrect? Answer using codes given below :
(a) In Attorney General v. Great Eastern Railway Co. the House of Lords observed that the doctrine of ultra vires as it was explained in the Ashbury case, should not be maintained.
(b) Section 13 (i) (c) of the Companies Act provides incidental objects which need not be stated in the memorandum.
(c) If incidental objects are not stated in the memorandum, they would not be allowed by the principle of reasonable construction
(d) The doctrine of indoor management operates to protect insiders against the company
Codes : - Read Assertion (A) and Reason (R) and answer using the codes given below :
Assertion (A): Shareholders are not, in the eye of law, part owners of a company. The company is something different from the totality of the shareholders.
Reason (R) : Shareholders are collective owners of the company.
Codes :
