An outsider is presumed to know the constitution and the statutory pub...
Doctrine of Indoor Management
The Doctrine of Indoor Management is a legal principle that provides protection to third parties who deal with a company in good faith and believe that the company's internal proceedings have been followed. This principle is also known as the Turquand Rule or the Rule in Royal British Bank v Turquand. According to this rule, an outsider is presumed to know the constitution and the statutory public documents of a company but not what may not have taken place within the doors that are closed to him.
Exceptions to the Doctrine of Indoor Management
There are certain exceptions to the Doctrine of Indoor Management that can be summarized as follows:
1. Knowledge of Irregularities: The Doctrine of Indoor Management does not protect a third party if he has knowledge of any irregularities or defects in the internal proceedings of the company. Therefore, if a third party has any such knowledge, he cannot claim protection under this doctrine.
2. Ultra Vires Acts: The Doctrine of Indoor Management does not protect a third party if the act in question is ultra vires or outside the scope of the company's powers. Therefore, if a third party enters into a contract with a company for an act that is beyond its powers, he cannot claim protection under this doctrine.
3. Negligence: The Doctrine of Indoor Management does not protect a third party if he has been negligent in his dealings with the company. Therefore, if a third party fails to exercise due diligence while dealing with the company, he cannot claim protection under this doctrine.
Conclusion
In conclusion, the Doctrine of Indoor Management provides protection to third parties who deal with a company in good faith and believe that the company's internal proceedings have been followed. However, there are certain exceptions to this doctrine, such as knowledge of irregularities, ultra vires acts, and negligence. Therefore, it is important for third parties to exercise due diligence while dealing with a company to avoid any legal implications.