DOCTRINE OF CONSTRUCTIVE NOTICE

Constructive means Presumption and Notice means to give information about something. Whenever a company is registered, all the documents are uploaded and registered. It is a very transparent thing as we can read all the MOAs and AOAs of various companies. These documents are public documents. 

The doctrine of Constructive Notice imposes a duty on the buyer. The buyer needs to do due diligence before purchasing any shares or investing. The buyer needs to check the documents and scrutinize them before registering. A check on the tile is required before one enters into a contract or any sort of investment. It is also said that this doctrine is harsh because sometimes we cannot find out whether the title was correct or not. 

Section 399 of the Companies Act provides that MOA and AOA when registered with the ROC become public documents. Any person who wishes to enter into a contract with the company has the means of ascertaining the powers of the company and the extent of the powers delegated to the Board of Directors. Every person dealing with the company is treated to have actual or constructive knowledge of the contents of these documents. When a person enters into a contract that is not permitted in the MOA and AOA, the contract is void and the company will not be liable for the same. 

·        Kotlas Venkatswany vs. Ram Murthy and Ors.

In this case, the Articles required that all the documents should be signed by the MD, CS, and the Working Director on behalf of the company. A mortgage deed was executed in the favour of the mortgagee that it was only signed by the CS and the Working Director. The Mortgagee filed a case on the company for foreclosure of the property which was mortgaged against the loan. 

The Court held that no claim would stay under such contract because the mortgagee must have examined the Articles before lending the money as every person dealing with the company is presumed to have read and understood the MOA and AOA in their true perspective. Therefore, applying the rule of constructive notice the company must be protected against the outsider.

This Article Does Not Intend To Hurt The Sentiments Of Any Individual Community, Sect, Or Religion Etcetera. This Article Is Based Purely On The Authors Personal Views And Opinions In The Exercise Of The Fundamental Right Guaranteed Under Article 19(1)(A) And Other Related Laws Being Force In India, For The Time Being.