1. DOCTRINE OF INDOOR
MANAGEMENT &
PIERCING OF
CORPORATE VEIL
Submitted By- Divya Sehgal (29)
Gurpreet Kaur (30)
Mehak Pal (45)

2. DOCTRINE OF
INDOOR
MANAGEMENT

3. • The Doctrine of Indoor Management says
that if a person enters into a contract with a
Company he has the rights to inquire into the
correctness of the contract since Article and
Memorandum of Association are public
documents.
• It is invoked by the person

4. T.R Pratt (Bombay) Ltd. V. E.D. Sassoon & Co.
Ltd.,
Company A lent money to Company Bon a
mortgage of its assets. The procedure laid
down in the articles for such transactions was
not complied with. The directors of the two
companies were the same. Held, the lender
had notice of the irregularity and hence the
mortgage was not binding

5.  Memorandum of Association and Articles of
Association are two most important documents needed for
the incorporation of a company.
 Section 610 of the Companies Act, 1956 provides that the
memorandum and articles when registered with Registrar
of Companies 'become public documents' and then they
can be inspected by anyone on payment of a nominal fee.

6.  Every person dealing with the company is
deemed to have a constructive notice of the
contents of the memorandum and articles of
the company.
 An outsider dealing with the
company is presumed to have read
the contents of the registered
documents of the company.
 The further presumption is that he has
not only read and inspected the
documents but has also
 understood them fully in the proper sense.
This is known as the rule of constructive
notice.
 So, the doctrine or rule of constructive
notice is a presumption operating in favor
of the company against the outsider

7. PIERCING OF
CORPORATE VEIL

8. CONCEPT
•In the eyes of law , a company is a legal person with a
separate entity distinct from its members of
shareholders. In essence it means that there is a veil or
curtain separating the legal entity of the company
from its members or shareholder.
• When any fraudulent and dishonest use is made of
the legal entity, the individuals concerns will not be
allowed to take shelter behind the corporate
personality. The Courts will break through the
corporate shell and apply the principle of ‘lofting or
piercing the corporate veil’. The Court will make the
members or the controlling persons liable for debts
and obligations of the company.

10. LAW WILL LIFT CORPOATE VEIL:
Under Statutory Provisions
 Under Judicial Interpretation

11. Under Statutory Provisions
 Reduction of the number of members
below statutory minimum
 For establishing the relationship of holding
and subsidiary company
 For facilitating the task of an inspector to
investigate the affairs of the company
 For investigation of the ownership of the
company

12. UNDER JUDICIAL INTERPRETATION
• Protection of Revenue
Example Case
Re Sir Dinshaw Maneckjee Petit: In this case, the assesse
formed four companies and transferred his investments to
each of these companies in exchange for share. Now the
companies received his income but they handed back the
amount to him as pretended loan. His income was divided
into four parts reducing his tax liability. It was held that the
companies did no business and were created by the assesse
simply as the means for avoiding tax.

13. • Prevention of fraud or improper conduct
Example Case
Gilford Motor Co. vs. Horne: In this case,
Horne was appointed as the Managing Director
of Gilford Motor Co., under an agreement that
contained a condition that he shall not solicit
away the customers of the company. But Horne
formed a company which resorted to
solicitation in violation of the contract. The
court restrained the company.

14. • Determination of the enemy character of a
company
Example Case
Daimler Co. Ltd. Vs. Continental Tire and Rubber Co.
(Great Britain) Ltd: In this case, a company was
incorporated in England for the purpose of selling their tire
manufactured in Germany by a Germany company. Its
majority shareholders all the directors were Germans. On
declaration of war between England & Germany in 1914,
the persons in control of its affairs became alien enemies
and accordingly the company was declared to be an enemy
company. During the war period the company filed a suit to
recover a trade debt, which was dismissed by the court and
observed that such payment would be a trading with an
enemy company and to allow alien enemies to trade under
the corporate facade will be against public policy.