Doctrine of Constructive Notice

1. Meaning
   The Memorandum of Association (MOA) and Articles of Association (AOA) are Public documents and are easily available for inspection of public at the office of Registrar of Companies.
2. Under the doctrine of constructive notice, it is presumed that, the person dealing with a company has read these documents even if he failed to read the same.
3. In short, every person dealing with a Company is deemed to have “constructive notice” of contents of the company’s MOA & AOA.
4. Case Law
   In case of Kotla Venkataswamy V/s Rammurthy (AIR 1934; Mad 579), the Hon’ble Court had observed this doctrine.
   1. The Article of Association of a company laid down that all documents executed by a company required the signature of the managing director, the secretary and one working director.
   2. A deed of mortgage signed on behalf of the company in favour of the Plaintiff. However, the same had been signed by the secretary and one working director.
   3. The dispute occurred between the parties in respect of validity of the deed of mortgage.
   4. The Madras High Court held that the Plaintiff accepted a deed of mortgage executed by the secretary and a working director only. Now, the Plaintiff could not claim under this mortgaged deed as it was not duly executed as per the Articles of the company. She would have abstained from accepting a deed inadequately signed.
5. It is a duty of every person dealing with a company to read the relevant provisions of these documents.
6. The doctrine of constructive notice applies not only to MOA and AOA but also to all such documents which are required to be registered with Registrar of Companies.
7. Section 399 of the Companies Act, 2013 provides that, when the MOA and AOA are registered with the Registrar of Companies, they become Public Documents and can be inspected by any person on payment of prescribed fees.
8. Doctrine of constructive notice has sometimes resulted in hardship and injustice to third parties because it does not take into account the realities of business life.
9. This doctrine looks unrealistic and imaginary and is a fiction created by judicial pronouncements of the Courts.
10. Exception
    The doctrine of Indoor Management acts as an exception to the doctrine of constructive notice.

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