Doubt

30 lakhs as mentioned in AoA. AoA is a public document.

CA Suraj Lakhotia

Admin

03-Sep-20 16:51

Sir but answer was 50lac

Thread Starter

sai t

CA Foundation

★ 2K+

03-Sep-20 16:52

The facts which you have cited in the image are related to one of the most popular cases of companies act under doctrine of indoor management. Contracts of company that are ultravires to Companies act -- void -ab-initio(void right from the inception) MOA --- void -ab- initio( ratification of shareholders is not valid retrospectively but possible prospectively) i.e,, company can alter MOA and then can enter in to new contract prospectively. AOA --- ratification of company(shareholders) is valid retrospectively. Here in this case the authority of directors of royal British bank is only up 30 lakhs if any excess borrowal should be taken prior approval with shareholders in general body meeting as per AOA required. when the contract is made there is no approval taken by directors from shareholders. So, now the company can take approval and ratify the contract retrospectively and make the contract valid. Even if approval is not taken the company is liable for 50lakhs because turquand as an outsider he cannot know whether approval is taken in general body meeting relating to this borrowing (because it is an internal matter). Hence turquand can presume that approval has been received and lend the money in good faith. Therefore, company is liable to 50 lakh in any of these two cases. Later company can claim amount from directors for their fault in this matter.

VIJAYA SARADHI MAGANTI

CA Inter

★ 850

04-Sep-20 11:03

Doctrine of constructive notice is applicable only to the extent of matters that are disclosed in MOA. All the Internal affairs of the company cannot be disclosed in it so outsiders can presume if any internal approvals should qualify the contract such approvals has been received and contract can be entered in good faith.

VIJAYA SARADHI MAGANTI

CA Inter

★ 850

04-Sep-20 11:10

In this case contract can also become void Of aoa ??

Thread Starter

sai t

CA Foundation

★ 2K+

04-Sep-20 19:15

Yes there are certain exceptions for doctrine of indoor management in such cases the contract with the parties will be valid only to the extent of limits provided in AOA. Such as contracts with directors because they are aware of internal affairs so the excess amount of which is provided in AOA cannot be claimed by directors if they lend money to the company and receive debentures. In your case if turquand is director he can only claim 30lakh. The contract to the extent of excess 20lakh is void and it cannot be claimed.

VIJAYA SARADHI MAGANTI

CA Inter

★ 850

04-Sep-20 20:05