A creditor being an outsider or a third party and an innocent stranger is entitled to proceed on the assumption of its existence ; and is not expected to know what happens within the doors that are closed to him. Where the act is not ultra vires the statute or the company such a creditor would be entitled to assume the apparent or ostensible authority of the agent to be a real or genuine one.
He could assume that such a person had the power to represent the company, and if he in fact advanced the money on such assumption, he would be protected by the doctrine of internal management. Commissioner of police the learned judge observed that the lenders to a company should acquaint themselves with memorandum and articles but they cannot be expected to embark upon an investigation as to legality, propriety and regularity of acts of directors.
The rule is based upon obvious reasons of convenience in business relations. Firstly, the memorandum and articles of associations are public documents, open to public inspection.
The rule is of great practical utility. It has been applied in a great variety of cases involving rights and liabilities. Thus, where the directors of company having the power to allot shares only with the consent, something which he could do only with the approval of the board; where the managing agents having the power to borrow with the approval of directors borrowed without any such approval, the company was held bound. Turquand's Rule and Consequences The Indian Courts in certain recent judgments have further broadened the scope of the Doctrine of indoor management.
The object being the same i. Therefore, notice contemplated under Section A of the Act is required to be given only at the stage when application under Section , of the Act is made to the Court for sanctioning the scheme and not any time prior thereto. Exceptions The rule of doctrine of indoor management is however subject to certain exceptions. Knowledge of an irregularity may arise from the fact that the person contracting was himself a party to the inside procedure. As in Devi Ditta Mal v The Standard Bank of India, where a transfer of shares was approved by two directors, one of whom within the knowledge of the transferor was disqualified by reason of being the transfer himself and the other was never validly appointed, the transfer was held to be ineffective.
Similarly in Howard v. Patent Ivory Manufacturing Co. Likewise, in Morris v Kansseen, a director could not defend an allotment of shares to him as he participated in the meeting, which made the allotment. There are many online pharmacies that you can find on the Internet.
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