Constructive Notice
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The document explains the concept of constructive notice as outlined in Section 610 of the Companies Act, 1956, highlighting the public nature of a company's memorandum and articles. It details the significance of the memorandum of association and articles of association in defining a company's operations and management. The document also discusses the doctrine of constructive notice, emphasizing its limited acknowledgment in court and a specific case where the validity of a deed was evaluated in relation to company execution requirements.
![EFFECT OF THE DOCTRINE OF
CONSTRUCTIVE NOTICE
• The ‘Doctrine of Constructive Notice’ is more or less an imaginary doctrine. It
does not take notice of the realities of business life. People know a company
through its officers and not through its documents.
• The courts in India do not seem to have taken it seriously though. The Madras
High Court, for the first time, held the validity and scope of the rule of
constructive liability in Kotla Venkataswamy v. Rammurthy.
• The dispute in this case pivots around the valid execution of mortgage bond as
per Article 15[6] the company’s articles of association so as to make the
company liable. The Court held that the plaintiff, notwithstanding acted in good
faith, could not claim under this deed. The Court further observed that if the
plaintiff should have discovered that a deed such as she entered into, required
execution by three specified officers of the company and she would have
refrained herself from accepting a deed inadequately signed](https://image.slidesharecdn.com/constructivenotice-170629083857/85/Constructive-Notice-5-320.jpg)
Constructive Notice
- 2. WHAT IS CONSTRUCTIVE NOTICE • Section 610 of the Companies Act, 1956 provides the inspection, production and evidence of documents kept by Registrar. • It provides that the memorandum and articles when registered with Registrar of Companies becomes public document and then they can be inspected by anyone on payment of a nominal fee. • Therefore, any person who contemplates entering into a contract with the company has the means of ascertaining and is thus presumed to know the powers of the company has the means of ascertaining and is thus presumed to know the powers of the company and the extent to which they have been delegated to the directors.
- 3. MEMORANDUM OF ASSOCIATION • For the incorporation of a company, Memorandum of Association and Articles of Association are two most important documents • The memorandum of association of company, often simply called the memorandum , is one of the most important documents and must be drafted with care. • It has to be filed with the Registrar of Companies during the process of incorporation of a Company. It contains the fundamental conditions upon which the company is allowed to operate. • It is the document that governs the relationship between the company and the outside. • It is one of the documents required to incorporate a company in the United Kingdom, Ireland, India, Nepal, Bangladesh, Pakistan and Sri Lanka, Tanzania and is also used in many of the common law jurisdictions of the Commonwealth.
- 4. ARTICLES OF ASSOCIATION • The articles of association is a document that specifies the regulations for a company's operations, and they define the company's purpose and lay out how tasks are to be accomplished within the organization, including the process for appointing directors and how financial records will be handled. • Articles of association often identify the manner in which a company will issue stock shares, pay dividends and audit financial records and power of voting rights. • This set of rules can be considered a user's manual for the company because they outline the methodology for accomplishing the day-to- day tasks that must be completed.
- 5. EFFECT OF THE DOCTRINE OF CONSTRUCTIVE NOTICE • The ‘Doctrine of Constructive Notice’ is more or less an imaginary doctrine. It does not take notice of the realities of business life. People know a company through its officers and not through its documents. • The courts in India do not seem to have taken it seriously though. The Madras High Court, for the first time, held the validity and scope of the rule of constructive liability in Kotla Venkataswamy v. Rammurthy. • The dispute in this case pivots around the valid execution of mortgage bond as per Article 15[6] the company’s articles of association so as to make the company liable. The Court held that the plaintiff, notwithstanding acted in good faith, could not claim under this deed. The Court further observed that if the plaintiff should have discovered that a deed such as she entered into, required execution by three specified officers of the company and she would have refrained herself from accepting a deed inadequately signed