The Doctrine of Constructive notice talks about assuming the person or entity has all the knowledge about the law which a reasonable person should have. In this doctrine, it is noted that no person cannot give the excuse of he was not aware of any specific notice or law, such in conditions like a legal notice of company which is published in a newspaper which the designated for legal notices or posting them in the designated court house. As these places are public, it is assumed that the person involved in a dispute have acknowledged about this notice.
The articles and memorandum of association of a company are registered with registrar of companies, as of this office of the registrar is a public office the above-mentioned documents become public documents, and these documents become accessible for all.
So, it is the duty of all persons belonging to the company to have knowledge about the public documents, their conduct should be relatable to the provisions of the documents.
Meaning of Constructive Notice
The constructive notice is a legal entity shall have the knowledge or should be known, as a reasonable person would have known of a legal action taken or going to be taken, even if they don’t have any real or actual knowledge of it.
This doctrine is generally interpreted with regards to legal notices published. It may be either posted at the courthouse or any newspaper which are designated places for publishing it. As because these are available easily or open to the public in general forex.- libraries and courts are open to all persons belonging to the general public. Whenever a notice is issued to a person it can be a group notice signifying all person belonging to that dispute, so the person is considered as he has received notice even if they haven’t actually aware of it.
Uses of Constructive Notice
The constructive notice can be used in the recording of deeds, liens, mortgages and similar documents in country registries in the United States (US). As these documents are considered as a public document for public information and which can be accessed by any member of the general public. So as per this these such recordings are considered as constructive notice of conveyance of land.
Doctrine of Constructive Notice Under Companies Act, 2013
The doctrine of constructive notice as according to the companies law is a doctrine where all persons dealing with a company are deemed to have knowledge of articles of association and memorandum of association of the companies.
The doctrine of Indoor Management is an exception to it.
The concept of constructive notice either by the tenant or landlord is allowed to use by the New York City Housing court. Like, this notice can be given to the landlord when the unsupported and broken metal grate on a public sidewalks falls down or collapse when a person stepped on it while going from that path. So the landlord is reasonably expected to know this is a safety hazard.
Section 399 of the Companies Act, 2013 points out the rules and regulations governing the inspection, evidence of documents with the Registrar and production, it includes the doctrine of constructive notice. In this doctrine, also explains the following,
There is a constructive notice not merely of the memorandum and articles of association, but also of the documents, such as special resolution mentioned in Section 117 which are required by the Act to be registered with the Registrar. There cannot be a notice of documents that are filed only for the sake of the record, like as returns and accounts. According to Palmer, the principle applies only to the documents which affect the powers of the company.
This doctrine of constructive notice should apply to the common Law from. To repeat the form is a public document which contains particulars of directors who are the mind and will of a company and also managers and secretaries who are responsible for the day to day running of the company.
Characteristics of Constructive Notice
(a) Constructive Notice is also known as legal fiction, the reason behind it is that courts assume the interested parties have knowledge that they may not actually have.
(b) This notice is often relied upon when service upon an interested party has become impossible due to the party is either ignoring the process server at his door or simply unable to found when service is attempted.
(c) constructive notice is known as superior to actual notice, forex.- someone to whom the summons is actually served with related papers can have the benefit of dismissal of the case on the ground of lack of notice if an improper serving of the papers has done. But in the constructive notice the person who is properly served and received the constructive notice but because of some other reason he had not received a physical copy of the summons and related paperwork will unable to dismiss the case on the group of lack of service.
Connection of the Constructive Notice with the company
In company law, the documents as articles of association and memorandum of association, it is presumed that all the persons dealing with any company have full information and have read the public documents as mentioned above. It is important for anyone who wants to join the company to have knowledge about the limitations or drawbacks of the company which have mentioned in the public documents and to also know that the directors can contract or not or till which extent they can contract.
This information has written into the documents. If a person deals with a company and hasn’t read the articles or memorandum, then it’ll be considered as his/her fault, and they cannot question that they have not been told earlier or informed about it. The law will only presume that the persons shall have the knowledge before having any relation to the company. So it is the only necessary thing a person should have access to before dealing with a particular company.
Case laws relating to Constrictive Notice
Karen Dipietro v. Connecticut’s Farmington Sports Arena 2012
The plaintiff Karen Dipietro sued the defendant in Connecticut’s farming sports arena after her daughter sustained injuries while playing indoor soccer on the premises.
Kotla Venkaswamy v. China Ramamurthy
In this case, the articles of association of the company made mandatory that all the deeds be signed by the managing director, the secretary and a working director on behalf of the company. The company secretary and working director signed a mortgage deed which execution was made in favour of the plaintiff. After some days on another date, the company opted for voluntary liquid and sold mortgaged property to the defendant and then approached the court.
In its decision the court upheld the sale of the mortgaged property and the reason given by the court was that the Articles of Association of the company significantly asked for the signs of four offices of the company, this was public knowledge. But because the plaintiff not acted prudently and escaped from its duty to read the documents, here the doctrine of constructive notice will apply and the mortgage deed will be considered as an incomplete document.
Rama Corporation v. Proved Tin and General Investment Co. (1952)
In this case, the plaintiff’s companies director formed an agreement with the director of the defendant company which would enable them to subscribe to funds that can be used by them for finance the sale of goods produced by another third company. The director of the plaintiff company gave a cheque to the defendant’s company. But as according to articles of association of the defendant’s company say that only a director to whom the power of the board has been delegated only he can collect the cheque on behalf of the company. The plaintiff didn’t read the articles of the defendant’s company and was not aware of this clause.
So the decision of the court applied the doctrine of Constructive Notice and the defendant’s company was held not bound by the agreement.
Dehra Dun Mussoorie Electric Tramway Co. Ltd v. Janmandae Das AIR 1932 ALL 141
In this case articles of the company have provided that the directors would delegate all the powers except the power to borrow something. But the managing agents took the overdraft without having the approval of the board was held binding the court saying that such temporary loans must be kept outside the field of related provisions.
The companies Act 2013, Section 117 provides for memorandum and articles of the association are the public documents.
These public documents should be read by the outsiders who want to deal with that company.
As this has been presumed that outsiders have knowledge of the public documents in which internal management and specific clauses and incorporation of the company have been specified.
As a prudent man, he/she must go through the articles of association and memorandum of association and it cannot be said that they didn’t have knowledge of it. So he/she must read these documents. If they don’t want to be trapped in the problem in the future and to make the right decision and contract with the company should read these important documents of the company.
Therefore, because he/she cannot shift the burden or make the company liable for their own fault. An outsider cannot plead guilty of ignorance of not properly reading the documents.
However, the doctrine of constructive notice plays a vital role in the security of the company from outsiders, when anyone joins the company without having knowledge of its provisions or laws, which are assumed to be having acknowledged by any person who steps into the company.
This Article is Authored by Magaonkar Revati Umashankar, 5th Year BSL Student at Dayanand College of Law.