In the corporate environment, there are different concepts that help define the partnership that guarantees the protection of different stakeholders in the business in the transactions they conduct. One such theory is the indoor management doctrine. The indoor management doctrine emerged 150 years ago. It is also known as the rule of Turquand. The theory arose from the landmark case of Royal British Bank V Turquand (1856) 6 E&B 327. The Articles of the Corporation provided for the borrowing of bond capital, requiring a resolution to be adopted at the General Assembly. The directors secured the loan, but the resolution failed to pass. The loan repayment was forfeited, and the corporation was held liable. In the absence of that resolution, the shareholders declined to consider the claim. The company is held liable since the person dealing with the company is entitled to assume that compliance with internal management is necessary. This doctrine is also a possible safeguard against the possibility of the constructive notice doctrine being abused. The person entering into the transaction only needed to be satisfied that his proposed transaction was not inconsistent with the articles and memorandum of the company. He is not bound to see the company's internal irregularities and if there are any internal irregularities, the company will be liable because the person acted in good faith and he did not know about the company's internal arrangements. There are several reasons why the doctrine has continued to be applied and has come to be accepted as one of the fundamental corporate law principles. First, although the Articles of Association and the Memorandum of Association are in the public domain, the internal procedures that take place in the company are not privileged to all members of the public, and so informed decisions can not be made at all times. Second, if the doctrine of indoor management is not available, there would be great scope for abuse of the doctrine of constructive notice. So, this theory continues to be applied by the courts of law. As a response to the doctrine of constructive notice, the doctrine of indoor management was developed. It places a Bar on the constructive notice doctrine and protects in good faith the third party who acted in the act. This doctrine protects outsiders dealing or contracting with a business, it was analyzed that the doctrine does not operate in an arbitrary manner, there are some restrictions imposed on it such as forgery, third parties with knowledge of irregularity, negligence if the third party does not read memorandum and articles and the doctrine will not apply where the issue is about the very existence of the doctrine.

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. Further, despite all efforts that have been made to ensure the accuracy and correctness of the information published, White Code Legal and Tax shall not be responsible for any errors caused due to human error or otherwise.