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Constructive Doctrine Case Study

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Indian Position on the Doctrines of Constructive Notice and Indoor Management
Indian courts have shown a certain degree of concern and unwillingness in applying this doctrine to the disadvantage of the third party since the early times. For example in the case of Dehradun Mussourie Electric tramway Co., the issue was that of taking an overdraft by the managing agents without the consent of the board, regardless of the articles of the company prohibiting the directors from delegating the powers to borrow. The doctrine was not applied by the court and it was held that temporary loans are required for day to day working of the business. It was according to the Indian Contract Act. Sections 188 and 189 of the act states that the agent has the power …show more content…
The court notices that the declaration signed was fake as the evidence points to the fact that the essential meeting never took place. It also notices and took into account that the third party might not have had notice of the same due to the false representations made by the agent. Here the court still does not apply the Ruben rule to declare the document untrue but it does apply the Turquand rule and binds the corporation to the contract.
Kotla Venkataswamy v. Rammurthy is a one of the case which shows the negative application of constructive notice for the first time. In the case, the doctrine has been applied in its usual sense where the third party mortgagee was denied relief on account of the transaction being irregular in nature. Also in the case of Lakshmi Ratan Cotton Mills the court once again accorded protection by applying the Turquand Rule to the third party.
The current legal arrangement has not been changed much and the courts maintain the position that the company is bound by the acts of the agent and also that the indoor management rule would be applicable as long as the transaction benefits the …show more content…
It doesn’t matter whether or not the articles of the company grant any such right upon him as required for those acts. The question of application of the indoor management rule does not arise when the question of constructive notice does not arise. The uncomplicated applications of the principles of agency seems to be sufficient and enough.

In light Section 86 of the Companies act, 1913 the importance of doctrine of Indoor notification diminishes. Thus; the Indian judiciary didn’t deal with the issue the same way English judiciary did. The laws in the Indian Judiciary already favours the rights of the third party in a business deal by reducing the weight of substantiation on the third party to apply with the conditions which are necessary to apply for the indoor management rule.

With cases like Lakshmi Ratan Cotton mills case, the judiciary relied on the direct applications of the indoor management rule as the 1956 act doesn’t contain analogous

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