Aryaman Dubey, BML Munjal University
Brief Background
From this case, we will learn about the two important doctrines and their usage in company law –
The doctrine of Constructive Notice
The doctrine of Indoor Management
The company's memorandum of association must be filed with the registrar of corporations. Since those conducting business with the Company are free to look at this document and determine whether there are any restrictions on their authority or the scope of their operations, it is available for public inspection. It produced an issue since it believes that anyone outside the Company who places restrictions on management is aware of them. Therefore, it considers outsiders working with the Company to be aware of it if it was later discovered that there was an irregularity within the Company about any decision.
Facts
To liquidate the bankrupt "Cameron's Coalbrook Steam, Coal and Swansea and London Railway Company," Turquand was chosen as the official manager. According to the Joint Stock Companies Act of 1844, this firm was established.
The Royal British Bank received a £2000 bond from the corporation, which was used as collateral for the company's withdrawals from its current account. Two directors and the secretary signed the bond, which had the business seal.
He was sued by the Royal British Bank for failing to pay the same.
The company asserted that the directors only had the authority to borrow the company's resolution had permitted what under the terms of its registered deed of settlement (the articles of association).
The defendants further argued that the company's shareholders had not authorized the issuing of any bonds and that they had not voted any resolutions permitting them to do so.
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