IFIM COLLEGE, BENGALURU: 560 100

VI Semester B.Com Course

6.1 BUSINESS REGULATIONS
CASE STUDIES WITH SOLUTIONS
Instructions to all Students:
For all the Case Study the students must first write a Summary of the Case Study and then only they
must start answering the questions and it is mandatory to do so.
CASE STUDY NO: 1 – UNIT NO: 1 – INTRODUCTION TO BUSINESS LAWS

Black & Co. is a limited company which is 10 years old. The said company is doing a flourishing
business in the leather goods and footwear products. The company has employed about 1500
workmen in various capacities. The company directors in their Board meeting wanted to diversify
the business into textile. The board passed the resolution to start the textile business as a subsidiary.

The company’s Memorandum of Association, in one of the clauses, is very clear that the company
shall only deal with leather products and footwear. Now the very act of the company is Ultra Vires
the Memorandum of Association. Please explain. Advise the company to overcome this problem.

SOLUTION:
Any act beyond the confines of Memorandum of Associations is null and void. In law terms, it is
called Ultra Vires. The Board of Directors are bound by the Memorandum of Associations of the
company.
In the instant case, the Board of Directors are not supposed to diversify their business without
amending Memorandum of Associations clause. Currently the company is in the business of leather
and footwear products, and it is desirous of entering meeting must pass a resolution to this effect and
accordingly can entry into the textile business. Without doing this, the company cannot diversify its
business, the board of directors are responsible as per the corporate governance code as will as the
various provisions of the companies act for pecuniary damages.

CASE STUDY NO: 2 – UNIT NO: 2 – CONTRACT LAWS

a) X, an auctioneer, advertises through newspaper that the sale of office furniture will be held at
Bangalore. Y, a broker from Chennai, reaches Bangalore on the stipulated time and date. X, the
auctioneer, withdraw all the furniture from the auction sale. Y sues X for the loss of time and
expense. Will he succeed?
b) X contracts with Y to buy 50 copies of Business Law authored by A. Y supplies 25 copies of the
book written by A, 5 copies written by B and 10 copies written by C. Advise X.
SOLUTION:

a) Y will not succeed. The legal rules as to the valid offer is that the seller offering to sell a
commodity is only an invitation and intention to offer and that cannot be construed as sale. It is
upto the seller to sell the commodity or otherwise. Y cannot question the property of X. However
it is the duty of Mr. X, the auctioneer to intimate the revocation of offer. Otherwise he has to pay
the damages.

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b) Mr. X, as per law can reject the whole consignment outright. Y has supplied wrong quantities
and mixed quantities. The Sale of Goods Act, 1930, envisages that the seller must supply the
right quantity as order by the buyer. On the other hand if Mr. X desire he can accept only 25
copies of business law authored by A and reject the remaining copies authored by other authors.
He is having ample discretion to take the action against Mr. Y.
CASE STUDY NO: 3 – UNIT NO: 2 – CONTRACT LAWS
a) There is a contract for the sale of 25 quintals of ghee within a specified period by A to B. A
delivers 20 quintals but does not deliver the residue. A claims the price of the ghee supplied, but
refused to supply the residue unless paid for the quantity supplied. Decide the case.
b) At an auction sale, A makes the highest bid for a flower vase. Purporting to accept the bid, the
auctioneer strikes the vase and breaks it. Who is to bear the loss?
SOLUTION:
a) B cannot succeed in getting the price from A, unless the remaining 5 quintals of Ghee he
supplied to A. As per the Sale of Goods Act 1930, the delivery of goods must be according to the
quantum specified by the buyer, not more and not less, the exact quantity must be supplied to the
buyer by the supplier. The buyer has got every right to reject the consignment. In the instant
case, A has to supply the remaining 5 quintals of Ghee and claim the price.
b) The ownership in goods passes from seller to the buyer as soon as the sale is effected, whether
buyer takes possession or not and that is immaterial. In the instant case, the highest bidder
accepted the offer but the subject matter called flower vase was no more. In other words it is the
destruction of subject matter by the seller unknowingly, the destruction ceases the contract. The
Doctrine of Frustration can be invoked in this case and it is no fault of either party.

CASE STUDY NO: 4 – UNIT NO: 3 – CONSUMER LAW

The Jhungudu Knitting Company is a manufacturer of apparel. A German buyer had agreed to buy
goods from it for the summer season of 2018. Jhungudu Knitting Company exported a consignment
and sent all the relevant documentation through a courier. The documents thus sent included the
invoice, the packaging list, the original export certificate, and the certificate of origin. The courier
company had represented in its brochures and advertisements that it delivered parcels to destinations
in Europe within a week. The documents did not reach the destination. As a result, the German
buyer could not receive the consignment. Subsequently, duplicate copies were sent. However, by
then, the summer season was over. Due to the delay, the German buyer paid only DM 35,000/-
instead of the invoice value of DM 60,000. Jhungudu Knitting Company is claiming Rs. 4,50,000 as
damages from the courier company.

Questions for exploration:-

a) What would have been the liability of the courier company if it had explicitly mentioned that its
liabilities due to delay in delivery or loss would not exceed Rs. 5,000.
b) What would have been the liability of the courier company if Jhungudu Knitting Company had
explicitly mentioned the circumstances in which the courier was being sent and the courier had
agreed on the terms of being responsible for business losses on account of delays?
c) What is the liability of the courier in the above case, where nothing had specifically been
mentioned?
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SOLUTION:
a) If the courier company had explicitly mentioned that the liabilities due to delay in delivery and
loss would not exceed Rs.5,000, then the courier company would be held liable to the extent of
Rs.5,000 only. Business in all fields including banking, insurance, carriage, etc. trade with
customers through pre-printed standard forms, requiring them to sign a form stipulating the terms
and conditions. The Supreme Court states that, “a person who signed a document containing a
contract and terms is normally bound by them even though he/she has not read them and even
though he/she is ignorant of their precise legal effect.”
b) Yes.
c) There is a liability for a public carrier in cases of a short delivery of consignment, improper care
of the package, shipping of goods to the wrong destination. In many cases of international
shipping or transport of goods their liability is limited by international laws and conventions.
Many local couriers will almost always have a limited liability clause. Had nothing being
mentioned in the terms and conditions, the courier company would be liable for the loss occurred
to the Jhungudu Knitting Company i.e., 60,000 – 35,000 = 25000 plus any other damages as the
court feels appropriate payable at any particular interest rate for any delay.

CASE STUDY NO: 5 – UNIT NO: 3 – COMPETITION AND CONSUMER LAWS

a) ABC Co. sells to Life Co. 500 bags of sugar each containing 100 kgs. It is agreed that Life Co.
shall get two months credit and the price per bag of sugar at Rs.1,500. Life Co. allows the sugar
to remain in ABC Co.’s warehouse. In the meantime, because of huge unaccumulated losses,
Life Co. becomes insolvent before the expiry of two months. Official Receiver demands the
delivery of sugar from the ABC Co. without offering to pay. What are the rights of ABC Co.?
b) ‘A’ offered to sell his house to ‘B’ for Rs. 1,00,000. ‘B’ accepted the offer by post. On the next
day ‘B’ sent a telegram revoking the acceptance valid? Would it make any difference if both the
letter of acceptance and the telegram of revocation of acceptance reach ‘B’ at the same time?
c) ‘A’ drew cheques in favour of ‘B’. ‘A’ clerk forged B’s endorsement and negotiated the
cheques to ‘C’ who took them in good faith and for value. ‘C’ received payment of the cheques.
‘A’ claims to recover the amount from ‘C’. Will he succeed?
SOLUTION:
a) ABC Co., is entitled to retain the goods as security for the price until it is paid. In the case of
buyer’s i.e., Life Co’s., insolvency, the lien exists even though goods had been sold on credit
and the period of credit has not yet expired, provided the goods are still in possession of the
seller i.e., ABC Co., (Section 47).
b) Yes, the revocation of acceptance is valid because the acceptor i.e., ‘B’ may revoke his
acceptance at any time before the letter of acceptance reaches the offer or i.e., ‘A’. If the letter
of acceptance and the telegram of revocation of acceptance reach ‘A’ at the same time, the
formation of contract will depend on the fact that which of the two is opened first, revocation is
not possible.
c) ‘A’ will not succeed in recovering the amount from ‘C’ as ‘C’ had accepted the cheques in good
faith and had no opportunity of verifying the endorsements. However, ‘A’ can file a claim
against his own clerk to recover the amount.

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CASE STUDY NO: 6 – UNIT NO: 4 – ECONOMIC LAWS
Analyze the case and answer the questions given below:
Estimating the effects of Global Patent Protection in Pharmaceuticals: A Case Study of Quinotones
in India.
Under the TRIPS agreement, WTO members are required to enforce product patents for
pharmaceuticals. The debate about the merits of this requirement has been extremely contentious.
Many low income economies claim that patent protection for pharmaceuticals will result in
substantially higher prices for medicines, with adverse consequences for the health and well-being of
their citizens. On the other hand, research based global pharmaceutical companies, argue that prices
are unlikely to rise significantly because most patented products have therapeutic substitutes. In this
case, we empirically investigate the basis of these claims.
Central to the ongoing debate is the structure of demand for pharmaceuticals in poor economies
where, because health insurance coverage is so rare, almost all medical expenses are met out of
pocket. Using a detailed product level data set from India, we estimate key price and expenditure
elasticity’s and supply side parameters for the fluoroquinolones sub segment of the systematic anti
bacteria’s i.e., antibiotics segment of the Indian Pharmaceuticals market. We then use these
estimates to carry out counterfactual simulations of what prices, profits and consumer welfare would
have been had the fluoroquinolones molecules we study have been under patent in India as they were
in the U.S at the time.
Our results suggest that concerns about the potential adverse welfare effects of TRIPS may have
some basics. We estimate that in the presence price regulation the total annual welfare losses to the
Indian economy from the withdrawal of the four domestic product groups in the fluoroquinolones
sub-segments would be on the order of U.S & 305 million, or about 50% of the sales of the entire
systemic anti bacterials segment in 2018. Of this amount, foregone profits of domestic producers
constitute roughly & 50 million, the overwhelming portion of the total welfare. In contrast, the profit
gains to foreign producers in the presence price regulation are estimated to be only amount 19.6
million per year.
Questions:
a) Does India benefit from WTO Patent Protection? Discuss.
b) Does India face adverse welfare effects of TRIPS? Comment.
SOLUTION:
a) India was one of the 76 governments that become members of the WTO on the first day of the
formation of the WTO. Thus, India was one of the founder members of the WTO.
Benefits to India:-
 The GATT secretariat estimated that largest increase in the level of merchandise trade in goods
will be in the areas of clothing (60%), agriculture, forestry and fishery products (20%) and processed
food and beverages (19%). India’s competitive advantages lies in these fields. Hence, it is logical to
believe that India will obtain large gains in these sectors.
 India’s textile and clothing exports will increase due to the phasing out of Multi-fibre
Arrangement (MFA) by 2005.
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 The reduction in agricultural subsidies and barriers to export of agricultural products, agricultural
exports from India will increase.
 The multilateral rules and disciplines relating to anti-dumping, subsidies and countervailing
measures, safeguards and disputes settlement machinery will ensure greater security and
predictability of international trade. This would be favourable environment for India’s
international business.
 India along with other developing countries has the market across to a number of advanced
countries due to the imposition of the clauses concerning to trade without discrimination.
Disadvantages to India:
Despite the benefits of the WTO to India, many economists and sociologists argue that, India would
be in a disadvantageous position by becoming a member of the WTO. Their arguments include:
 Trade Related Intellectual Property Rights (TRIPS): Protection of intellectual property rights
(Patents, Copyrights, Trademarks etc.,) has been made stringent. It is argued that the TRIPs
agreement goes against the Indian Patent Act 1970. Only process patents can be granted in food,
chemicals and medicines under the Indian Patents Act. TRIPs agreement provides for granting
product patents also. Under TRIPs patents can be granted to methods of agriculture and
horticulture, bio-technological process including living organism like plants and animals. The
duration of patents under TRIPs is 20 years.

 Introduction of product patents in India will lead to hike in drug prices by the MNCs who
have the product patent. This will hit the poor people who will not have the generic option open.

 The extension of intellectual property right to agriculture has negative effects on India.
Presently, plant breeding and seed production are largely, in the public domain. Indian scientists
have undertaken plant breeding and multiplication is in the hands of National and State Seed
Corporations. Government, through this machinery, provides seed to Indian farmers at very low
prices. Indian scientists, in future will find it extremely difficult to breed new varieties.

 Patenting has also been extended to a large area of micro-organisms.

 Application of TRIMs agreement undermines any plan or strategy of self-reliant growth

based on local technology and resources.
Services:
Service sector like insurance, banking, telecommunications, transportation is backward in India
compared to that of developed countries. Therefore, inclusion of trade in services is detrimental to
the interest of India. Liberalization of service sector would be under tremendous pressure.
b) TRIPs refer to Agreement on trade-related aspects of Intellectual Property Rights which came into
existence in the 1990s, during a conference held in Uruguay. Intellectual Property Rights (IPR)
are basically given to manufacturers of various products ranging from medicines, music,
computer software’s, etc., over other people who try to copy the design already introduced by the
manufacturers. These rights are in the form of Patents, Copyrights, Trademarks etc., Basically

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 under this agreement, countries especially the WTO members are required to enforce the IPR on
all the products out of which patents for pharmaceuticals is very important.

This requirement of the agreement has an adverse impact in the case of developing economies as
patent protection for pharma products would lead to an increase in the price of these products and
this in turn will negatively affect the welfare of the people. India being a developing economy has
been adversely affected by TRIPs. Research has been conducted and it had been proved that certain
antibiotics which were manufactured in India had to be withdrawn from the market on the grounds
that the companies had violated patents of US companies manufacturing the same drugs.

Consequently, Indians had to purchase the drugs manufactured by the US companies which were
more expensive than the Indian drugs. This has affected the welfare of Indian citizens as few people
could afford those drugs. This has affected the access to medicines difficult for the common man as
medicines become expensive as they are patented. Thus, affecting the welfare of the people, studies
have showed that easy accessibility of medicines will save around 10 million lives a year world wide
of which 4 million is accounted by Africa and Asia.

CASE STUDY NO: 7 – UNIT NO: 5 – ENVIRONMENTAL LAW

Assume that a democratically elected government, after a favourable vote in an election, launches a
programme to clear 1,50,000 acres of tropical rain forests in order to promote economic
development. To carry out the will of engineering firms for a contract to help clear the acreage. A
number of international firms have indicated that they will bid on the project. Your company wants a
report from you on the proposal. Prepare a detailed report arguing for and against bidding on the
project.
SOLUTION:
The newly elected government has decided to clear 1,50,000 acres of tropical rain forests in order to
promote economic development. Following are the comments in favour of and against bidding on
the project of clearing the acreage.
The bidding of for clearing of the tropical forest will offer the following advantages:
i. It will generate revenue for the company to which the project has been granted.
ii. It will lead to economic development and prosperity of the nation.
iii. It will also lead to infrastructure development.
The arguments against bidding on the project are:
i. It is a matter of environmental concern. Environment includes: water, air, land, human beings,
other living creatures, plants, microorganism and property. It also includes light, food, heat,
breeze and all other forces of nature, forming essential necessities of life. These are all life
creating, developing and saving devices.
ii. Trees constitute an important part of nature. They lead to rainfall, natural vegetation and
climatic balance of the region, they also provide a natural habitat for wildlife. Clearing of
1,50,000 acres of forests will be a great loss to the country as forests are natural resources which
should be preserved.

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CASE STUDY NO: 8 – UNIT NO: 5 – ENVIRONMENTAL LAW
a) Discuss the pollution control measures taken by State Government of Karnataka.
b) Elaborately discuss about the various acts and laws that could be enforced to restrict the use of
plastic carry bags in Bengaluru City.
c) Suggest various measures to the Bangalore Development Authorities in controlling air pollution.

SOLUTION:

a) The Karnataka State Pollution Control Board (KSPCB) is a statutory body constituted by the
Government of Karnataka on 21/09/1974 under the Water (Prevention and Control of Pollution) Act,
1974, in short the Water Act. Initially the mandate of the Board was only to implement the Water
Act, 1974. Subsequently, the Board was given the responsibility of implementing a series of
environment related Acts & Rules.
The various pollution control measures taken by the State Government are as follows:-
 It has implemented two Continuous Air Quality Monitoring (CAQM) stations for Bengaluru City.
 It has handed over Parisara Vahinis to transport department for vehicular monitoring and to
upgrade emission monitoring equipments.
 It has extended capital investment from Rs.25 lakhs to 100 lakhs for all ‘green’ category
industries, to grant 10 years consent accepting one year consent fee under the Air and the Water Act.
 It is monitoring various parameters of environment to assess major changes in the environment of
Karnataka to take decisions and evolve action plans to protect the environment. Monitoring not only
covers ambient air quality, surface and ground water quality, but also covers effluents, emissions,
soil, noise and solid waste within the premises of the industry and other properties.
 Ambient air quality of Bengaluru city is being monitored at five stations under CAQM.
 Two CAQM stations at Bengaluru, one with KSPCB’s own funding and the other with Rs.50
lakhs (50% Capital Cost) assistance from the Central Pollution Control Board (CPCB), New Delhi is
being established for strengthening the air quality monitoring in the Bengaluru City.
b) The various acts and laws that could be enforced to restrict the use of plastic carry bags in
Bengaluru City are as follows:
 Plastic Shopping Bag Ban Act: The act will ban the supply of certain types of plastic shopping
bags from 1st November 2011. Specifically, the act will ban bags that are made in whole, or in part of
polyethylene with a thickness of less than 35 microns. These are generally the type of bag distributed
through supermarkets, grocery stores and takeaway food outlets.
 Plastics Manufacture and Usage (Amendment) Rules, 2003:

This Act states that:

a) No vendor shall use carry bags/containers made of recycled plastics for storing, carrying,
dispensing, or packaging of foodstuffs.
b) No person shall manufacture, stock, distribute or sell carry bags made of virgin or recycled
plastics which are less than 8x12 inches in size and less than 20 microns in thickness.
c) Carry bags/ containers made of virgin plastics shall be in natural shade or white.

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 The Plastic manufacture, sale and usage rules, 1999 as amended in 2003; The Rules prohibit the
manufacture, stocking, distribution or sale of carry bags made of virgin or recycled plastic less than
20 x 30 cms in size and 20 microns in thickness. The Rules also disallow the use of recycled plastic
bags and containers for storing, carrying, dispensing or packaging of food items.
c) There are five main causes and sources of Air Pollution:
i. Particulate matter: It is the solid and liquid and aerosol’s suspended in the atmosphere.
ii. Sulphur di oxide: It is a colourless pollutant. The CO2, when oxidized to SO3, and
precipitated as H2SO4 it becomes acid rain. SO2 corrodes metals, stones, leather, paper and
fabrics.
iii. Carbon monoxide: It is emitted by the combustions of petrol, diesel, coal or burning of
wood.
iv. Hydrocarbons: Decay of organic matter or burning of petroleum releases hydrocarbons.
v. Oxides of Nitrogen: Human activities results in adding NO2 andN2O in the atmosphere.
They cause respiratory diseases in humans.
Control: Air Pollution is controlled in the following ways:
i) Particulate Matter: It is possible to minimize emission particles from point sources such as at
thermal electrical generating stations or industrial smelting units. Containment is accomplished
using devices that remove the aerosol particles from the fast moving stack in the form of gas
steam.
ii) Carbon monoxide: Carbon monoxide pollution can be reduced by modifying the combustion
process. If nuclear power is used instead of coal or petroleum, this pollution can be completely
eliminated.
iii) Hydrocarbon Pollution: It can be reduced by modifying the chemical processes. It is done by
incineration at 6500 Celsius to 7500 Celsius and absorption.
iv) Developing new types of engines: Pollution due to automobile exhaust can be reduced by
developing new types of engines (Steam, Gas), new types of fuels (Propane, Alcohol).
v) Removing Sulphur di oxide pollution: It can be reduced by removing Sulphur and H2S from
coal.

Best Wishes to one and all

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