Saumya Garg, BBA-LLB (Hons.), School of Law, University of Petroleum and Energy Studies
INTRODUCTION:
The Doctrine of indoor management plays a different role than the conceptual doctrine of constructive note. While the indoor management doctrine provides a broad level of security to the corporation concerning its internal operations, and constructive notice doctrine shields the organization from outsiders. Additionally, the Memorandum of Association specifies the company's control, and the Articles of Association provide the rules regulating that control's exercise.
But just as the Constructive Notice theory developed to protect investors from obligations over which they had no influence, the Indoor Management rule developed to protect third parties from irregularities in corporate practices. This doctrine is based on the principle of convenience because it is impossible to conduct business if a person communicating with an authorized agent of a corporation is required to request proof that all internal rules have been correctly followed. The idea of apparent convenience in business relationships serves as the foundation for this approach. Although the details of organizational processes are available for public inspection, on the other hand, the memorandum and articles of association are official records and can be inspected as well. An outsider is expected to have the knowledge about the constitution of a company. Additionally, individuals who deal with companies need to know whether the company is doing well or not and they were also required to thoroughly examine the company's machinery to check for problems.
