Doctrine of Constructive Notice

Introduction: 

The memorandum and articles of association of every company are registered with the registrar  of the company. Section 399 read with section 17 of the Companies Act provides that such  memorandum of association and article of the association are the public document and should be  open and accessible to all. Now the point arises whether the reading by a person of such  document is necessary or not? 

To solve out this question the doctrine of constructive notice was recognised. 

Meaning: 

When the document is provided by the company subject to some regulations, it is presumed that  the persons have known the contents of those documents and such kind of presumption leads to  the evolution of this doctrine. And such presumed notice is called the constructive notice. 

Cases: 

(1) Kotla Venkataswamy v. Chinta Ramamurthyi, this case provides the practical effect of  this rule. 

Facts of this case: 1) The article of association of a company required that all the deeds accepted  should be signed by the Managing Director the secretary and the working director on behalf of  the company. 

2) But the plaintive adopted a deed of mortgage executed by the working director only. 

Court's Observation: The Honorable Court finds that if the plaintiff had gone with the article of  association, he might come to know about the procedure and would have refrained from  accepting such an inadequate signed deed. Show the plaintiff could not claim under this deed.

(2) Oakbank Oil Co. v. Crumii, this case provides a further interpretation of this doctrine. 

Interpreted Observations: 1) Further, it was held that it is presumed that when a person dealing  with the company is not only to have read those documents but to have understood them  according to their proper meaning. 

2) Such presumption extends not only to the company's powers but also to those of its officers. 

3) Such doctrine leads not only to the AOA and MOA but also to all the public documents which  are registered with the registrar. 

Mis-application of Doctrine: Since it is found through various courts, the application of this  doctrine, now does not seem to behave more serious.

Cases: 

(1) Dehradun Mussorie Electric Tramway Co. Ltd. V. Jagmandar Dasiii, In India, under this  case the application of the doctrine was overlooked. 

Facts: 1) The articles of a company provided that the Director have all the powers except the  power to borrow. 

2) An overdraft was taken by the Managing agents without the approval of the board. 

Court's Observations: By saying that, "such temporary loans must be kept outside of the  preview of the relevant provisions", the court held this overdraft was binding. 

(2) Charnock Collieries Co. Ltd. V. Bholanath Dhariv, similarly, in this case, the Kolkata  High Court enforced security which was not signed in accordance with the company's articles. 

Conclusion:

To conclude it, it is found that for the company it becomes frantic to get the knowledge that the  all the documents delivered are understood or read by the persons, so the duty of the company  becomes discharged when the company delivers the documents. But by the time, a serious note  to this doctrine has lapsed, but not completely vanished. 

Author – Payal Agrawal 

S. S. Jain Subodh Law College, Rajasthan University, Jaipur