CONSTRUCTIVE NOTICE

Doctrine of Constructive Notice

Meaning

The Doctrine of Constructive Notice states that any person dealing with a company is presumed to have knowledge of the company’s public documents, i.e., the Memorandum of Association (MOA) and Articles of Association (AOA). These documents are filed with the Registrar of Companies (ROC) and are open for public inspection.

Legal Provisions

• Section 399 of the Companies Act, 2013: Provides public access to company documents like MOA, AOA, resolutions, etc.

• Any person dealing with a company cannot claim ignorance of these documents.

Effects of the Doctrine

1. Presumed Knowledge – Outsiders must read and understand MOA and AOA before entering contracts.

2. No Protection Against Irregularity – If a transaction violates MOA or AOA, the outsider cannot claim relief.

3. Binding Nature – The company is not liable for acts beyond its authority.

Case Law: Kotla Venkataswamy v. Rammurthy (1934)

• A mortgage deed was executed by the company’s secretary and managing director without following the AOA requirement of three directors signing it.

• The court held that the lender should have checked the AOA, and since it was not followed, the mortgage was invalid.