Economics

Applicability of Doctrine of Indoor Management to LLP

Meaning of Indoor Management

The word “in-door” suggest the thing which is going on other side of the door i.e. an outsider

can’t see and observe the company internal affairs. The doctrine of Indoor management,

popularly known as the Turquand's rule initially arose some 150 years ago in the context of the

doctrine of constructive notice. The doctrine of indoor management is an exception to the rule of

constructive notice. It imposes an important limitation on the doctrine of constructive notice.

According to doctrine of Indoor management “persons dealing with the company are entitled

to presume that internal requirements prescribed in memorandum and articles have been

properly observed”.

Doctrine of Constructive Notice

Memorandum of Association and Articles of Association are two most important documents

needed for the incorporation of a company. The memorandum of a company is the

constitution/charter of a company. On the other hand, the articles of association enumerate

claim the internal rules of the company under which it will be governed. Section 610 of the

Companies Act, 1956 provides that the memorandum and articles when registered with

Registrar of Companies 'become public documents' and then they can be inspected by

anyone on payment of a nominal fee.

Therefore, notice about the contents of memorandum and articles is said to be within the

knowledge of both members and non- directors members of the company. Such notice is a

deemed notice in case of members and a constructive notice in case of non-members.

Thus, every person dealing with the company is deemed to have a constructive notice of the

contents of the memorandum and articles of the company. An outsider dealing with the

company is presumed to have read the contents of the registered documents of the company.

The further presumption is that he has not only read and inspected the documents but has also

understood them fully in the proper sense. This...