This Article has been written by Manas Rajdeep , a student of Amity University, Lucknow.
Introduction
According to the Doctrine of Constructive Notice, anyone transacting business with a company is deemed to have read and understood any “public documents,” such as the Memorandum of Association (MOA), Articles of Association (AOA), and any other documents filed with the registrar publicly, so that third parties cannot hold the company accountable for any irregularities in dealing. Due to the requirement that all corporations register their memorandum and articles of association with the Registrar of Companies, they are expressly regarded as public documents. The memorandum and articles become public papers because the office of the Registrar is a public office. They are open and available to anybody. Hence, it is the responsibility of every person doing business with a corporation to review its publicly available documents and ensure that his contract complies with their terms. Yet, whether someone reads them, he is to be in the same situation as if he had. He will be taken to be aware of what those documents contain.
In other words, a person interacting with the corporation is assumed to have read and understood those documents in accordance with their intended meaning. He is assumed to have been aware of both the company’s and its officers’ authority. Additionally, there is a constructive notice for all papers, including special resolutions [Section 117 of the Co Act 2013] and particulars of charges [Section 77 of the Co Act 2013], which must be registered with the Registrar in accordance with the Act.
The concept of constructive notice in the legal community states that a person may be informed of an ongoing legal matter through public posting. For instance, when a court issues a summons to someone and is unable to contact them directly. This is regarded as constructive notice, and according to the doctrine of constructive notice, everyone dealing with the firm must not only read these documents but also comprehend their appropriate meaning, which includes both the company’s and its executives’ authority.
What is the relationship between the company and the doctrine of constructive notice.
When discussing the Memorandum of Association and Articles of Association, which are considered public papers under company law, it is assumed that the individual dealing with the firm is fully informed and has read the public documents. To better understand the company’s limitations or flaws, anyone who wishes to do business with it should review the company’s public records. Knowing whether or not the directors will contract, as well as how far they can, is necessary.
All of them are stated in the company’s articles of incorporation or memorandum. If you are working for a corporation and you haven’t read the articles or the memoranda. When that happens, it will be assumed that you have read the articles and all the material in the memoranda, so you won’t be able to argue that you weren’t informed or told before. As reading the public document is the first thing a person should do before doing business with a certain company, the law will assume that you have done so.
It is a crucial stage in the establishment of a company to include the following key articles in the Memorandum of Association, which is defined by Sections 2(56) and 4 of the Companies Act, 2013. These clauses are referred to as the conditions of the company’s incorporation.
- Name Clause
· Registered Office Clause
· Objects Clause
· Liability Clause
· Capital Clause
What exactly is a MOA (Memorandum of Association)?
The MOA (Memorandum of Association) is a crucial legal document used in the application for incorporation. In accordance with Section 2(56) of the Companies Act, 2013, “memorandum” refers to the Memorandum of Association of a company as originally drafted and as modified by regulations under any previous company act or under this specific act. For the registration of a firm, it is a crucial document. The organization’s founding objectives are outlined in this paper. This document outlines the company’s authority and the conditions under which it operates.
What exactly do Articles of Association (AOA) mean?
The Articles of Association (AOA) are a set of rules and regulations that govern how a corporation is to operate. Since that it describes the process, the business uses to acquire daily duties, it is regarded as a user manual. The structure of the document is standard. The aim, structure, share capital, and shareholder meeting provisions are all mentioned.
Characteristic of Constructive Notice
(a) Constructive Notice is also referred to as legal fiction because courts presume interested parties are aware of information that they may not truly possess.
(b) Where service on an interested party has become impracticable because the party is either ignoring the process server at his door or cannot be located when service is attempted, this notification is frequently relied upon.
(c) Constructive notice is regarded as superior to actual notice in the currency market. Someone to whom the summons is served with related papers may profit from the action being dismissed because of lack of notice if the papers were delivered improperly. However, in the case of constructive notice, the party who was duly served, received the constructive notice, but for some other reason did not obtain a physical copy of the summons and other pertinent documents, will not be able to have the case dismissed for lack of service.
Case law: –
The very first case of this doctrine was Oakbank Oil Co. v. Crum [1882]
It was decided in Oakbank Oil Co. v. Crum (1882) 8 A.C. 65 that everyone who interacts with the firm is believed to have read and understood the MOA and AOA of the corporation. This kind of notice is known as a Constructive Notice.
Kotla Venkaswamy v. China Ramamurthy
In this instance, it was required by the company’s articles of organisation that all deeds be signed on the company’s behalf by the managing director, the secretary, and a working director. A mortgage deed was signed by the operating director and company secretary and executed in the plaintiff’s favour. After a few days on a different date, the business decided to voluntarily liquidate, sold the defendant the mortgaged property, and then went to court.
The justification offered by the court in its ruling for upholding the sale of the mortgaged property was that the company’s Articles of Organization specifically required the signage of four offices, and this was known to the public. Nonetheless, the law of constructive notice will apply in this case and the mortgage deed will be regarded as an incomplete document because the plaintiff failed to act responsibly and neglected its responsibility to examine the contents.
Rama Corporation v. Proved Tin and General Investment Co. (1952)
In this case, the director of the plaintiff’s firm and the director of the defendant company came to an arrangement that would allow them to subscribe to funds that might be used by them to finance the sale of goods manufactured by a different third party. The director of the plaintiff business presented the defendant business with a check. Yet, the defendant’s company’s articles of association state that only a director who has been given authority by the board may collect the check on the company’s behalf. The plaintiff was unaware of this clause because she didn’t read the defendant’s company’s by-laws. So the decision of the court applied the doctrine of Constructive Notice and the defendant’s company was held not bound by the agreement.
Conclusion
Yet, the idea of constructive notice, which is presumed to have been acknowledged by everyone who enters the business, is crucial in protecting the company from outsiders when anyone joins without being aware of its rules or regulations.
Referance
https://thelegallock.com/all-you-need-to-know-about-doctrine-of-constructive-notice
https://www.naukri.com/learning/articles/difference-between-moa-and-aoa/#moa
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