The Supreme Court in Mahima Datla vs Renuka Datla observed that the Duomatic Principle that 'strict adherence to a statutory requirement may be dispensed with if it is demonstrated otherwise on facts if the same is consented by all members' is applicable even in the Indian context.
The court noted that the Duomatic Principle as derived from the decision In Re: Duomatic Ltd. and can be briefly stated as "anything the members of a company can do by formal resolution in a general meeting, they can also do informally if all of them assent to it." It also noted that, in Salmon v. Salmon Co. Ltd., [1897] AC 22 it was held that "a company is bound in a matter intra vires by the unanimous agreement of its members".
It said "The aforesaid Principle emanating from Salmon' Case (supra) has found its utility across various aspects of company law such as Duomatic Principle, Doctrine of Indoor Management, etc. This Principle having its origin in common law, is applicable even in the Indian context. ... It is, in this context, we must note that application of Duomatic Principle is only applicable in those cases wherein bona fide transactions are involved. Fraud is a clear exception to application of these principles, be it Duomatic Principle or Doctrine of Indoor Management"
The Bench also clarified that the said principle is only applicable in those cases wherein bona fide transactions are involved and that 'Fraud' is a clear exception. The Court in this context referred to observations in Bowthorpe Holdings Ltd. v/s Hills 2002 EWHC 2331 (Ch) , wherein Sir Andrew Morritt V-C, observed as under:
“... the transaction must be bona fide or honest. This, in my view, is demonstrated by the qualification of Viscount Haldane in AG for Canada v Standard Trust 1911 AC 498, 505 that ‘the case was not ... a cloak under which a conspiracy to defraud was concealed’, by Younger LJ in In re Express Engineering Works [1983] Ch 258 , 268 that ‘no fraud is alleged in respect of this transaction’, and by Lawton LJ in Multinational Gas v Multinational Services that the members must act in good faith. Thus, in In re Duomatic Ltd [1969] 2 Ch 365, 372 Buckley J cited with approval the view of Astbury J in Parker and Cooper Ltd v Reading [1926] Ch 975, 984 that the transaction must be both intra vires and honest.”