DOCTRINE OF CONSTRUCTIVE NOTICE
The law recognizes a corporation as an artificial individual which means that a legal entity has been granted some status. It is governed by its constitution and structure which sets out the company's powers, goals and functions and the nature of its business. The collection of such documents is called the Memorandum and Papers of Association. Since the company needs to register these documents to obtain its certificate of incorporation, they are public documents which are accessible to the public either at no cost or on payment of a reasonable sum. An individual who is working with the company is duty-bound to read, understand and review these documents to ensure that their contract is in line with the company’s provisions. The person shall be deemed to have understood the reports as per the meaning in the manner they are to be interpreted. It requires a knowledge of the powers of the company, its directors, its officers and the nature of those powers. This presumption that the individual communicating with the company is aware of the contents of the document and the articles is known as the doctrine of constructive notice. Consequently, if a person enters into a contract that is contrary to the Memorandum or beyond the powers conferred on the Directors in the Articles of Association, the contract is void and can not be enforced by the person even if he/she has acted in good faith and the money has been used to achieve the objective of the company as set out in the Memorandum of Understanding.
In the case of Kolta Venkataswamy v. China Ramamurthy, the court held that the company's Articles of Association made it compulsory that all the deeds be signed on behalf of the company by the managing director, the secretary, and a working director. “The secretary and the company's working directory signed a mortgage act that was executed for the benefit of the plaintiff.” The firm chose voluntary liquidation at a later date and sold the mortgaged property to the defendant. The complainant then went to trial. The court held that the mortgaged property should be sold. The court's reason for this was that the company's Articles of Association specifically requested the signing of four company officers, and that was public knowledge. But because the complainant did not behave prudently and ignored his obligation to read the papers, the doctrine of diligent notice will be applied, and the mortgage deed will be deemed as incomplete.
Similarly, in the case of Rama Corporation v. Proved Tin and General Investment Co. (1952), the court held that the plaintiff company's director formed an agreement with the defendant company's director that would allow them to subscribe to funds that they can use to finance the sale of third company-produced goods. The plaintiff's director gave a cheque to the defendant company. However, according to the articles of association of the defendant company, only the director to whom the power of the board has been delegated may collect a check on behalf of the company. The plaintiff had not read the papers of the defendant and had been unaware of this provision.
The court applied the doctrine of Constructive notice and the defendant company was held free from the agreement.