Question
Which one statement is correct from the following statements :
The correct answer is
If the contract is consistent with the public documents, the person contracting will not be prejudiced by irregularities that may be set the indoor working of the company.
Understanding Company Law: Doctrine of Indoor Management
The question asks to identify the correct statement concerning company law principles, specifically the doctrine of indoor management and related concepts.
Analyzing the Correct Statement
Option 2 states: "If the contract is consistent with the public documents, the person contracting will not be prejudiced by irregularities that may be set the indoor working of the company."
- This statement accurately reflects the principle of the **Doctrine of Indoor Management** (also known as the rule in Turquand's Case).
- This doctrine protects outsiders who deal with a company in good faith.
- It presumes that the company's internal procedures, as suggested by its public documents (like the Memorandum and Articles of Association filed with the registrar), have been duly followed.
- Outsiders are generally not affected by internal procedural irregularities they are unaware of, provided the transaction appears authorized on the face of the public records.
Analyzing Incorrect Statements
- Option 1: Incorrect. If a contract is *inconsistent* with public documents, it raises concerns, and the contracting party might indeed be prejudiced. The protection applies when dealings align with apparent authority derived from public records.
- Option 3: Incorrect. The doctrine of indoor management is designed to protect the **outsider** dealing with the company, not the company itself, from the consequences of internal mismanagement or procedural errors.
- Option 4: Incorrect. The **Doctrine of Ultra Vires** concerns acts that are beyond the company's legal powers as defined by its constitution. While it relates to the company's capacity, it primarily protects the company and its shareholders from unauthorized acts, not specifically outsiders from internal procedural irregularities. The doctrine of indoor management addresses the latter.
Therefore, Option 2 is the only statement that correctly articulates the protective scope of the doctrine of indoor management for contracting parties.
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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 :
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