TITLE:LEGAL ASPECT OF BUSINESS C.NO. 103. DOCTRINE OF INDOOR MANAGEMENT. ORIGIN. ROYAL BRITISH BANK Vs TURQUAND (1856) FACTS OF THE CASE ARE: The Articles empowered the Directors to borrow money provided they were authorized by a Resolution passed at the General Meeting of the Co.
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TITLE:LEGAL ASPECT OF BUSINESSC.NO. 103
DOCTRINE OF INDOOR MANAGEMENT
ROYAL BRITISH BANK
The Articles empowered the Directors to borrow money provided they were authorized by a Resolution passed at the General Meeting of the Co.
The outsiders dealing with the Co. are entitled to presume that as far as the internal management of the Co. is concerned, everything has been regularly done.
“Persons transacting business with the Co. are deemed to have notice of what they would have discovered by making a search at the office of the Registrar of Co.’s, and they would be stopped from asserting that they had not read the documents. But such persons are not deemed to have notice of, nor are they under a duty to inquire into the internal proceedings of a Co. . Thus an outsider is presumed to know the Constitution of a Co., but not what may or may not have taken place within the doors that are closed to him.”
LORD LOREBURNobserved of the case:
“It is quite true that persons dealing with limited liability Co.’s are not bound to inquire into their indoor mgt. & will not be affected by irregularities of which they have no notice. But this doctrine, which is well established, applies only to irregularities that otherwise might affect a genuine transaction. It can’t apply to a FORGERY”.