Doctrine of Indoor Management

Company Law

1. Bhargav Dangar Company Law Roll no. 18 Doctrine of Indoor Management

2. A transaction may have two aspects, namely substantive & procedural. An outsider dealing with a company can only find out the substantive aspect by reading the Memorandum & Articles. Even though he may find out the procedural aspect, but he cannot find out whether the procedure has been followed or not. Outsider can assume that things which have been done regularity. It’s known as “Doctrine of Indoor Mgt” or “Turquand rule”. Introduction of Doctrine of Indoor Mgt

3. Exceptions Suspicion of irregularity Forgery Negligence Ignorance of Articles Lack of Authority Knowledge of irregularity

4. Knowledge of irregularity: A person, who deals with the company has the knowledge of irregularity regarding the internal management of the company, cannot claim benefit under the rule “indoor management”. suspicion of irregularity: A person contracting with a company is not protected by the ‘Turquand rule’ if the circumstances are so suspicious as to demand inquiry.

5. Forgery : “The Turquand rule” is not applicable to the transactions of the company in which forgery of signature is involved. The rule applies to irregularities but not to illegalities. A company is not held liable for forgeries committed by its officers. By a presumption a forgery cannot be converted into a transaction. Ignorance of Articles : The doctrine of indoor management is based on the principles of estoppel . A person who did not consult the memorandum and the articles cannot claim protection under the rule of indoor management.

6. Thank You