Bank was authorised by its Articles to issue bonds. The directors issued bond to 'A' without the requisite resolution. A filed a suit for recovery of the money against the company. The company resisted the suit on the gr

This case relates to the doctrine of indoor management. This doctrine protects the outsider against the company. According to this doctrine, the person entering into a transaction with the company only needed to satisfy that his proposed transaction is not inconsistent with the articles and memorandum of the company. He is not bound to see the internal irregularities of the company and if there are any internal irregularities, the company will still be liable to honour its part of the contract as that outside person has acted in the good faith and he did not know about the internal arrangement of the company. This doctrine was laid down in the case of Royal British Bank v. Turquand . It was held that "Outsiders are bound to know the external position of the company, but are not bound to know its indoor management." Therefore, on the basis of this doctrine, 'A' will succeed to recover his money.