Doctrine of Constructive Notice

Doctrine of Constructive Notice

The doctrine of constructive notice is the most important doctrine in the company law. According to this doctrine, the outsiders to the company are presumed to be well-known with regard to the Articles of Association of the company. The reason for the same is that the articles of association is a public document and any person dealing with the company is required to read the public document before dealing with the company.

Hence it is presumed that any person who is dealing with the company is fully aware of the rules and regulations of the company as these rules and regulations are written in the Articles of Association and the Articles is a public document. Any outsider before dealing with the company can have access to the Articles and after having the knowledge of the dealings of the company, the outsider will make a deal with the company.

The doctrine functions as the safety to the company while dealing with the outsiders. It is the duty of the outsiders to be fully aware of the rules and regulations of the company and the functioning of the company as well. In the case of any dispute, the outsiders cannot claim that they had no knowledge of the rules of the company as the doctrine states that before dealing with the company the outsider must have knowledge of the rules of the company as given in the Articles.

Effects of Doctrine of Constructive Notice

The effect of doctrine of constructive notice is harsh on the other party who is transacting with the company. The doctrine puts a liability on the person who is dealing with the company to inspect all the documents before entering into any contract with the company. One necessary inference of this doctrine is that a person transacting with the company is considered to have read and understood all the documents of the company. Such person is also supposed to understand the powers of the company’s officers to which they are authorized.

In case of any act of the company being ultra vires of the Articles or the Memorandum, a person cannot claim for any relief on the ground that they were unaware of the said provisions of the Articles or the Memorandum because of the Doctrine of Constructive Notice.

Exceptions to Doctrine of Constructive Notice

There are few exceptions to the Doctrine of Constructive Notice which are as follows:-

  • In case any company commits any forgery or any fraud in the Articles of Association or the Memorandum of Association, then the outsider will not be liable as per the Doctrine of Constructive Notice.
  • Another exception to the Doctrine of Constructive Notice is that when the outsider has prior knowledge of any irregularity committed by the company then they cannot claim any relief in case of default by the company. The Doctrine is applicable only if the outsider has no knowledge of the irregularity by the company.
  • Another exception of the Doctrine of Constructive Notice is if the outsider commits any negligence then also the Doctrine will not be applicable.
  • One of the important exceptions of the Doctrine of Constructive Notice is Doctrine of Indoor Management. According to the Doctrine of Indoor Management, the outsiders to the company are not required to know of the workings of the company. Simply speaking, the Doctrine of Indoor Management means that the outsiders have no knowledge of the company’s internal affairs and as a result in case of internal irregularity the outsider is saved by this Doctrine of Indoor Management.

The Doctrine of Indoor Management saves the outsiders from the company’s irregularity which occurs internally. For example, if an outsider deals with the company on any matter which is required to be passed by special resolution, then the outsider will assume that the special resolution had been passed and they cannot know if there is any irregularity in passing of the resolution. That is, if no special resolution had been passed then the outsider would not have knowledge of the same and hence they are saved as per the Doctrine of Indoor Management.

Aishwarya Says:

I have always been against Glorifying Over Work and therefore, in the year 2021, I have decided to launch this campaign “Balancing Life”and talk about this wrong practice, that we have been following since last few years. I will be talking to and interviewing around 1 lakh people in the coming 2021 and publish their interview regarding their opinion on glamourising Over Work.

If you are interested in participating in the same, do let me know.

Do follow me on FacebookTwitter  Youtube and Instagram.

The copyright of this Article belongs exclusively to Ms. Aishwarya Sandeep. Reproduction of the same, without permission will amount to Copyright Infringement. Appropriate Legal Action under the Indian Laws will be taken.

If you would also like to contribute to my website, then do share your articles or poems at adv.aishwaryasandeep@gmail.com

We also have a Facebook Group Restarter Moms for Mothers or Women who would like to rejoin their careers post a career break or women who are enterpreneurs.

We are also running a series Inspirational Women from January 2021 to March 31,2021, featuring around 1000 stories about Indian Women, who changed the world. #choosetochallenge

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.