The directors of the company were authorised under the Articles of Association of Company to borrow ₹20,000 without the consent of shareholders in general meeting. The directors themselves let ₹50,000 to the company with

This problem refers to the exception to the rule of doctrine of indoor management. The doctrine is not applicable where a person had express or implied knowledge of the irregularity. Despite knowing about this fact if a person lends money ultra vires articles, it cannot seek protection under the rule of indoor management. In the case of Howard vs. Patent Ivory Company , the article of the company empowered directors to borrow up to 1000 pounds only. However, they could extend the limit of 1000 pound by consent in general meeting. Without such permission, they took 3500 pounds from one of the directors who took debentures. Later on, the company refused to pay back. The court held that the company is only liable to pay back 1000 pounds because the director had noticed about the limit and condition. Similarly in this case, the company is liable for only ₹20,000 which was authorized by Article of Association. The company will not be held liable for ₹50,000 as this amount was in excess of the borrowing capacity of the company under Articles of Association.