Company Law

1. Bhargav Dangar
Company Law
Roll no. 18

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”.

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

4.  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”.
 A person contracting with a company is not protected by the ‘Turquand
rule’ if the circumstances are so suspicious as to demand inquiry.

5.  “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.
 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.