Xaviers Institute of Business

Management Studies

sub: Corporate Law

Ans (1) all contracts are agreements but all agreements are not contracts:

A contract is a legally binding agreement or relationship that exists between

two or more parties to do or abstain from performing certain acts. There
must be offer and acceptance for a contract to be formed. An offer must
backed by acceptance of which there must be consideration. Both parties
involved must intend to create legal relation on a lawful matter which must
be entered into freely and should be possible to perform.

Definition of contract

According to section 2(h) of the Contract Act 1872:

” An agreement enforceable by law is a contract.”

A contract therefore, is an agreement the which creates a legal obligation

i.e., a duty enforceable by law.

From the above definition, we find that a contract essentially consists of

two elements:

(1) An agreement and

2) Legal obligation i.e., a duty enforceable by law.

Example;

A promises to sell a horse to B for Rs.100,000, and B promises to buy horse

at that price.
All contracts are agreements:

For a Contract to be there an agreement is essential; without an

agreement, there can be no contract. As the saying goes, “where there is
smoke, there is fire; for without fire, there can be no smoke”. It could will be
said, “where there is contract, there is agreement without an agreement
there can be no contract”. Just as a fire gives birth to smoke, in the same
way, an agreement gives birth to a contract.

What is agreement?

An agreement is a form of cross reference between different parties, which

may be written, oral and lies upon the honor of the parties for its fulfillment
rather than being in any way enforceable.

As per section 2 (e) of Contract At 1872:

” Every promise and every set of promises, forming the consideration for
each other, is an agreement.” Thus it is clear from this definition that a
‘promise’ is an agreement.

What is a ‘promise‘?

the answer to this question is contained in section 2 (b) which defines the
term.” When the person to whom the proposal is made signifies his assent
thereto the proposal is said to be accepted. A proposal, when accepted,
becomes a promise.”

An agreement, therefore, comes into existence only when one party makes
a proposal or offer to the other party and that other party signifies his
assent thereto.

All agreements are not contracts

As stated above, an agreement to become a contract must give rise to a

legal obligation. If an agreement is incapable of creating a duty enforceable
by law. It is not a contract. Thus an agreement is a wider term than a
contract.
 Agreements of moral, religious or social nature e.g., a promise to lunch
together at a friend’s house or to take a walk together are not contracts
because they are not likely to create a duty enforceable by law for the
simple reason that the parties never intended that they should be attended
by legal consequences

On the other hand, legal agreements are contracts because they create
legal relations between the parties.

EXAMPLE: a- A invites B to dinner. B accepts this invitation but does not

attend the dinner. A can not sue B for damages. It is social agreement
because it does not create legal obligation. So it is not a contract.

b- A promises to sell his car to B for one million. It is legal agreement

because it creates legal obligations between the parties. So it is a
contracAccording to section 10 of the contract act 1872.

“All agreements are contracts if they are made by the free consent of the
parties, competent to contract, for a lawful consideration and with a lawful
object and not hereby declared to be void.”

Thus an agreement becomes a contract when at least the following

conditions are satisfied.

1-free consent

2-competency of the parties

3-lawful consideration

4- lawful object.

Conclusion:

In a nut shell, an agreement is the basis of a contract and contract is the

structure constructed on these basis. An agreement starts from an offer and
ends on consideration while a contract has to achieve an other milestone
that is enforceability. Due to this, breach of an agreement does not give rise
to any legal remedy to the aggrieved party while breach of contract
provides legal remedy to the aggrieved party against the guilty party. Thus
we can say that all contracts are agreements but all agreements are not
contracts.

This is one of the fundamental stuff to know in general contract law

anywhere in the world.

All contracts are agreements because of two key things:—

1. Mutual understanding between the contracting parties for a contract

to be formed — that is, they agree to be legally bound to each other
under the terms and conditions of their agreement.

2. The contract is a voluntary agreement between the parties that is

enforceable in and by law as a binding legal agreement. This is why
contract law is also classified as a branch of the law of obligations
such as in the Civil Code jurisdictions.

Agreements are not necessarily contracts because of two key things:—

3. An agreement at the most fundamental level is a form of cross-

reference between different parties for fulfillment by honour rather
than being enforceable in any way by law.

4. It usually lacks one or more of the essential elements that are

required to be present to form a valid contract.

The essential elements present in a contract are:—

5. Parties who/that are capable of contracting, i.e. legal capacity.

6. Consent of the parties, especially if contracting through

intermediaries.

7. A lawful purpose or objective.

8. Consideration from both parties, and this is usually money from one
party and goods or services from the other party.
 9. An express intent by both parties for the agreement to be legally
binding and legally enforceable, i.e. that the agreement is expressly a
contract.

10. Clauses on each party’s obligations, performance and/or non-

performance.

11. Clauses on dispute resolution and the jurisdiction for such.

Ans (3) Condition and Warranty Under Sale of Goods Act, 1930

The Sale of Goods Act 1930 provides the definition for a Condition as – ““A
condition is a stipulation essential to the main purpose of the contract, the
breach of which gives rise to a right to treat the contract as repudiated” and
for a Warranty as – “A warranty is a stipulation collateral to the main
purpose of the contract, the breach of which gives rise to a claim for
damages but not to a right to reject the goods and treat the contract as
repudiated”

A Condition forms the core of the contract i.e. considered as an essential to

the main purpose of the contract. Therefore, the repercussion would be
repudiation of the contract or claim for damages or both depending upon
the breach and case.[ii] Breach of a Condition makes a contract voidadble
on the part of non-defaulting party to the contract. However, a Warranty is
treated as a collateral to the main purpose of a contract and therefore, the
repercussions of breach of warranty by one of the parties would be only a
claim for damages by the non-defaulting party.

A breach of Warranty by one of the parties does not make the contract a
contract voidable and does not give any right to the non-defaulting party to
repudiate the contract. The same position is further, clarified by section 59
of Sale of Goods Act, which provides that when there is a breach of
warranty by the seller, this breach does not provide the buyer with the right
to breach the contract, he may only sue the seller for breach of Warranty in
diminution or extinction of the price. Whether a particular stipulation in the
contract is a Condition or a Warranty, depends on the case to case.

A breach of warranty by one party cannot treated as one of breach of

condition, however, a breach of a Condition by one of the parties to the
contract can be treated as a breach of Warranty. The Sale of Goods Act
provides for the situations when a breach of a Condition by one of the
parties can be treated as breach of warranty under a contract of sale of
goods.[iii] Those situations being:

12. When the buyer himself waives the Condition, which gives right to
the buyer to repudiate the contract on breach of that particular
stipulation; or

13. When the buyer treats the Condition as a Warranty and does not
repudiate the contract on the basis of such breach; or

14. Where the contract is non-severable and the buyer has accepted
either the whole goods or any part under the contract; or

15. Where the law itself excuses the fulfilment of a Condition.

EXPRESS AND IMPLIED CONDITONS AND WARRANTIES

Terms of a contract of sale of goods can be both express or implied. When a

stipulation (Condition or Warranty) is expressively provided in the contract
of sale of goods, it is considered as express stipulation. On the other hand,
when the contract does not expressively provide for an express Condition or
Warranty, however, due to the nature of the nature of the contract or
intention of the party there is existence of a Condition or Warranty in the
nature, it is known as implied Condition or Warranty. The Sale of Goods Act
provides provisions for express and implied Conditions and Warranties.

IMPLIED CONDITIONS

Section 14 of the Sale of Goods Act states that, “an implied condition on the
part of the seller that, in the case of a sale, he has a right to sell the goods
and that, in the case of an agreement to sell, he will have a right to sell the
goods at the time when the property is to pass”, which means that it is an
implied condition that the seller of a good has the right to sell it or has the
right to transfer the title of the property. Therefore, when the seller’s title
to the property turns out to be defective or the seller does not have the
right to transfer the property to the buyer, it gives the right to the buyer to
repudiate the contract of sale of goods and to claim the money from the
seller in addition to damages, if any. A seller can only sell or transfer the
oppression of the property when he is the true owner of the property or
has the right to transfer the property.

The Sale of Goods Act also provides for situations when goods are sold by
description i.e. there is a contract of sell the goods by description given. In
such situations, it is an implied condition that the goods sold to the buyer
should match the description given about the goods. If the goods do not
match with the description given, in such cases the buyer can repudiate the
contract making the contract voidable at the option of buyer. The buyer
cannot be compelled to accept the goods when the goods sold are not in
accordance to the description provided.

Where goods are to be sold to the buyer as per the sample as well as the
description given. However, if the goods sold to the buyer matches or are in
accordance to the sample but are not in accordance with the description
given, the buyer can repudiate the contract on the breach of such
stipulation. In such situations, the necessity of goods sold to the buyer to be
in accordance with the sample as well as description is treated as an
implied condition and breach of the same gives the right to the buyer to
repudiate the contract of sale of goods.

When goods are sold under the contract of sale of goods, the Sale of Goods
Act enumerates certain implied conditions, breach of any would provide the
right to repudiate the contract. Following are the conditions:

16. the bulk shall correspond with the sample in quality;

 17. the buyer shall have a reasonable opportunity of comparing the bulk
with the sample; and

18. the goods shall be free from any defect rendering the un-
merchantable, which would not be apparent on reasonable
examination of the sample. It can be concluded that this condition is
applicable where the defects are latent as the section states that
which (defects) could not be discoverable by an ordinary examination
of the goods. The buyer can repudiate the contract if the defects are
found after sometime due to potential existence of the defect but not
presently evident.

Also, section 16 of the act mentions that there is no implied condition as to

the quality or fitness of the goods for any particular purpose. However,
section 16 also clarifies that the condition as to the reasonable fitness of
goods for a particular purpose may be implied if the buyer had made known
to the seller to select the best goods and the seller has ordinarily been
dealing in those goods. This implied condition will also not apply if the
goods have been sold under a trademark or a patent name. An implied
condition as to quality or fitness for a particular purpose may be annexed
by the usage of trade. In case of eatables, there an implied condition that
the eatables shall be wholesome.

IMPLIED WARRANTIES

The Sale of Goods Act enumerates an implied Warranty that the buyer shall
have complete possession of the goods sold to him and shall enjoy quite
possession of the such goods. In case of any kind of disturbance, the buyer
can sue the seller for the breach of Warranty and can claim damages arising
out of such breach.

Section 14 of the Sale of Goods Act also provides for implied warranties.
section 14 also provides for an implied warranty that the goods shall be free
from any charge or encumbrance in favour of any third party, not declared
or known to the buyer before or at the time the contract is entered into.
The Sale of Goods Act also makes provisions for an implied warranty as to
quality or fitness for a particular may be annexed or attached by the usage
of trade.[vii] If goods sold are of dangerous nature and as per the usage of
trade the seller has to disclose the dangerous nature of goods and if the
seller does not disclose, the buyer can sue the seller for breach of implied
warranty.

THE RULE OF CAVEAT EMPTOR

Section 16 of the Sale of Goods Act states that, “subject to the provisions of
this Act or any other law for the time being in force, there is not implied
warranty or condition as to the quality or fitness for any particular purpose
of goods supplied under a contract of sale”, brings the common law rule of
Caveat Emptor, which means ‘let the buyer beware’.[viii] When the sellers
display their goods in the open market, it is for the buyer to make a proper
selection or choice of the goods. The buyer alone shall be responsible for
checking the quality and suitability of goods before a purchase is made. The
said rule owes its origin to the fact that in the early times most of the sales
used to took place in the market

However, the rule of caveat emptor has certain exceptions to it.

19. when a buyer brings the purpose of buying goods to the knowledge
of the seller, relies on seller’s skill and goods are of a description
which is in the course of seller’s business, it becomes the duty of the
seller to deliver reasonably fit goods to the buyer;

20. Where the goods are sold by sample and the goods do not match
with the sample;

21. Where the goods have been sold by both sample and description and
the goods match with sample but do not match with the sample; and

22. When the goods have been sold by making some fraud or
misrepresentation
Ans (4) Difference between Lay-off and Retrenchment
The biggest difference between layoff and retrenchment is that layoff is
volatile in nature, i.e. employees are recalled, once the period of layoff is
over while retrenchment is non-volatile i.e. that involves full and final
termination of services

Difference between Lay-off and Retrenchment

Last updated on May 11, 2017 by Surbhi S

layoff and retrenchment

The biggest difference between layoff and retrenchment is that layoff is

volatile in nature, i.e. employees are recalled, once the period of layoff is
over while retrenchment is non-volatile i.e. that involves full and final
termination of services.

The employment contract is terminated with the employees by the

employer, due to three major reasons which are: (i) the organization is
going through the lean period, (ii) initial faulty hiring, (iii) employee shows
deviant behavior, which affects the whole environment.

The method used in involuntary separation is layoffs, VRS, Retrenchment,

discharges etc. Many think that layoff and retrenchment are one and the
same thing but that is not true.Read the article to learn some more
differences between these two.

Content: Layoff Vs Retrenchment

23. Comparison Chart

24. Definition

25. Key Differences

26. Conclusion
BASIS FOR COMPARISON LAYOFF RETRENCHMENT

Meaning Lay-off refers to the provisional termination of the employee,

at the instance of the employer. Retrenchment means involuntary
separation of an employee due to the replacement of labor by machines or
the close of the department.

What is it? Action step Business strategy

Defined in Section 2 (kkk) of Industrial Dispute Act, 1947 Section 2

(oo) of Industrial Dispute Act, 1947

Nature Temporary Permanent

Operation of company Stops after the declaration. Continues even

after the declaration.

Re-appointment As soon as the lay-off period ends. Employee's

connection with the organization are severed immediately.

Definition of Layoff

To layoff is to temporarily or permanently terminate or get rid of the staff /

employee. This is usually done by a company / firm on account of a
business slowdown as a result of which there is insufficient work to be
allotted to an employee who is registered with the establishment and who
has not yet been retrenched.

It is Suspension or termination of employment (with or without notice) by

an employer or management. A company layoff involves the cessation of
employee benefits such as salary or wages. The laid-off employees are paid
laid-off compensation. All of the laid-off employees should be taken back in
their usual posts, as soon as the layoff lifted out. It may be due to, one of
the given reasons:

27. Shortage of raw materials

 28. Economic recession

29. Breakdown of machinery

30. Accumulation of stocks

Definition of Retrenchment

Retrenchment is to reduce the amount of corporate expenses. When a

company/firm implements retrenchment, it cuts off or minimises all the
unnecessary expenditures, usually by cutting back on the diversity of
products or services it offers and often reducing the size of its company by
closing down some of its offices that don’t necessarily mean a reduction in
a company’s workforce.

It simply means termination of employee’s services, because of

replacement of the worker by machines or closure of the unit due to the
lack of product’s demand, produced by the unit. In retrenchment, the
termination of services of several employees takes place where they are
sent to the home and their connection with the organisation are completely
and immediately severed

Key Differences between layoff and retrenchment

31. Layoff refers to the provisional termination of the employee, at the

instance of the employer. Retrenchment means involuntary
separation of an employee due to the replacement of labour by
machines or the close of the department.

32. The layoff is an action step, whereas retrenchment is a business

strategy to reduce company’s expenses.

33. The layoff is defined in section 2 (kkk) of the Industrial Disputes Act,
1947. Conversely, Retrenchment is defined in section 2 (oo) of the
Industrial Disputes Act, 1947.

34. The layoff is of a temporary nature, i.e. it is for a definite period, in

which the employees are recalled after the expiry of the term. As
 opposed to retrenchment, is permanent in nature.

35. After the declaration of layoff, the company’s operations stops

because of the shortage of raw material, the breakdown of
machinery, economic recession and so on. On the other hand, the
operations of the company continue even after retrenchment is
declared.

36. As soon as the layoff period is over, the employees are re-appointed
to their previous posts. Unlike Retrenchment, in which the employees
are not taken back by the company, once they are terminated.

Conclusion

Therefore, with the above discussion, it is quite clear that layoff and
retrenchment are two different ways of involuntarily terminating
employees. While in both the cases the employees are paid compensation
as per the method specified in the act. However, gratuity is paid only in
retrenchment but not in layoff.

Ans (5) Health and Safety Provisions under Factories Act, 1948
There are various measures under Factories Act 1948 which are taken by
factories for health, safety and welfare of their workers. Such measures are
provided under Chapters III, IV and V of the Act which are as follows:

Chapter III of the Act deals with the following aspects.

(i) Section 11 ensures the cleanliness in the factory. It must be seen that a
factory is kept clean and it is free from effluvia arising from any drain, privy
or other nuisance. The Act has laid down following provisions in this respect
:
 37. All the accumulated dirt and refuse on floors, staircases and passages
in the factory shall be removed daily by sweeping or by any other
effective method. Suitable arrangements should also be made for the
disposal of such dirt or refuse.

38. Once in every week, the floor should be thoroughly cleaned by

washing with disinfectant or by some other effective method [Section
11(1)(b)].

39. Effective method of drainage shall be made and maintained for

removing water, to the extent possible, which may collect on the
floor due to some manufacturing process.

40. To ensure that interior walls and roofs, etc. are kept clean, it is laid
down that: (i) white wash or color wash should be carried at least
once in every period of 14 months; (ii) where surface has been
painted or varnished, repair or revanish should be carried out once in
every five years, if washable then once in every period of six months;
(iii) where they are painted or varnished or where they have smooth
impervious surface, it should be cleaned once in every period of 14
months by such method as may be prescribed.

41. All doors, windows and other framework which are of wooden or
metallic shall be kept painted or varnished at least once in every
period of five years.

42. The dates on which such processes are carried out shall be entered in
the prescribed register. If the State Government finds that a
particular factory cannot comply with the above requirements due to
its nature of manufacturing process, it may exempt the factory from
the compliance of these provisions and suggest some alternative
method for keeping the factory clean.

(ii) Disposal of waste and effluents

Every occupier of a factory shall make effective arrangements for the

treatment of wastes and effluents due to the manufacturing process carried
on in the factory so as to render them innocuous and for their disposal.
Such arrangements should be in accordance with the rules, if any, laid down
by the State Government. If the State Government has not laid down any
rules in this respect, arrangements made by the occupier should be
approved by the prescribed authority if required by the State Government

(iii) Ventilation and temperature

Section 13 provides that every factory should make suitable and effective
provisions for securing and maintaining :-

43. adequate ventilation by the circulation of fresh air; and

44. such a temperature as will secure to the workers reasonable

conditions of comfort and prevent injury to health. What is
reasonable temperature depends upon the circumstances of each
case. The State Government has been empowered to lay down the
standard of adequate ventilation and reasonable temperature for any
factory or class or description of factories or parts thereof. It may
direct that proper measuring instruments at such places and in such
position as may be specified shall be provided and prescribed records
shall be maintained.

Measures to reduce excessively high temperature: To prevent excessive

heating of any workroom following measures shall be adopted:

45. Walls and roofs shall be of such materials and so designed that
reasonable temperature does not exceed but kept as low as possible.

46. Where the nature of work carried on in the factory generates

excessively high temperature, following measures should be adopted
to protect the workers:

(a) by separating such process from the workroom; or

(b) insulating the hot parts; or

(c) adopting any other effective method which will protect the workers.

3. The Chief Inspector is empowered to direct any factory to adopt such

methods which will reduce the excessively high temperature. In this regard,
he can specify the measures which in his opinion should be adopted

(iv) Dust and fume

There are certain manufacturing processes like chemical, textile or jute,

etc., which generates lot of dust, fume or other impurities. It is injurious to
the health of workers employed in such manufacturing process. Following
measures should be adopted in this respect:

·1 Effective measures should be taken to prevent the inhalation and

accumulation of dust, fumes etc., in the work-rooms.

·2 Wherever necessary, an exhaust appliances should be fitted, as far as

possible, to the point of origin of dust fumes or other impurities.
Such point shall also be enclosed as far as possible.

·3 In stationery internal combustion engine and exhaust should be

connected into the open air.

·4 In cases of other internal combustion engine, effective measures

should be taken to prevent the accumulation of fumes there from.
(Section 14) It may be pointed that the evidence of actual injury to
health is not necessary. If the dust or fume by reason of
manufacturing process is given off in such quantity that it is injurious
or offensive to the health of the workers employed therein, the
offence is committed under this Section. Lastly the offence
committed is a continuing offence. If it is an offence on a particular
date is does not cease to be an offence on the next day and so on
until the deficiency is rectified.

(v) Artificial humidification

Humidity means the presence of moisture in the air. In certain industries

like cotton, textile, cigarette, etc., higher degree of humidity is required for
carrying out the manufacturing process. For this purpose, humidity of the
air is artificially increased. This increase or decrease in humidity adversely
affects the health of workers.

Section 15(1) empowers the State Government to make rules (i) prescribing
the standards of humidification, (ii) regulating methods to be adopted for
artificially increasing the humidity of the air, (iii) directing prescribed tests
for determining the humidity of the air to be correctly carried out, and
recorded, and (iv) prescribing methods to be adopted for securing adequate
ventilation and cooling of the air in the work-room.

Section 15(2) lays down that water used for artificial humidification should
be either purified before use or obtained from a public supply or other
source of drinking water.

Where the water is not purified as stated above. Section 15(3) empowers
the Inspector to order, in writing, the manager of the factory to carry out
specified measures, before a specified date, for purification of the water.

(vi) Overcrowding

Overcrowding in the work-room not only affect the workers in their efficient
discharge of duties but their health also. Section 16 has been enacted with
a view to provide sufficient air space to the workers.

(1) Section 16(1) prohibits the overcrowding in the work-rooms to the

extent it is injurious to the health of the workers.

(2) Apart from this general prohibition Section 16(2) lays down minimum
working space for each worker as 14.2 cubic meters of space per worker in
every workroom.

For calculating the work area, the space more than 4.2 meters above the
level of the floor, will not be taken into consideration

Posting of notice: Section 16(3) empowers the Chief Inspector who may
direct in writing the display of a notice in the work-room, specifying the
maximum number of workers which can be employed in that room.
According to Section 108, notice should be in English and in a language
understood by the majority of the workers. It should be displayed at some
conspicuous and convenient place at or near, the entrance. It should be
maintained in clean and legible conditions.

Exemptions : The chief Inspector may by order in writing, exempt any work-
room from the provisions of this section, subject to such conditions as he
may think fit to impose, if he is satisfied that non-compliance of such
provision will have no adverse effect on the health of the workers employed
in such work-room.

(vii) Lighting

Section 17 of the Factories Act makes following provisions in this respect:

·5 every factory must provide and maintain sufficient and suitable

lighting, natural, artificial or both, in every part of the factory where
workers are working or passing;

·6 all the glazed windows and sky lights should be kept clean on both
sides;

·7 effective provisions should be made for the prevention of glare from

a source of light or by reflection from a smooth or polished surface;

·8 formation of shadows to such an extent causing eye-strain or the risk

of accident to any worker, should be prevented; and

·9 the state government is empowered to lay down standard of

sufficient and suitable lighting for factories for any class or
description of factories or for any manufacturing process.

(viii) Drinking water

Section 18 makes following provisions with regard to drinking water.

 ·10 every factory should make effective arrangements for sufficient
supply of drinking water for all workers in the factory;

·11 water should be wholesome, i.e., free from impurities;

·12 water should be supplied at suitable points convenient for all

workers;

·13 no such points should be situated within six meters of any washing
place, urinals, latrine, spittoon, open drain carrying sullage or effluent
or any other source of contamination, unless otherwise approved in
writing by the Chief Inspector;

·14 all such points should be legible marked Drinking Water in a language
understood by majority of the workers;

·15 in case where more than 250 workers are ordinarily employed,
effective arrangements should be made for cooling drinking water
during hot weather. In such cases, arrangements should also be made
for the distribution of water to the workers; and

·16 the State Government is empowered to make rules for the

compliance of above stated provisions and for the examination, by
prescribed authorities, of the supply and distribution of drinking
water in factories.

·17 Latrines and urinals

Every factory shall make suitable arrangement for the provision of latrines
and urinals for the workers. These points as stated below, are subject to the
provisions of Section 19 and the rules laid down by the State Government in
this behalf

8) the State Government is empowered to make rules in respect of

following:

·18 prescribing the number of latrines and urinals to be provided to

proportion to the number of male and female workers ordinarily
 employed in the factory.

·19 any additional matters in respect of sanitation in factories;

·20 responsibility of the workers in these matters.

8) the State Government is empowered to make rules in respect of

following:

prescribing the number of latrines and urinals to be provided to proportion

to the number of male and female workers ordinarily employed in the
factory.

any additional matters in respect of sanitation in factories;

responsibility of the workers in these matters.

(i) Fencing of machinery

Fencing of machinery in use or in motion is obligatory under Section 21.

This Section requires that following types of machinery or their parts, while
in use or in motion, shall be securely fenced by safeguards of substantial
construction and shall be constantly maintained and kept in position, while
the parts of machinery they are fencing are in motion or in use. Such types
of machinery or their parts are:

every moving parts of a prime-mover and flywheel connected to a prime-

mover. It is immaterial whether the prime-mover or fly-wheel is in the
engine house or not;

head-race and tail-race of water wheel and water turbine;

any part of stock-bar which projects beyond the head stock of a lathe;

every part of an electric generator, a motor or rotary converter or

transmission machinery unless they are in the safe position;

every dangerous part of any other machinery unless they are in safe
position.
(ii) Safety measures in case of work on or near machinery in motion

Section 22 lays down the procedure for carrying out examination of any
part while it is in motion or as a result of such examination to carry out the
operations mentioned under clause (i) or (ii) of the proviso to Section 21(1).
Such examination or operation shall be carried out only by specially trained
adult male worker wearing tight fitting clothing (which shall be supplied by
the occupier) whose name has been recorded in the register prescribed in
this behalf and who has been furnished with a certificate of appointment
and while he is so engaged.

No woman or young person shall be allowed to clean, lubricate or adjust

any part of a prime-mover or any transmission machinery while the prime-
mover or transmission machinery is in motion or to clean, lubricate or
adjust any part of any machine if the cleaning, lubrication and adjustment
thereof would expose the woman or the young person to risk of injury from
any moving part either of that machine or of any adjacent machinery
[Section 22(2)].

(iii) Employment of young persons on dangerous machines

Section 23 provides that no young person shall be required or allowed to

work at any machine to which this section applies unless he has been fully
instructed as to dangers arising in connection with the machine and the
precautions to be observed and (a) has received sufficient training in work
at the machine, or (b) is under adequate supervision by a person who has a
thorough knowledge and experience of the machine.

(iv) Striking gear and devices for cutting off power

Section 24 provides that in every factory suitable striking gears or other

efficient mechanical appliances shall be provided and maintained and used
to move driving belts to and from fast and loose pulleys which form part of
the transmission machinery and such gear or appliances shall be so
constructed, placed and maintained as to prevent the belt from creeping
back on the fast pulley. Further, driving belts when not in use shall not be
allowed to rest or ride upon shafting in motion.

Suitable devices for cutting off power in emergencies from running

machinery shall be provided and maintained in every work-room in every
factory. It is also provided that when a device which can inadvertently shift
from ‘off’ to ‘on position in a factory’, cutoff power arrangements shall be
provided for locking the devices on safe position to prevent accidental start
of the transmission machinery or other machines to which the device is
fitted.

(v) Self-acting machines

Section 25 provides further safeguard for workers from being injured by

self-acting machines. It provides that no traverse part of self-acting machine
in any factory and no material carried thereon shall, if the space over which
it runs is a space over which any person is liable to pass whether in the
course of his employment or otherwise, be allowed to run on its outward or
inward traverse within a distance of forty fivecentimeters from any fixed
structure which is not part of the machines.

However, Chief Inspector may permit the continued use of a machine

installed before the commencement of this Act, which does not comply
with the requirement of this section, on such conditions for ensuring safety,
as he may think fit to impose.

(vi) Casing of new machinery

Section 26 provides further safeguards for casing of new machinery of

dangerous nature. In all machinery driven by power and installed in any
factory

(a) every set screw, bolt or key on any revolving shaft, spindle, wheel or
pinion shall be so sunk, encased or otherwise effectively guarded as to
prevent danger;

(b) all spur, worm and other toothed or friction gearing which does not
require frequent adjustment while in motion, shall be completely encased
unless it is so situated as to be so safe as it would be if it were completely
encased.

The section places statutory obligation on all persons who sell or let on hire
or as agent of seller or hire to comply with the section and in default shall
be liable to punishment with imprisonment for a term which may extend to
3 months or with fine which may extend to Rs. 500 or with both.

(vii) Prohibition of employment of woman and children near cotton openers

According to Section 27, no child or woman shall be employed in any part of

factory for pressing cotton in which a cotton opener is at work. However, if
the feed-end of a cotton opener is in a room separated from the delivery
end by a partition extending to the roof or to such height as the inspector
may in any particular case specify in writing, women and children may be
employed on the side of partition where the feed-end is situated.

(viii) Hoists and lifts

Section 28 provides that in every factory:

(i) every hoist and lift shall be of good mechanical construction, sound
material and adequate strength. It shall be properly maintained and
thoroughly examined by a competent person at least once in every period
of six months and a register shall be kept containing the prescribed
particulars of every such examination,

(ii) every hoist way and lift way shall be sufficiently protected by an
enclosure fitted with gates and the hoist or lift and every such enclosure
shall be so constructed as to prevent any person or thing from being
trapped between any part of the hoist or lift and any fixed structure or
moving part,

(iii) the maximum safe working load shall be marked on every hoist or lift
and no load greater, than such load shall be marked on every hoist or lift
and no load greater than such load shall be carried thereon,
(iv) the cage of every hoist and lift shall be fitted with a gate on each side
from which access is afforded to a landing,

(v) such gates of the hoist and lift shall be fitted with interlocking or other
efficient device to secure that the gate cannot be opened except when the
cage is at the landing and that the cage cannot be moved unless the gate is
closed.

(ix) Lifting machines, chains, ropes and lifting tackles

In terms of Section 29, in any factory the following provisions shall be

complied with respect of every lifting machine (other than a hoist and lift)
and every chain, rope and lifting tackle for the purpose of raising or
lowering persons, goods or materials:

(a) all parts including the working gear, whether fixed or movable, shall be

(i) of good construction, sound material and adequate strength and free
from defects;

(ii) properly maintained;

(iii) thoroughly examined – by a competent person at least once in every

period of 12 months or at such intervals as Chief Inspector may specify in
writing and a register shall be kept containing the prescribed particulars of
every such examination;

(b) no lifting machine or no chain, rope or lifting tackle, shall, except for the
purpose of test, be loaded beyond the safe working load which shall be
plainly marked thereon together with an identification mark and duly
entered in the prescribed register and where it is not practicable, a table
showing the safe working loads of every kind and size of lifting machine or
chain, rope or lifting tackle in use shall be displayed in prominent positions
on that premises;

(c) while any person is employed or working on or near the wheel track of a
travelling crane in any place where he would be liable to be struck by the
crane, effective measures shall be taken to ensure that the crane does not
approach within 6 meters of that place

(x) Safety measures in case of use of revolving machinery

Section 30 of the Act prescribes for permanently affixing or placing a notice

in every factory in which process of grinding is carried on. Such notice shall
indicate maximum safe working peripheral speed of every grindstone or
abrasive wheel, the speed of the shaft or spindle upon such shaft or spindle
necessary to secure such safe working peripheral-speed. Speed indicated in
the notice shall not be exceeded and effective measures in this regard shall
be taken.

(xi) Pressure plant

Section 31 provides for taking effective measures to ensure that safe

working pressure of any plant and machinery, used in manufacturing
process operated at pressure above atmospheric pressure, does not exceed
the limits. The State Government may make rules to regulate such
pressures or working and may also exempt any part of any plant or
machinery from the compliance of this section.

(xii) Floor, stairs and means of access

Section 32 provides that in every factory

(a) all floors, steps, stairs passages and gangways shall be of sound
construction and properly maintained and shall be kept free from
obstruction and substances likely to cause persons to slip and where it is
necessary to ensure safety, steps, stairs passages and gangways shall be
provided with substantial handrails,

(b) there shall, be so far as is reasonably practicable, be provided, and

maintained safe means of access of every place at which any person is at
any time required to work;

(c) when any person has to work at a height from where he is likely to fall,
provision shall be made, so far as is reasonably, practicable, by fencing or
otherwise, to ensure the safety of the person so working.

(xiii) Pits, openings in floors etc.

Section 33 requires that in every factory every fixed vessel, sump, tank, pit
or opening in the ground or in a floor which, by reason of its depth,
situation, construction, or contents is or may be source of danger shall be
either securely covered or securely fence. The State Government may
exempt any factory from the compliance of the provisions of this Section
subject to such conditions as it may prescribe.

Ans (9) Special Privileges of a Private Company over Public Company

Both private and public companies are regulated by the provisions of the
Companies act, 1956. However certain provisions of the Act do not apply to
a private company. These are the privileges which a private company enjoys
over the public company under the act. They are summarized below:

1) The minimum number of members in a private company can be two only

as against seven in a public company.

2) Provisions regarding minimum subscription before allotment of shares do

not apply to a private company.

3) A private company need not file a prospectus or a statement in lieu of

prospectus with the Registrar

4) Further shares can be issued without passing special resolution obtaining

Central Government’s approval and need not be offered other existing
members

5) Private companies may issue share capital of such kinds in such forms
and with such voting rights as it may think fit. However, its paid up capital

shall not be less than rupees one lac.

6) Private company can commence business immediately on incorporation.

7) Private company need not keep an index of members.

8) Private company need not hold statutory meeting or file statutory report.

9) Provisions as to overall maximum managerial remuneration and

remuneration to directors do not apply to a private company.

10) Minimum number of directors is only two in a private company.

11) Provisions as to proportion of directors liable to retire by rotation do not

apply to a private company.

12) Director’s consent to act as such is not required.

13) Restrictions on appointment of directors as regards their consent and

holding qualification shares do not apply to a private company.

14) Government approval to appointment or amendment of provisions

relating to managing or whole term or non rotational directors is not
required.

15) Director’s contract to take up qualification shares need not be filed with
the registrar of companies,.

16) Provisions regarding loans to directors do not apply.

17) Provisions regarding interested directors not to participate or vote in

Board’s proceedings do not apply.

18) Provisions requiring government approval fro increasing remuneration

of a director or managing director do not apply.

19) Prohibition regarding appointment of a managing director for more

than five years at a time does not apply.

20) Restrictions on advancing loans to other companies do not supply

21) Provision relating to transfer of shares not to be registered except on

production of instrument of transfer, transfer by legal representative
application for transfer and power to refuse registration an appeal against
refusal do not apply without prejudice to a power of a private company to
enforce its restrictions against the right to transfer the shares of such
company.

When private, many lose its privileges?

When it fails to comply with the essential requirements of a private

company (Sec 3(1) (iii)) Discussed default complying with the said provisions
shall disentitle a private company from the privileges and exemptions it is
entitled to. The Companies act shall apply to such a company as if it were
not private company (Sec43).

Procedure for converting a private company into public limited company

(Sec 44)

Section 44 of the companies act prescribes the following procedures for

converting a Private Limited Company into a public Limited Company:

1) Alter the articles of the company’s by special resolution to eliminate

restrictions of a private company under Sec 3 (1) (iii) .

2) if the number of members is less than 7, it must be raised at least to 7.

3) If the number of directors is less than three it must be raised at least to

three.

On the date of such alterations private company shall cease to exist. It shall
become a public company. It shall within 30 days file with the Registrar
either a prospectus or statements in lieu of prospectus and the resolution
altering the articles.