LEGAL ENVIRONMENT OF

BUSINESS
SUBJECT CODE – CP-402

MASHUDUL HAQUE
ROLL NO. – 18-MBE-065
ASSIGNMENT NO. - 2
QUESTION 1. DISCUSS THE MERTIS AND DEMERTIS OF INDIAN PARTNERSHIP
ACT 1932 BY DRWING COMPLETE ANALYSIS WITH THE HELP OF SUITBALE
CASES/ ILLSUTRATIONS.

ANSWER:

MERITS AND DEMERITS OF INDIAN PARTNERSHIP ACT, 1932

MERITS
1. More Manpower - In a partnership firm, there are more than one owner. Due to the
presence of more than one owner, the partnership firm has the advantage of having
more manpower as compared to sole proprietorship firms.

2. More Financial Resources - Since there are more than one owner in a partnership
firm, the partnership firm has access to more financial resources. A partnership firm
can raise more capital as there are more than one owner.

3. Ease of formation - The formation of a partnership firm is easy because registration

is not compulsory. Again, it is not mandatory for partners to register their partnership
agreement or partnership deed.

4. Easy Dissolution - The dissolution or the closure of a partnership firm is not very
difficult. There are not many legal formalities involved in closing the business and
hence it is possible to close down the business very smoothly.

5. Division of risk- In case of partnership firm, there is a division of risk. In case of

sole proprietorship concern, there is only one owner and hence there is no division of
risk. However, in case of partnership firm, there are two or more than two owners and
hence there is a division of risk. The risk is not borne by a single person. The risk of
loss gets divided among all the partners.

6. Secrecy - There is more secrecy in the partnership firm as compared to some other
bigger forms of business organization like a private limited company or a public limited
company. This is because the partners do not have to publish the partnership firm's
financial statements anywhere. In case of some other forms of business organisation
like a public limited company, you need to publish your financial statements to the
public on a regular basis.

7. Better Decision Making - In case of partnership firm, the decision is taken by the
owners jointly. Since the decision is taken jointly, it results in better decision making.
8. Flexibility - In case of partnership firm, there is more flexibility in the operation of
the business as compared to some other bigger forms of business organization like a
public limited company. In case of a public limited company in certain decision making,
you have to involve shareholders. So, you need to call shareholders meeting before
making the decision which is not the case in case of the partnership firm. So, there is
a lot of flexibility in decision making as well as the operation of the business.

DEMERITS-

1. Unlimited Liabilities: In case of partnership firm, the owners have unlimited liability
which means that in case the business assets are not sufficient to pay off the business
liabilities, then the property of the owners can be used to pay off the external liabilities
of the business.

2. No Separate Legal Status - The partnership firm does not have any separate legal
status. In the eyes of the law, the partnership firm and owners are one man and the
same. That is the reason why owners have unlimited liabilities. So, the law sees a
partnership firm and the owners as one and the same entity. In case of a private limited
company or a public limited company, the business has its own separate legal identity,
which means that in eyes of law the business and the owners are two separate entities,
which means that the liability of the owners is limited it’s not unlimited since the
business is considered to be a separate legal entity from the owners.

3. Limited Resources - Though the partnership firm has more resources financial as
well as human as compared to sole proprietorship firm, however when you compare it
with other bigger forms of business organizations like public limited or a private limited
company the resources of a partnership firm are less. So, this form of business
organization has limited resources when you compare it with other bigger forms of
business organizations like a public limited company or a private limited company.

4. Disputes among the Partners - Quite often in this form of business organization
there is a difference of opinions among the partners. This can damage the reputation
of the firm in the market. Sometimes it may also result in conflicts and eventually the
dissolution of the business.

5. No perpetual existence- Partnership firm does not enjoy a perpetual existence or

a permanent existence because it does not have any separate legal identity in the
eyes of law. Law considers partnership business and the owners one and the same.
As a result, death or insolvency of partners can lead to the closure of the partnership
firm.
6. Risk of Implied Authority - Every partner in the partnership firm has an authority
to enter into contracts or agreements on behalf of the firm. So, one partner can enter
into agreement or contract with anyone on behalf of all the other partners. A wrong
decision by anyone partner can result in heavy losses of the business and since the
liability of all the partners is unlimited, all the partners have to bear the loss. So
sometimes all the partners or all the owners of partnership firm have to bear the loss
because of a wrong decision of anyone partner.

EXAMPLE OF LEGAL CASES

1. Uttamchand Vs. Mohandas

FACTS
Plaintiff, a minor, claimed recovery of the vacant possession of the shop which he had
given for carrying out the business in which he was made a partner (his guardian
signed on behalf of him). In the initial proceedings, plaintiff came to know of the
illegality.
ISSUE
Whether the contract was void ab-initio or discovered to be void?
HELD
Although the parties to the contract are presumed to know the law, yet the presumption
is rebutted if it is proven that the parties are in misapprehension, lack of knowledge or
apprehension as to their rights. In the present case, firstly, a guardian can though
validly enter into a partnership agreement on behalf of a minor for admitting latter to
the benefits of the partnership where partnership already exists, yet a minor can never
be made a partner in a firm, in the instant case from the terms of the agreement the
intention of the parties to make plaintiff only beneficiary and not be liable for losses of
partnership could be implicit; Secondly, plaintiff though came to the Court seeking to
enforce the contract, but with further proceedings, case to know of the illegality of the
contract. Therefore, on account of conduct of the parties, facts and circumstances of
the case, the contract was discovered to be void and plaintiff was entitled to recovery
of the possession of the property.

2. Champaran Cane Concern v State of Bihar and Anr.

(Co-ownership vis-a-vis partnership)

Facts
The appellants, living in far off place of U. P appointed a common manager for facility
of cultivation and management of land in Champaran (Bihar). The concern was
assessed as a partnership firm for all the three years, though the assessee claimed
that it was a co-ownership concern. The further argument of the assessee was that
the lands were undivided between the co-owners and the total net profits arising out
of the joint cultivation were divided between the two co-owners. On these statements
the assessee pleaded that s. 13 of the Act (Bihar Agricultural Income-tax Act) [1]
applied and the common manager should have been assessed in respect of the
agricultural income-tax payable by them. This plea of the assessee was rejected by
the Income-tax Officer.
JUDGEMENT
From the beginning to the HC, the order was passed against the assessee and the
firm was held as partnership firm.
HIGH COURT
HC concluded the firm to be a partnership firm on the following facts:
 Two co-owners joined together in appointing the common manager.
 The cultivation was made jointly on behalf of the two co-owners by the common
manager and the profits arising there from were distributed to them in proportion
of their respective shares.

SUPREME COURT
Appellant Conceded: s. 13 of the Act will not apply even if the assessee is a
partnership firm. S. 13 in terms will apply if the assessee in the present cases is a co-
ownership concern.
Respondent Conceded: If the concern is really a co-ownership, then the s.13 will be
applicable and this will favour the assessee
Issue: Was the assessee a partnership firm or a co-ownership concern?
JUDGMENT
 The HC erred in deciding the concern as partnership firm on the Facts I & ii.
Two co-owners may appoint a common manager for facility of cultivation and
management without entering into a partnership and the fact that the profits or
even the losses are distributed in accordance with the shares of the two owners
does not necessarily establish a partnership within the meaning of the
Partnership Act, 1932. Law Point (Lindley on Partnership)
 Co-ownership is not necessarily the result of agreement, whereas partnership
is. (Lack of agreement in this case)
 Co-ownership does not necessarily involve community of profit or of loss, but
partnership does. (Community of profit in this case)
 One co-owner can without the consent of the other, transfer his interest etc., to
a stranger. A partner cannot do this. (No evidence, in this case, as to, two
partners could not transfer their interests in the concern without the consent of
each other)
 In a co-ownership one co-owner is not as such the agent, real or implied, of the
other. (respondents failed to establish mutual agency in this case)
 Assessee is a co-ownership, s.13 applicable, appellants not liable to pay but
the manager.
“Whether any person holds land, from which agricultural income is derived, as a
common manager appointed under any law for the time being in force or under any
agreement or as receiver, administrator or the like on behalf of persons jointly
interested in such land or in the agricultural income derived therefrom, the aggregate
of the sums payable as agricultural income-tax by each person of the agricultural
income derived from such land and received by him shall be assessed on such
common manager, receiver, administrator or the like, and he shall be deemed to be
the assessee in respect of the agricultural income-tax so payable by each such person
and shall be liable to pay the same.”

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QUESTION 2. DISCUSS IN DETAIL THE HISTORY AND LEGAL FRAME WORK

OF INDIAN CONSUMER PROTECTION ACT, 1986? AND IT’S AMENDENENT IN
THE YEAR 2019. DO YOU THINK THE SAME ACT IS EMPOWERED TO DEAL THE
CONSUMER ONLINE? EXPLAIN?

ANSWER:

HISTORY AND LEGAL FRAMEWORK OF INDIAN CONSUMER PROTECTION

ACT, 1886 AND ITS 2019 AMENDMENT

INTRODUCTION
The concept of consumer protection is a thought as old as human civilization.
Protecting the buyers’ interests is amongst the prime considerations of the business.
According to Mahatma Gandhi consumerism giving an opportunity for the
businesspersons to serve him and he is the ultimate purpose of the business and we
can even go to the extent of saying that according to certain interpretations of some
Indian traditions a customer/consumer is equivalent to God. But the profit motive of
the marketers, sellers and dealers is resulting in consumer exploitation through
deceitful and immoral market practices (Singh and Grewal 2013). Consumer
Protection is a socio-economic day to day activity that is to be carried out by
government and business with a prime objective of protecting interests of consumers
and their fair satisfaction. Itis the prime responsibility of the government to protect the
rights and interest of consumers through formulating suitable policies, laws and
administrative framework. Different acts and laws were incorporated to protect
the consumers. But Consumer Protection Act 1986 (CPA 1986) is considered as a
milestone in the history of India for consumers right. This paper examines the
background antievolution of Consumer Protection act over a period of time. This study
is based on secondary data. This paper analyses the background of CPA 1986, its
implementation, post implementation, changes and journey.
CONSUMER
A person who purchases goods and services.
CONSUMER RIGHTS
Consumer rights are generally a refer laws that give powers to consumers against
exploitations and misconduct, misinformation &misguide by producers and sellers and
force them of goods to protect interests of consumers. These laws have come into
existence through a series of legal disputes in India, and have been shaped by the
result of those cases
CONSUMER PROTECTION IN ANCIENT INDIA
The concept of consumer protection against unscrupulous, unfair and unethical
malfunction practices and safeguarding the interest of consumers was a part of Indian
culture, business and administration for centuries in the ancient times. References to
it can be seen in Ancient Indian Dharmas like Manu Smriti (800 BC- 600 BC), The
Yajnavalkya Smriti (300 B.C. - 100 B.C), The Narada Smriti (100 A.D.-200 A.D.), The
Brihaspati smriti (200A.D.- 400 A.D.) In the Katyayana Smriti (300 A.D. - 600 A.D)
were explained the living conditions of the people of that time and were basis on the
Dharma to be
Followed at that time. They were even the premise for the system that is being followed
currently. In India, Manu Smriti was one of the most influential texts that dealt with
various consumer matters. Arthashastra of Kautilya is considered as one of the oldest
and a very effective book on trade and commerce in ancient India. Kautilya
(Chanakya) has mentioned different punishments to be given to sellers who involve
themselves in different kinds of exploitations, and wrong measures. The consumer
protection was a common part of the ancient laws. (Shinawatra, 1951)
MEDIEVAL PERIOD AND PRE-INDEPENDENCE
During the medieval period Muslim kings who ruled India, like Alauddin Khilji, Sher
Shah Suri, and Akbar etc., thought about protecting the shoppers and consumers and
they enacted strict laws for the same. They introduced weights, measures
standardization process.
THE MODERN AND BRITISH TIMES
British rulers combined the previous customs and culture (dharma) with a unified
nationwide system that had similarities with the laws already enacted in Britain.
(Prasad, 2008).
They introduced Acts like:
• The Indian Penal Code, 1860
• Carriers Act, 1865 Law of Tort
• The Indian Contract Act, 1872
• Sale of Goods act 1930
• The Agricultural Product (Grading & Marking) Act, 1937
• The Drugs and Cosmetics Act, 1940

POST-INDEPENDENCE
After independence, many laws were enacted in India for safeguarding innocent
customers from unfair and restrictive trade practices sort of a false and
dishonorable description regarding the character and quality of the goods
exaggerated statements concerning their power and efficiency, false weights and
measurements and obstruction of capital and resources into the stream of production.
The Acts that were enacted and covered the whole of the Republic of India are as
follows:
• The Drugs Control act, 1950
• The Industries (Development and Regulations) Act, 1951
• The Drugs and Magic Remedies (Objectionable Advertisements) Act, 1954
• The Prevention of Food Adulteration Act, 1954
• The Essential Commodities Act, 1955
• The Trade and Merchandise Marks Act, 1958
• The Monopolies and Restrictive Trade Practices Act, 1969, Compaction Act 2002
• The Cigarettes (Regulation of Production, Distribution, and Supply) Act, 1975
• The Standards of Weights and Measures Act, 1976
• The Prevention of Black Marketing and Maintenance of Supplies of Essential
• Commodities Act, 1980
• The Standards of Weights and Measures (Enforcement) Act, 1985
• The Bureau of Indian Standards Act, 1986
But of these Acts weren't as effective, focused and did not cater to needs all sections
of the population. There was a need for a focused and strong law to ensure for
better protection of the interests of shoppers and consumers and to save them
from the evils of unfair trade practices and for this the Protection Act-1986 was enacted
by Indian Government. The various amendments in this Act unto
2019 AMENDMENT OF CONSUMER PROTECTION ACT
Covers E-Commerce Transactions: The New Act has widened the definition of
'consumer'. The definition now includes any person who buys any goods, whether
through offline or online transactions, electronic means, teleshopping, direct selling or
multi-level marketing. The earlier Act did not specifically include e-commerce
transactions, and this lacuna has been addressed by the New Act.
Enhancement of Pecuniary Jurisdiction: Revised pecuniary limits have been fixed
under the New Act. Accordingly, the district forum can now entertain consumer
complaints where the value of goods or services paid does not exceed INR 10,000,000
(Indian Rupees Ten Million). The State Commission can entertain disputes where such
value exceeds INR 10,000,000 (Indian Rupees Ten Million) but does not exceed INR
100,000,000 (Indian Rupees One Hundred Million), and the National Commission can
exercise jurisdiction where such value exceeds INR 100,000,000 (INR One Hundred
Million).
E-Filing of Complaints: The New Act provides flexibility to the consumer to file
complaints with the jurisdictional consumer forum located at the place of residence or
work of the consumer. This is unlike the current practice of filing it at the place of
purchase or where the seller has its registered office address. The New Act also
contains enabling provisions for consumers to file complaints electronically and for
hearing and/or examining parties through video-conferencing. This is aimed to provide
procedural ease and reduce inconvenience and harassment for the consumers.

Establishment of Central Consumer Protection Authority: The New Act proposes

the establishment of a regulatory authority known as the Central Consumer Protection
Authority (CCPA), with wide powers of enforcement. The CCPA will have an
investigation wing, headed by a Director-General, which may conduct inquiry or
investigation into consumer law violations.
The CCPA has been granted wide powers to take suo-moto actions, recall products,
order reimbursement of the price of goods/services, cancel licenses and file class
action suits, if a consumer complaint affects more than 1 (one) individual.
Product Liability & Penal Consequences: The New Act has introduced the concept
of product liability and brings within its scope, the product manufacturer, product
service provider and product seller, for any claim for compensation. The term 'product
seller' is defined to include a person who is involved in placing the product for a
commercial purpose and as such would include e-commerce platforms as well. The
defense that e-commerce platforms merely act as 'platforms' or 'aggregators' will not
be accepted. There are increased liability risks for manufacturers as compared to
product service providers and product sellers, considering that under the New Act,
manufacturers will be liable in product liability action even where he proves that he
was not negligent or fraudulent in making the express warranty of a product. Certain
exceptions have been provided under the New Act from liability claims, such as, that
the product seller will not be liable where the product has been misused, altered or
modified.
Unfair Trade Practices: The New Act introduces a specific broad definition of Unfair
Trade Practices, which also includes sharing of personal information given by the
consumer in confidence, unless such disclosure is made in accordance with the
provisions of any other law.
Penalties for Misleading Advertisement: The CCPA may impose a penalty of up to
INR 1,000,000 (Indian Rupees One Million) on a manufacturer or an endorser, for a
false or misleading advertisement. The CCPA may also sentence them to
imprisonment for up to 2 (two) years for the same. In case of a subsequent offence,
the fine may extend to INR 5,000,000 (Indian Rupees Five Million) and imprisonment
of up to 5 (five) years. The CCPA can also prohibit the endorser of a misleading
advertisement from endorsing that particular product or service for a period of up to 1
(one) year. For every subsequent offence, the period of prohibition may extend to 3
(three) years.
The New Act fixes liability on endorsers considering that there have been numerous
instances in the recent past where consumers have fallen prey to unfair trade practices
under the influence of celebrities acting as brand ambassadors. In such cases, it
becomes important for the endorser to take the onus and exercise due diligence to
verify the veracity of the claims made in the advertisement to refute liability claims.
Provision for Alternate Dispute Resolution: The New Act provides for mediation as
an Alternate Dispute Resolution mechanism, making the process of dispute
adjudication simpler and quicker. This will help with the speedier resolution of disputes
and reduce pressure on consumer courts, who already have numerous cases pending
before them.
With the New Act all set to become the law, gone are the days, where the 'consumer
was asked to beware'. A consumer is now the one who assumes to be treated like a
King. Hence, it is important for consumer driven businesses (such as, retail, e-
commerce) to be mindful of the changes in the legal landscape and have robust
policies dealing with consumer redressal in place